3 ways to save tax for your small business in 2023

Kirsty Young Advice and Tips, Business Tips, Tax

As business accountants, making sure our clients only pay the right amount of tax is a key part of our job. No wonder that we are frequently asked about key strategies to save tax.

Based on our decades of experience (!), these are the 3 major areas where we feel you can really impact your tax bill.

 

1. Keep. Good. Records.

We just can’t say this often enough – keeping good records will help you save tax. Here’s how.

  • As a business owner , your tax bill is based on your taxable profit.
  • Reducing this profit by claiming all of the tax reliefs and deductions you can brings the tax liability down.

It’s very easy to miss out on claiming deductions by just not keeping good records.

Here’s an example:

You are travelling to a client’s venue for a full day meeting. You are there late into the evening and need to eat. You stop at the motorway services on the way back and buy a McDonalds and a coffee. You pay for it with some loose cash in your wallet, but bin the receipt by mistake.

Are you going to remember this deductible subsistence much later on when you prepare your tax return? We doubt it. It won’t have come out of your bank, or off a card, or even Apple Pay or similar. You will not have a prompt, or any proof.

Action: Getting into a daily habit of recording expenditure from the day before, or if you have a book-keeper, forwarding all costs regularly each day. Also investigate using technology such as Xero or QuickBooks, and their ‘receipt capture’. (There are also stand-alone apps for receipts as well.) Being able to simply snap a receipt on your mobile phone, and forget about it until you need it for annual accounting is a huge bonus.

 

2. Educate Yourself

The tax law is the UK runs to well over 22,000 pages! It’s therefore no surprise that business owners aren’t educated in every possible tax deduction.

Whilst it’s unlikely you will become an expert (or we’d be out of a job…), some basic knowledge of what you are allowed to deduct can really help you spot opportunities.

We’re not talking about some crazy borderline tax evasion scheme. We are talking about just making sure you know what you can claim, so you only pay the right amount of tax.

Action: It’s important that the information you educate yourself with is both accurate and reliable. (So please don’t ask any AI-based text writer!) We suggest starting by:

reading more of our blogs

listening to our podcasts

watching our YouTube Videos

All written and presented by our very own human director, Dan Heelan!

You can also add in a smattering of the .Gov website, which provides further information on the topics. Do be careful with .Gov though, as the info there is oddly generic and can sometimes be misleading! (Surprisingly, it can also be out of date if you accidentally read an old press release or similar.)

It’s also good to understand what ‘tax deductible’ really means. You can start by reading our blog on tax deductions and how they work. If only they taught you all this stuff in school, but that’s another campaign…

 

3. Consider your business ‘structure’

A key tax-saving area is making sure your trading structure is set up to be tax-efficient. Getting this bit right really can save substantial amounts of tax.

But it needs to be based on your circumstances and goals. (You are likely to need professional help with this one, to be honest.)

You may have heard limited companies can save tax (and they definitely can in the right circumstances), but they aren’t always the answer. You have other options like self-employment and partnerships, which in the right situation can also work well.

Action: Seek professional help to understand if you’ve got this right (and preferably before you have applied/paid to form a limited company….)

Tax Trap: Don’t assume you can always choose your structure. For example, if you are employed, it’s unlikely you could suddenly stop doing that on a Friday and come back as a limited company on the Monday, billing your old boss for your work without consequence.

 

Loving these tips but want some human help?

Ask your accountant or book a consultation with us . In many circumstances we offer a paid 1 hour, 1-2-1 consultation so you can ask simple questions of an accountant. You don’t have to become a client, so it’s a great way for you to get the help, when you need it.