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Set Up Your Own Business? Effective Tax Planning: 6 Areas Where Your Business Can Save Money

Updated: Nov 22, 2023

Effective Tax Planning: 6 Areas Where Your Business Can Save Money

Tax: The Nitty Gritty!

It's the new year, and many people have decided that this is the year to go it alone and set up their own business, and good on them; it's a daunting process, but working for yourself can be a fantastic experience!

Chances are that one of the first things you think about when looking at setting up your own company is tax; the HMRC says tax doesn't have to be taxing, but for many, it's a mind blower, but of course, tax planning is an essential part of company operations and can help UK companies to make significant savings. By taking the time to evaluate the situation, companies can ensure that they are taking advantage of all available tax reliefs, deductions, and credits. This article will discuss some key areas where a company can save money on their taxes.


Value Added Tax (VAT) is a form of indirect taxation charged by governments on goods or services consumed in the European Union. Companies making taxable supplies are required to register for VAT and charge it to customers at the standard rate of 20%. There are also reduced rates available for certain types of supplies, such as foodstuffs and children’s clothing. Companies may also be able to reclaim any VAT they have paid on purchases.

Capital Allowances:

Capital allowances are a form of tax relief that can help companies reduce their corporation tax liability. These allow for the deduction of capital expenditure, which is money spent on buying assets such as equipment, machinery and buildings. The amount that can be claimed depends on the type and cost of the asset, but in some cases, up to 100% of the cost can be deducted from taxable income.

Tax-Efficient Investments:

The UK government offers various schemes to encourage companies to invest in research and development (R&D), energy efficiency, and employee share ownership plans (ESOPs). These schemes can help reduce tax liabilities, as companies can benefit from tax credits or deductions. So, for example, when your company wants to apply for Research & Development Tax Credits, there is a relief available.

Loss Relief:

In certain circumstances, a company may be able to claim relief against its taxable income if they have incurred losses during the accounting period. This could include both trading and non-trading losses. Losses can be claimed for up to three years back in time, depending on the type of loss incurred.

Employee Benefits:

The government also offers various employee benefits that are exempt from taxation, such as childcare vouchers and cycle-to-work schemes. These benefits not only provide financial assistance to employees but also offer tax savings for employers who are eligible for offsetting allowances.

Tax Avoidance Schemes:

Tax avoidance schemes are designed to help companies pay less tax than they would otherwise have to. They usually involve complex financial arrangements and require careful consideration before entering into such agreements. Companies should always seek professional advice before doing so, as any losses incurred or penalties imposed could be very costly in the long run.

By exploring the different areas of tax, companies can make significant savings and reduce their overall tax liabilities. In addition, taking professional advice and understanding how the system works can help ensure that companies are taking full advantage of all available reliefs, deductions and credits. Doing so will provide much-needed funds that can be reinvested back into the company and help to support future growth.

Land and property tax is a complex subject, so it is always advisable to speak to an expert when it comes to land and property to make sure you're getting the most up-to-date information and the best advice on how to save money on your portfolio.

If you have taken the plunge, or are about to, then my tip is to network; look on Facebook for groups that have been set up to answer questions about what your business is about, or groups that cover small business matters, and of course taxation, it can be a massive help, as the information is free, another peoples experience can be invaluable, but if you need to be 100% certain of a tax matter than do speak to a qualified accountant!

Images in this article are courtesy of Unsplash and are used under the Unsplash License.


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