Tax-Saving Tips for Small Business Owners

As an ambitious entrepreneur, you often feel like there aren’t enough hours in the week. You’re busy with running the day-to-day operations, managing team members and, well, life. It means you’re left with little time to stop and consider how you can save on tax.

Yes, tax can be an absolute minefield if you’re unprepared, but we’re here to help you navigate it. The key is to look at your business from every angle to find areas where you can reduce how much you pay.

Know your VAT inside-out.

We often find small business owners paying too much in VAT. It’s an area where you can find quick, tax-saving wins.

Pay close attention to HMRC’s VAT Flat Rate Scheme. If your business has a VAT turnover of £150,000 or less (excluding VAT), you could be eligible to:

  • Pay a fixed rate of VAT to HMRC.
  • Keep the difference between what you charge your customers and pay to HMRC.

The best way to find out if you could benefit from the scheme is to chat with your accountant. For certain businesses, it can be an unexpected source of profit!


Make sure you’re claiming all expenses you can.

If you’re a business owner who works from home, HMRC offers generous tax savings. Got a home office setup in your spare bedroom? It’s likely you can claim tax relief.

If you’re self-employed:

  • You can claim work-from-home tax relief through your tax return.
  • You’ll pay less in Basic Rate or Higher Rate tax and National Insurance.

If you’re a limited company owner:

  • You can claim work-from-home tax relief through your company.
  • You’ll pay less in Corporation Tax.

Top tip: really try to get into the habit of keeping a record of all expenses. HMRC can disallow expense claims if they aren’t backed up with receipts or invoices, so don’t fall into that trap!


Pass on tax savings to your employees.

Tax-free benefits are a great way for both you and your team members to enjoy tax savings.

For example:

  • The cycle-to-work scheme can save up to 25% of the cost of a new bike and offer tax savings.
  • Tax-free childcare vouchers.
  • Company mobile phones.
  • Welfare counselling

Pension contributions are another way for business owners to reduce their taxable income. In other words, when you set aside money for your golden years, you’ll also be benefitting in the short term. The current annual allowance is £60,000, so you can claim tax relief on contributions up to this amount.


Pay yourself efficiently.

How much tax you pay will also be impacted by:

  1. The amount you take out of the business to pay yourself.
  2. The way you pay yourself, i.e. salary, dividends, benefits-in-kind.

Company cars are a common benefit-in-kind. Depending on the use case, owners can save tax by having a vehicle owned by their business. 

Dividends can be a great way of paying yourself and other directors in your business, but it comes with a word of warning! It has to be done carefully as doing it the wrong way could trigger excess tax, so it’s wise to seek your accountant’s advice beforehand.


Find a fantastic accountant.

Nowadays, accountants are so much more than financial administrators. Sure, they handle the paperwork and compliance, but when you work with them as your trusted business advisor? 

That’s when the magic happens.

We get it – when every pound counts towards growing your business, it’s natural to want to save on accountancy fees by doing everything yourself. Unfortunately, it often has the opposite effect.

A great accountant will actually save you money. They’ll spot areas where you’re losing out by not claiming everything you’re entitled to, and go through your business with a fine-tooth comb to find potential savings.

Plus, getting an expert to handle the finances frees up your time to focus on the important decisions. The more time you’re able to dedicate to working on your business, the more it will benefit.

Take your time to find the perfect accountant for your business (psst – check out our blog on why you should choose a small accounting firm).


You don’t have to feel overwhelmed by taxes.

There are quite a few areas to get your head around – but you don’t have to take it on alone. If you’d like an expert eye to look at where you can save tax in your business, fill in our form and we’ll be in touch