Want To Improve Your Business Tax Efficiency? Here’s What To Do

Want To Improve Your Business Tax Efficiency? Here’s What To Do

Tax seasons come and go, but thinking and planning are key for saving money on your business taxes. According to a recent study, 76% of UK businesses reported some business concerns, including financial performance, trade and workforce and business resilience. And so far as finances are concerned, effectively managing your taxes can improve your profitability and cash flow and add value to your business. Here are four ways to improve your business tax efficiency.

  1. Utilise your tax relief 

There are a variety of tax reliefs that encourage business expansion. It would be best to check if you qualified for this, including employment allowance, patent tax relief, and business rates. Research suggests that UK SMEs are missing thousands of pounds in unclaimed tax credits designed to reward innovation. Various types of tax relief may be available on an investment in a UK business, and the impact can be significant enough to mitigate potential losses.

  1. Stay away from tax avoidance schemes

It is normal to see businesses employ various mechanisms to avoid tax. While some of these tax avoidance schemes are legal, they are not always the easiest things to do. Many such mechanisms fall foul of the HRMC, especially if their sole purpose is tax avoidance. These schemes are usually promoted as legitimate wealth management, tax planning or investment opportunities. However, you want to be careful to avoid costing you more in the long run.

  1. Change your business structure

The type of business entity you choose for your business plays a crucial role in tax efficiency. Your business structure determines the type of taxes and how much you pay. There are three main types of taxes; personal income, self-employment, and corporate taxes. The rates for each vary and can significantly impact your tax liability. You are more likely to pay more without expert assistance since there is a risk of paying too little. Unfortunately, you expose your business to HRMC penalties when this happens.

  1. Offset losses against profits 

You can claim corporation tax relief by offsetting given losses in a tax year from trading, property income, or selling assets. You can achieve this through your business tax return. For instance, you may carry over losses to offset future years’ profits by lowering the taxes you pay the following year. You can likewise carry back losses to offset profits from previous years if they were incurred in the same trade.

  1. Get professional advice 

It is not always easy to maximise your company’s tax efficiency. Fortunately, a corporate accountancy firm can help you develop a tailored tax strategy for your business. Working with professionals is crucial for becoming tax efficient regardless of your business size and industry. They are experienced in dealing with even the most complex issues like claims related to capital allowance and R&D expenditure. These areas can be financially beneficial to your business.

Taxes should not be something you think about only at the year-end or when filing your returns. You want to consider the tips above to carefully plan, identify and capitalise on your business’s tax opportunities.

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