Five quick ways to reduce your expenses through tax strategies

Reducing your expenses is just as important as increasing your profits but many business owners fail to realise that they could significantly improve their bottom line by taking a look at their tax strategies.  

It might feel like you can’t do anything about your tax liabilities and that you just have to pay what you owe and try to make savings elsewhere – but that simply isn’t the case. 

The truth is that you can reduce your tax obligations in several key ways, and we will be discussing some of them below. 

Capital Gains Tax reliefs 

Businesses can reduce expenses by strategically managing assets to take advantage of Capital Gains Tax (CGT) reliefs.  

For example, utilising Entrepreneurs' Relief (now called Business Asset Disposal Relief) can significantly lower the CGT rate on the sale of business assets.  

Additionally, timing the disposal of assets to align with lower-income years can reduce the CGT rate, leveraging allowances and exemptions effectively. 

Inheritance Tax planning 

Effective Inheritance Tax planning with your trusted accountancy professional is crucial for any family-run business.  

Utilising reliefs such as Business Property Relief can potentially exempt business assets from Inheritance Tax.  

Moreover, planning the succession and transfer of business assets well in advance can ensure a more tax-efficient transition, safeguarding the financial stability of the business for future generations. 

It can also go a long way to setting up your loved ones for financial success and stability in the future.  

Navigating VAT to minimise costs 

Value Added Tax (VAT) planning is essential for managing cash flow and reducing costs.  

Strategies include adopting the most beneficial VAT scheme, such as the Flat Rate Scheme for smaller businesses, which simplifies calculations and can reduce the overall VAT liability.  

Regularly reviewing and categorising expenses correctly ensures that maximum VAT is reclaimed on eligible expenses. 

Again, an experienced accountant can help you manage your VAT responsibilities.  

Leveraging tax incentives for R&D 

Businesses engaging in research and development (R&D) can benefit significantly from R&D tax credits.  

These incentives can reduce your tax bill or provide a cash rebate for qualifying R&D activities.  

This not only encourages innovation but also provides a financial reprieve by effectively reducing the cost of investment in new technologies and processes. 

Utilising Government grants and tax incentives 

Exploring Government grants and tax incentives can lead to direct savings for your business and a more stable and healthy cash flow.  

From grants for specific sectors to tax incentives for employing certain demographics, such as apprentices or graduates, these opportunities can offer direct reductions in tax liabilities.  

Keeping abreast of available schemes through the Government’s “find a grant” site and applying them strategically can result in significant financial benefits for the business. 

Your accountant will be able to provide advice on applicable grants to your business and suggest ways in which you could make your company more eligible for funding.  

In summary, by focusing on these tax-centric strategies, businesses can effectively reduce their expenses through careful planning and strategic decision-making.  

Each of these tactics requires a thorough understanding of the tax system, however, and proactive management to maximise the financial benefits is essential. 

Speak to one of our experts for more information on reducing your expenses through tax strategies.