Industry-Specific Tax Breaks: Uncovering Hidden Opportunities For Your Business

In order to minimise tax deductions within your business and keep profits as low as possible, keeping accurate financial records is essential. By having a systemised process to track both your business’ income and expenses will make life a lot easier when it comes to preparing your end-of-year accounts.

A tax break is also known as a tax deduction and is essentially a benefit that the government offers that helps to reduce your total tax liability.

Common Tax Breaks

To begin with, let’s have a look at some of the most common ways to reduce your tax bill:

Corporation Tax

From the 6th April 2023, Corporation Tax increased from 19 to 25% for businesses with profits over £250,000. Any business with less than £50,000 profit will pay the 19% rate. Corporation Tax is the main tax that any limited company may pay, but as you can see the rate you pay depends entirely on your profit. If you use some of the other methods in this article to reduce your profits, your corporation tax bill will be smaller.

Capital Allowances

Capital allowances are a type of tax relief, allowing you to deduct some or all of the value of an item from your profits before you pay tax. Equipment, machinery, and business vehicles all fall into this category. The Spring Budget early this year brought some changes to capital allowances, as follows:

• Full expensing (businesses are able to claim 100% deduction from profit on qualifying plant and machinery investments)
• A 50% First-Year allowance (extended until March 2026)
• Annual Investment Allowances (a temporary allowance that has now been made permanent)

Additional Relief For R&D

If your business invests in researching and developing new processes, products, or services, you may benefit from additional tax relief. For those businesses that are R&D intensive, a 27% rate of relief is applicable, and a 14.5% credit rate is available for companies spending over 40% of their total expenditure on R&D.

Tax-Deductible Expenses

Tax-deductible expenses are costs that businesses can subtract from their gross profit before it is subject to tax. As a result, these types of expenses help to reduce the corporation tax that you pay annually. Both sole traders and limited companies can claim for expenses related to a business’s running costs, but you must take the time to understand which expenses qualify for tax deductions. It is always best to speak with professionals like the team at Wright Vigar, as our knowledge and experience ensure that your tax bill is the lowest it possibly can be.

Business Travel

Most business owners travel across the country, or even internationally, so don’t forget to include these in your expenses. Vehicle expenses can include insurance, fuel, parking, hire charges, and breakdown cover (if your vehicle is purchased through your limited company). Train, taxi, bus, and air travel are also classed as travel expenses, as are overnight stays and meals that are paid for as a result of a business trip.

For sole traders, claiming travel costs is slightly different as you claim a fixed rate deduction for mileage instead (45p per mile currently) which takes into account the wear & tear on the vehicle too.

Staff Uniform

You can claim a business tax deduction if your staff are required to wear a uniform, protective clothing, or costumes as part of their role. To claim this rebate, the company name & logo must be clearly visible on the uniform and employees wear the uniform while working.

If you don’t provide a laundry service for your employees, they can claim tax relief on the costs incurred from washing their uniform. This is a standard flat-rate expense of £60, that they must claim themselves.

Office & Equipment

If your company rents an office that is used solely for business purposes, this rent can be claimed as tax deductible (apart from any deposits paid on a rental property). When it comes to office equipment, office stationery, printing costs, phone and internet bills, and computer software, these are all eligible tax deductions too.

When it comes to claiming for these tax breaks, allowable expenses can be deducted from your gross profits to calculate your taxable profits. The majority of these expenses will simply be offset against your corporation tax bill. Keeping records is essential as HMRC can investigate records for at least 6 years following filed tax returns, which is why we would always advise getting an accountant in to ensure nothing is missed, preventing fines further on down the line.

Additional Tax Deductions For Businesses

Now we have run through some of the most common tax deductions for businesses, let’s have a look into the lesser-known tax breaks that you can leverage.

Pension contributions

Pension contributions can be paid directly to a Self Invested Personal Pension (SIPP), with the entire amount being totally tax deductible. Depending on how much of a lump sum you decide to transfer, you could significantly reduce your Corporation Tax bill.

Throw a Christmas party

This applies to all businesses, even if the company only has 1 director! HMRC allows you to claim £150 per director, with the potential for an extra £150 for a plus one. All you need to do is categorise this as an ‘other small expense’ in your accounting software.

Eye Tests

Medical health checks, in particular eye checks, are completely claimable as a business expense, along with any glasses purchased that are used exclusively for business purposes. Any treatment that is linked with an injury caused by your line of work is also claimable.

Training courses

If you want to keep your business ahead of the competition, training your employees is critical. Staying up-to-date with the latest industry trends requires sending your staff on courses, workshops, and seminars. All of which are tax-deductible.

Memberships and subscriptions

The membership costs to associations that you have to be part of within your business are tax-deductible. This includes things like professional body memberships, awarding bodies, and institutes that give you extra accreditations.

Tax Breaks In Different Industries

It is also worth mentioning that there are different tax incentives available depending on the industry your business sits in. For example, there are Creative Industry Tax Reliefs, that allow qualifying companies to increase their amount of allowable expenditure, reducing the amount of Corporation Tax to be paid. This tax relief applies to businesses directly involved in the production and development of films, high-end television, children’s television, animated television, video games, theatrical productions, orchestral concerts, museum or gallery exhibitions.

This does highlight the importance of having an accountant to look after your annual tax return. At Wright Vigar, we have a team of business & corporation tax planning specialists who are on hand to guide you through the minefield of minimising your tax bill, whilst ensuring you are HMRC compliant. For more information on the services we provide, get in touch.