Tax planning tips for SMEs to know

Tax planning is essential for Small and Medium-sized Enterprises in the UK to minimise tax liabilities. Indeed, tax planning is an important aspect of running any business, large or small. Tax is a major cost, so thinking carefully about how to minimise the liabilities while staying compliant with tax laws can make a huge difference to finances.

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A full understanding of tax is important

Directors of SMEs should have a clear understanding of their tax obligations, including corporate tax, Value Added Tax (VAT), National Insurance contributions, and other relevant taxes. Staying compliant with tax laws and regulations is crucial to avoid late fines. Being aware of the tax deadlines and requirements too, helps to avoid unnecessary penalties.

Use tax allowances and relief

It’s important to take advantage of tax allowances and reliefs available to SMEs. If your company is involved in projects in the field of science or technology, you may be eligible to claim Research and Development (R&D) relief. According to UK Research and Innovation, the Innovate UK Launchpad programme has £16 million funding on offer for 101 new projects which will benefit small and medium businesses.

Claim all allowable expenses

Ensure that all allowable business expenses are claimed against taxable profits. This may include costs related to rent, utilities, salaries and wages, travel and subsistence, professional fees, and other necessary expenditures incurred in the course of running the business.

Always keep accurate records. Good record-keeping allows accurate tax reporting and minimises the risk of errors.

If you require professional assistance, there are a number of legal companies that can help with various aspects of business law. If you require a directors personal guarantee, specialists such as can assist.

Pension contributions can be tax-efficient

Making pension contributions on behalf of directors or employees can be tax-efficient for small to medium-sized businesses. Contributions are deductible against taxable profits. Employers’ contributions to workplace pensions are also generally exempt from National Insurance contributions.

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Stay informed on tax news

It’s important to keep informed of changes to tax legislation and to seek professional advice when necessary to ensure that your tax planning remains effective and compliant with current regulations. Consulting with tax advisors or accountants specialising in SME taxation can provide valuable insights and advice tailored to the needs of your business. A tax advisor can help identify opportunities for tax savings and ensure that strategies are implemented effectively.

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