Running a small business can be challenging, and any opportunity to reduce costs is always welcome. One way to do this is by taking advantage of the tax reliefs available to you. Tax reliefs can help lower the amount of tax your business has to pay, freeing up funds to reinvest or manage your cash flow more effectively.
In this blog, we will explore the main tax reliefs for small businesses in 2024 and how you can make the most of them.
What are tax reliefs?
Tax reliefs are schemes set up by the government to reduce the amount of tax businesses and individuals have to pay. For small businesses, these reliefs can apply to different areas like investments, research, and even employment costs.
By claiming the right tax reliefs, you could significantly reduce your tax bill, leaving more money available to grow your business. The key is to understand what reliefs are available and how to claim them.
Key tax reliefs available in 2024
Annual Investment Allowance (AIA)
The Annual Investment Allowance (AIA) is designed to encourage businesses to invest in equipment, tools, and machinery.
In 2024, small businesses can claim up to £1 million on qualifying purchases, which means you can deduct the full cost of these assets from your taxable profits. If you’re planning any major purchases, AIA can be a big tax saver.
Just remember that only specific items, like vehicles, machinery, and office equipment, are eligible for this relief.
R&D Tax Credits
Even if your business doesn’t operate in the tech or science sectors, you may still qualify for Research and Development (R&D) tax credits. R&D tax relief is available if your business works on projects that aim to make an advance in science or technology.
This could include creating a new product, process, or service, or improving existing ones. Small businesses can claim up to 33% of their R&D costs, so it’s worth looking into even if you’re not sure your project qualifies.
Business Rates Relief
Business rates can be a major expense for small businesses, but fortunately, there are several reliefs available. If your property’s rateable value is less than £15,000 and your business only uses on property, you may qualify for Small Business Rates Relief, which could reduce your rates bill or even eliminate it altogether. Additionally, some businesses in retail, hospitality, and leisure may benefit from additional rates relief, so it’s important to check what’s available in your area.
Employment Allowance
The Employment Allowance allows eligible businesses to reduce their National Insurance contributions (NICs) by up to £5,000 a year.
If your business employs staff and pays NICs, this relief can help cut down on your overall employment costs. This can be especially useful for growing businesses looking to hire new staff or offer more competitive wages.
New or Updated Reliefs for 2024
Each year, the government may introduce new reliefs or make changes to existing ones, so it’s important to stay updated. Keep an eye on any changes announced in the Budget that could affect reliefs for small businesses.
Some industries may see new targeted reliefs introduced, and it’s always wise to consult with a bookkeeper or accountant to ensure you don’t miss out.
How to claim tax reliefs
Claiming tax reliefs can seem daunting, but it doesn’t have to be. Most reliefs are claimed through your annual tax return, but some require specific applications or additional forms. Here are a few tips to simplify the process:
- Keep Detailed Records: Make sure you keep receipts and records for all qualifying purchases, projects, or expenses. This will help you when it’s time to claim.
- Consult a Professional: If you’re unsure about whether your business qualifies for a specific relief, or how to claim it, working with a bookkeeper or accountant can make the process smoother.
- Stay Organised: Set reminders for important deadlines and check the HMRC website for the most up-to-date information on what reliefs are available and how to apply.
Common mistakes to avoid
While claiming tax relief can save you money, there are some common pitfalls to watch out for:
- Missing Out on Reliefs: Many small businesses miss out simply because they are not aware of all the reliefs they are eligible for.
- Incorrect Claims: Filing an incorrect claim, whether intentional or not, can lead to penalties from HMRC. Ensure that all the information you provide is accurate and complete.
- Forgetting to Review Eligibility: Your eligibility for certain reliefs can change as your business grows or changes. Regularly review what reliefs you’re claiming and check if you now qualify for additional ones.
Maximising your tax efficiency
To make the most of available tax reliefs, it’s important to take a strategic approach to your business’s finances. Here are some tips:
- Plan Your Investments: Consider the timing of major purchases or investments to maximise your tax reliefs. For example, if you know you’ll need new machinery next year, it might be worth purchasing before the end of the current tax year to claim AIA.
- Work with a Financial Planner: A good financial planner can help you map out a tax-efficient strategy that considers both short-term and long-term business goals.
- Reinvest Savings: Any money you save through tax reliefs can be reinvested into growing your business, whether that’s hiring more staff, upgrading equipment, or expanding into new markets.
Ready to make the most of your business tax relief opportunities?
Navigating the world of tax reliefs can feel overwhelming, but it’s a valuable way to reduce costs and improve your small business’s financial health.
From the Annual Investment Allowance to R&D Tax Credits, there are several options available in 2024 that can help you save money and reinvest in your business.
By staying informed and working with professionals where needed, you can make the most of these opportunities and keep your business on a solid financial footing.
If you’d like to discuss the tax relief opportunities available to your business, please get in touch.
