5 Tax Tips Every Small Business Owner Should Know

By July 3, 2020 July 30th, 2020 Taxation

Our firm provide our clients advice which is in line with the advice their tax professional give them.

As part of that guidance, there are a few tax advantages that most business owners either do not know about or simply do not t take advantage of. There are also some “deductions” that should be avoided due to misguided tax information. Here is a list of the five most common.

Track All Expenses Consistently

Track all of your expenses including the ones you pay for personally. Business owners always ask me “what about the purchase I paid for on my personal credit card?” Yes, it is all deductible; you just need to get it on the accounting records and account for it. Keep in mind that the credit card is personal so do not add that account to your chart of accounts. They will count as owner or shareholder contributions. TIP: Record these charges monthly so you do not forget at the end of the year.

Avoid Money Leaks

As a small business owner, you are sometimes faced with cash flow issues. As a result, you get behind on paying your bills and your taxes. While your suppliers may not assess late fees, you better believe the HMRC will in the form of penalties and interest. And these my friend are non-deductible. They are not even the interest portion. TIP: Fix this money leak by paying your taxes on time and use those funds on an expense that is deductible.

Maximise Retirement Contributions

Most small business owners are so busy working in their business that they never stop to think about what they will do once they retire. I am not even sure you think about retiring at all. But the fact is you will — one day. So you have to make sure to have something to fall back on. There are several retirement plan options that will allow you to put aside some funds tax free for your retirement and they are all tax deductible to the business. Yes, you can have your own company retirement plan.  TIP: Contact your tax adviser and your financial adviser to discuss retirement plan options.

Expenses Paid Personally

I cannot say it enough – stop co-mingling your personal expenses through the business. They are not tax deductible and us accountants — we know when you try to do it. Believe it or not we are smarter than the average bear. TIP: Don’t co-mingle.

Buying Fixed Assets

The HMRC allows you to expense the purchase of a fixed asset all in the first year instead of depreciating it, baring certain qualifications. You can deduct up to as much as original cost and reduce your taxable income to zero. TIP: Hold off buying any and all equipment until towards financial year end if you can so you can buy just enough and not too much.

What tax tips have you taken advantage of to help keep more money in your business?

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