The Creation of Digit 
28 May 2024
Man sitting at a table scrolling on his phone. He is in front of a display of surfboards.
How to Choose the Right Accounting Software for Your Business
10 June 2024

Top Tax Tips for Small Business Owners

Published: 10 June 2024

Tax planning is often a part of the business that gets overlooked. Hey, we get it. As a small business owner, freelancer, or entrepreneur, we know that you’ll have a hell of a lot on your plate. While client management and quality of service are vitally important, we wanted to draw your attention elsewhere to tax planning and the various strategies you could apply to your business.

Tax regulations can be a complex beast but once you have a good understanding, you may just see the benefits of staying informed. What’s more, efficient tax planning ensures you get the most out of your hard-earned cash! What’s not to love? We’ve put together this guide on small business tax advice and all things tax planning for entrepreneurs to help point you in the right direction.

Understanding Your Tax Obligations

As a small business, there’ll be several different types of taxes you’ll need to pay. These vary depending on several factors, such as the performance of your business and what services you offer. Here’s just a few tax obligations that should be on your radar:

  • VAT – If you sell products and services, you may need to start charging Value Added Tax, for which the standard rate is set at 20%. VAT is charged to customers as a separate amount on an invoice which is then paid directly to HMRC.
  • Income Tax – Once your profit goes over your personal tax allowance, you’ll need to start paying income tax which will be calculated based on the profits of your business.
  • NIC – If your business has other staff on the payroll, you’ll need to pay National Insurance Contributions directly to HMRC out of employee salaries.

It’s a good idea to get familiar with the different types of taxes and make sure you stay up to date with changes in these tax laws. Missing a deadline could mean you rack up a hefty fine. And it goes without saying it’s always best to stay on the right side of HMRC!

Keeping Accurate Records

Organisation really is your best friend when it comes to maintaining detailed financial records. Not only does it mean you comply with legal requirements, having accurate records ensures you’re in the best position possible to make informed decisions about how to improve the financial health of your business. This is something that is much trickier to pin down without the clear overview that comes with well-kept records containing hard facts and data. Your future self will thank you for when it comes to filing your annual self-assessment tax return.


So, we’ve established the importance of keeping records, but often the question is ‘how long do I need to keep them for?’. Well, HMRC advises that records must be kept for 6 years from the end of the last company financial year they relate to. This includes but is not limited to:

  • Receipts & petty cash
  • Orders & delivery notes
  • Invoices, contracts & sales books
  • Bank statements & correspondence
  • Paying-in slips

In some cases, this can even be longer. For example, if the company has bought something that it expects to last more than 6 years (normally equipment or machinery), or if the records show a transaction that covers more than one of the company’s accounting periods.

Taking Advantage of Deductions and Credits

Understanding tax laws means you’ll also be able to take advantage of deductions and credits available to you. As now’s as good a time as any, we thought we’d list some tax deductions for small businesses here to consider if they apply to you:

Startup costs – generally, most companies can claim back costs incurred when initially starting their business, e.g. for stock and equipment. These are known as pre-trading expenses and must only be used for expenses made before you started trading through your first tax return.

Home office deductions – if you regularly work from home or have a dedicated office space for use within your home, you can claim back on some expenses incurred from running your business. This could include utility bills such as gas and electric, telephone and broadband, or even a percentage of your rent payments. You must be able to prove you spend a significant amount of time working from home.

R&D tax credits – a little more niche, this is for businesses involved in innovative projects in science or technology. Essentially, if you’re spending money on the development of new products or services, or enhancing existing ones in your field, you could be eligible to claim Research and Development reliefs.

Small business rate relief – certain properties could be eligible for discounts from the local council on their business rates. The amount of relief received all depends on the property’s rateable value. Business rates aren’t paid on a property with a rateable value of £12,000 or less, if this is the only property your business uses.

Reclaiming VAT – if you’re classed as a VAT-registered business, you can reclaim VAT on items bought for business use when filling out your VAT return.

Planning for Estimated Taxes

How best to save on business taxes? If there’s one thing we want to get across in this article, it’s that planning is everything! Looking ahead to your future expenses really will alleviate some of your financial stress as you won’t be caught out with surprise deductions that have a large impact on your business. With that in mind, we’d recommend getting ahead and calculating your estimated taxes for the financial year in question. This is especially helpful for businesses with fluctuating income. In calculating your estimated taxes, you’ll feel well-equipped to handle upcoming challenges and the ebbs and flows of the businesses’ finances.

Find out more about how to calculate and pay estimated taxes here.

A Helping Hand from Accounting Software

So how best to implement our small business tax tips into your daily life? Well, a good place to start is to find accounting software that will help you streamline your tax preparation and record-keeping. Aside from it being a huge time-saver on tedious manual tasks, you’ll also be able to have comprehensive overviews and information on all aspects of taxes and finances stored in the same place. This level of organisation ensures accuracy and practicality so you can get on with other more important things, like running your business!

You’ll want to opt for efficient accounting software that has all the features necessary to simplify your working life. With software like FreeAgent, you’re able to run your entire business from absolutely anywhere. You heard us right! That means sending invoices, filing tax returns, managing expenses, the lot, are all easily accessible to you and can be done on the go.

Voted the UK’s number 1 bookkeeping software for small businesses, it’s no surprise that our very own bookkeeping service offers FreeAgent software as part of the package. We want you to be able to get the most out of your pay packet and that means being tax efficient. Accounting software brings you one step closer to this.

Staying Ahead of Deadlines

In the effort of staying up to date with the all-important tax deadlines, it’s a good idea to set reminders. Whether that’s an electronic message alert or a good old-fashioned pencil mark on your hanging calendar, taking these steps may just prevent you from missing an important deadline.

Dates for the Diary:

  • 5th October 2024 – deadline for telling HMRC you need to complete a return
  • 31st October 2024 – deadline for submitting paper tax return
  • 31st January 2025 – deadline for submitting an online tax return
  • 31st January 2025 – deadline for paying tax you owe
  • 5th April 2025 – end of tax year
  • 6th April 2025 – start of new tax year

Are you reading this with the rising anxiety of someone who has perhaps already left things a little too late? Wipe your sweat, that’s where we come in! Our late account filing package is an express service with a 48-hour turnaround that will have you back on track before you know it. Because we get that, as business owners and entrepreneurs, you’re spinning multiple plates and don’t always have time to sort through the accounting side of things too. Check out our late filing service page for more info.

It’s always best to stick to the rules and ensure you file accurate returns, pay taxes by the due date and furnish information of returns in a timely fashion. To avoid penalties if you know you are going to miss a deadline, always apply for an extension of time to file or a payment plan.

Review and Adjust Regularly

Something we encourage you to do is have a regular review of financial statements and tax strategies. Staying on top of changes and new regulations will help keep you informed on how to remain tax efficient. We also suggest adjusting estimated taxes and financial plans as the business grows and evolves. Remember, a one-size-fits-all approach doesn’t apply to your unique business!

Get In Touch

Interested in something you read in this blog? Want to discuss how professional accounting services can streamline your tax processes? Or maybe you’re brimming with more tax-related questions? Contact one of the team who would be happy to hear from you and are on hand to assist in any way.

Need help?

We look after limited companies, sole traders, freelancers, contractors and CIS workers.

Ready to get started?