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Whether you are setting up a new business, or already have a successful, well-established company, there are many ways that you can save money through tax reliefs and allowances.
Certain tax initiatives even allow business owners to save money that can be invested in their company.
Enhanced Capital Allowance (ECA)
Enhanced Capital Allowance (ECA) schemes encourage businesses to invest in efficient technologies. The scheme lets your business claim 100 per cent first-year allowances, i.e., tax relief, on investments in certain technologies and products.
If you buy an asset that qualifies for first-year allowances you can deduct the full cost from your profits before tax.
You can claim first-year allowances in addition to the Annual Investment Allowance (AIA) – they do not count towards your AIA limit.
- Some cars with low CO2 emissions
- Energy-saving equipment that’s on the energy technology product list, for example, certain motors
- Water-saving equipment that’s on the water-efficient technologies product list, for example, meters, efficient toilets and taps
- Plant and machinery for gas refuelling stations, for example, storage tanks, pumps
- Gas, biogas, and hydrogen refuelling equipment
- New zero-emission goods vehicles.
You cannot normally claim on items your business buys to lease to other people or for use within a home you let out.
Annual Investment Allowance
This measure remains temporarily increased from £200,000 to £1,000,000 for qualifying expenditure on plant and machinery incurred during the period from 1 January 2022 to 31 March 2023.
This measure is intended to deliver positive outcomes for businesses by supporting and encouraging business investment, and by simplifying the tax relief for such investments.
R&D tax credits
You may be eligible for R&D tax credits, even if your small business is running at a loss.
The HM Revenue & Customs (HMRC) definition is broad, and you don’t have to be engaged in laboratory work to benefit from this incentive.
Software developers, architects and many other professionals have all successfully claimed R&D tax relief because of this incentive.
Repairs and renovations to property
The business renovation allowance will give SMEs a tax break.
If the building your business plans to use has been empty for more than a year and was previously used in a different capacity, you may be eligible for a 100 per cent tax incentive on any renovations you might carry out.
Reduce NICs with the Employment Allowance
You can claim Employment Allowance if you’re a business or charity and your employers’ Class 1 National Insurance liabilities were less than £100,000 in the previous tax year.
Employment Allowance allows eligible employers to reduce their annual National Insurance liability by up to £4,000.
You’ll pay less employers’ Class 1 National Insurance each time you run your payroll until the £4,000 has gone or the tax year ends (whichever is sooner).
You can only claim against your employers’ Class 1 National Insurance liability up to a maximum of £4,000 each tax year. You can still claim the allowance if your liability was less than £4,000 a year.
In some cases, a company can eliminate their Employer’s NIC bill as a result. Note, it is not possible to claim the allowance if your company only has one employee/director.