The UK’s tax system can be horribly complex for the uninitiated. Most employers start their businesses to develop their products and services, not because they are accountants. It’s easy to miss some of the current tax relief options and then end up paying more to HMRC than is necessary.
Research and Developments tax credits
One underused resource is the relief Research and Development (R&D) tax relief scheme which can be in the form of either reduced tax or actual cash from HMRC. You don’t have to be a scientific based company to take advantage of this option. If your company develops and tests software, for example, you may qualify for this tax allowance. As long as some aspects of your company’s work is technically challenging, whether in design or product development, you may be eligible for the 32.6% cash benefit as a result of this scheme. There are numerous specialist companies that can help you make your claim, including inplus.co.uk.
Reduce your National Insurance (NI) contributions under Employment Allowance
Employment Allowance was announced in 2013 and introduced in 2014. An article in The Daily Mail suggested that as many as 450,000 companies could benefit from this scheme. The Employment Allowance lets companies ‘recruit a worker on £22,400 – or four workers on minimum wage – without paying a penny in employer’s national insurance’. Speaking about the NI reduction, the Federation of Small Businesses stated: “this will help create hundreds of thousands of jobs at a time when new posts are urgently needed.” The scheme was introduced in a bid to reduce unemployment and to encourage businesses to employ more staff. By reducing employers’ National Insurance liability by £2,000 the scheme is seen as a positive move by Chancellor Osborne to promote industry.
Plan your tax
If you leave filing your tax returns until the last minute, you may miss out on some tax advantages. It’s always worthwhile taking advice and carrying out some research. The This is Money website suggests that employers should investigate the opportunities for cutting their tax bills and making the best use of tax allowances. If you pay Capital Gains Tax, the ceiling for 2013/14-tax year is £10,900, and the website suggests that you can ‘use this allowance’ combined with your income tax allowance (£9,440) to enjoy £20,340 tax-free.
Annual Investment Allowance (AIA)
The consumer guide website Which suggests that not enough people take advantage of the annual investment allowance. This allowance allows you to claim for tools, computers and other forms of capital expenditure. Under AIA rules you can claim relief on up to £500,000 a year. This form of relief applies to small as well as large businesses.
Pensions schemes can help employers and employees
Employers can save money through contributions to an employee pension scheme. Some employers are also registered as employees in their own companies. As long as the contribution qualifies as salary replacement or salary saving your combined tax and NI bill could be reduced by as much as 34%. Every year the Budget introduces more changes to the UK tax laws, so it’s always an excellent idea to seek the advice of a professional in order to benefit from these changes.