As a small business owner, you don't always have access to the tax advice that bigger companies get. I've decided to put together a basic information pack for the small time business owner and employer, to give you a window into the savings you could be making. Good luck!
Running a partnership can save you money
A partnership is a small business composed of two or more self employed individuals. The tax arrangements for the partnership as a whole are not flexible - but the way the tax is split between the partner members is. Individual partners can avoid being hit with massive tax hikes by spreading their profits among the other members of the enterprise.
If you form a partnership after some years of sole trading, you can also create a tax window for yourself. A tax window happens when your tax arrangements change (legally) from sole trader to partner. Partnerships get to declare the start of their own tax year, which means you can give yourself one "year" in which you pay tax for just one month.
Claimable expenses are not free
It's easy to fall into the trap of thinking that the things you claim as expenses are freebies. They're not - you just don't pay tax on that money. When you buy something essential for your business, you have the right to take that figure off the taxable profit you declare for the year: but you still have to find the money to pay for the item.
Running a sensible list of annual expenses allows you to diminish your tax bill by cutting down on the amount of money you actually pay tax on. But trying to find things to buy to bring down a tax bill can be counter productive because you need to have the money there to do the buying in the first place.
Understanding what you can claim for is vital
There are dozens of things the small business can and should claim for. If you use your home as an office, you get a weekly contribution to your utilities. If you use a vehicle for work purposes, you can claim mileage instead of fuel costs. Claiming mileage allows you to factor in a certain portion of vehicle maintenance costs as well as fuel expenditure. In the event that you run a vehicle entirely for business purposes, you can claim all mileage associated with it.
If you don't know what you can and cannot claim for, you could be missing out on all sorts of benefits and tax breaks. Without an accountant, understanding every benefit is almost impossible. Do your research and claim for everything you have a legal right to claim on.
Small time employers may be making payroll mistakes
New legislation requires all employers to calculate their employee's tax and pay it at the same time as the employee himself or herself is paid. This is fine for bigger companies with a payroll department - but extremely difficult for small time employers. Domestic employers using nannies are a good example of this - a nanny's employer often doesn't even think of himself or herself as a business, because he or she is theoretically a client. However, "nanny tax" is real and complicated. Ask taxingnannies for advice here.
Mark Scott, the author is a chartered accountant, who offers free tax advice to charities and small businesses. His tax and business blogs are read by thousand of unique visitors every day, and his articles have been published by several broadsheet newspapers as well as the biggest tax advice sites in the UK.