How can a business in the startup phase pay less tax?

How can a business in the startup phase pay less tax?

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Date02 Oct 2014
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Posted ByAdmin
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Taxes are a taxing part of everyday life. And entrepreneurs in the startup phase need to know the circumstances in which they can possibly reduce their taxes.  For details specific to your personal circumstance it’s advised to consult a tax accountant. A good accountant will save you more than they cost and spare you the stress of doing your taxes

In the meantime, find out if the following tax credits, reliefs and incentives apply to you.

  1. Purchase of equipment for business use
  2. A number of capital allowance schemes have been introduced to encourage investment in particular assets or by particular sorts of businesses. Such schemes give tax relief on business equipment such as computers, cars, tools or furniture.

    For startups in the first year of business some extra allowances are also available. The capital allowances investment schemes page on the HMRC website provides a brief description of each scheme, linked to a detailed description.

    However, you cannot claim for things that you sell as your trade. Of course, if you buy on hire-purchase, you can claim a capital allowance on the original cost of the item, but any interest and other charges will be counted as business expenses.

  3. Tax credits
  4. There are two types of tax credits - Working Tax credit and Child Tax credit - both are benefits paid by the HMRC to help people with everyday costs. One can often get both types of tax credits which are not taxable.

    • Working tax credits:
    • Self-employed people and employees, on low incomes, qualify and can claim for a working tax credit. Some conditions apply. For more information, speak to your accountant or go to the working tax credits page on the Gov.uk website

    • Child tax credits:
    • People responsible for the care of at least one child or young person may qualify for child credits. This credit is given to the main carer of the child or young person.

    To find out how much you can get, please either get in touch with your local start-up accountant or visit HMRC’s website.

  5. Research and development tax reliefs
  6. R&D tax relief is a Corporation Tax relief which can either reduce your company’s tax bill or for some small and medium businesses provide a cash sum.  It was introduced to promote investment in innovation and any business that invests in research and development can claim an R&D tax credit.

  7. Enterprise Investment Scheme
  8. An enterprise investment scheme offer tax incentives to encourage direct investment in qualifying companies, but not other types of business. For more details go to the HMRC website or get in touch with your accountant.

  9. The Seed Investment Scheme
  10. Also known as SEIS, this scheme is designed for small, early stage early-stage companies to raise finance by offering a range of tax reliefs to individual investors who purchase new shares in those companies. To find out more visit www.seiswindow.org.uk

What next?

Having read about these reliefs, you will now have a basic understanding of how you can pay less tax. We hope this enables you to discuss your specific business circumstance with your local startup accountant in Welling, Kent.