TAX SAVING TIPS FOR SMALL BUSINESS OWNERS
Being an entrepreneur or small business owner is expensive as it is, when entrepreneurs are living on low margins and battling for market share. But operating and owning a small business is significantly more expensive when you pay more taxes than you owe.
When running an independent business, limiting expenses could prove to be the difference between a profitable business and the one plummeting.
It is completely fine, usual for small business owners to look for ways to reduce payable tax on their income. A proper planning of tax can characterize the best opportunities to decrease taxable income and the tax rates that apply. Planning well in advance, looking for opportunities to save tax from the start of business to eventual exit. It also implies that looking at the whole picture, to perceive how you can pay less tax both within the business and on your personal income.
Preparing your business taxes might be more detailed than planning for personal taxes, and it requires you to consider more alternatives. Be aware of the types of allowable business tax deductions that you can claim to reduce your tax payable. As this tax year has been one of a kind in terms of pandemic and government relief endowments, so make sure that you share all the required information with your tax accountant. Also, you should report all income received in your business for tax purposes.
However, saving tax is not the entire story, it is significant not to get distracted. Start with your overall business and personal goals, and then look for the opportunities to cover or pay less tax.
Here are different ways you can overcome the stress of business taxes and ideally put a little (or a lot) more money back in your pockets.
Tax saving tips are as follow:
Track your Spending:
Tracking your spending is simpler than ever nowadays, but it can still seem daunting to few. The best way is to use software like QuickBooks or Quicken to have one more opportunity to catch.
Use Tax Software:
One of the ways to save tax is by using tax planning software, which is an unquestionable requirement for small businesses. Using comparable tax software like Xero Accounting will make planning and filing your taxes online a lot easier. If you do not have the correct information about your expenses, you will pay more. All the small deductions can add up to the expenses.
Tracking your Carryover Taxes:
Taking stress about all this tax filing stuff. Make sure to follow deductions for things like capital losses, net operating losses, or even charitable donations. These are a couple of derivations or credits that might be carried forward when not completely utilised in one year.
Do not forget about Retirement Accounts:
Nobody has more retirement plans than self-employed individuals and entrepreneurs. Talk to your financial planner to assist you with tax reductions and payoff later by assisting you with making a secure retirement.
Employing your Family:
You may be able to save tax significantly by employing your spouse or transferring assets. Looking at the whole family’s tax position and long-term plans.
Request a Meeting with Tax Accountant
Make a report of your documents which are expected for the deadline of the tax return and accounts. Also keep your tax accountant informed about the changes happening in your business which could influence how your tax returns are accosted.
Claim Work from Home Allowance:
Many entrepreneurs or small business owners have their office set up at home, however not all of them understand that they can deduct expenses related to their offices set up at home, incorporating loans, interest payments, utilities, repairs, and insurance. But they should determine that which part of their home is committed to running the business or office.
Save your Auto Expense:
When you are allocating expenses to your vehicle, you must compute what percentage of the time your vehicle is being utilized for work. From that point, you can apply that percentage or rate to your overall vehicle expense. For such classification of deduction of the expense, there are two types which are available: the HMRC’s standard mileage rate (45p per mile is the tax-free approved mileage allowance for the first 10,000 miles in the financial year – it is 25p per mile thereafter. If a business chooses to pay employees an amount towards the mileage costs, these reimbursements are called ‘Mileage Allowance Payments (MAPs)) or your actual vehicle costs (like gas, repairs, and insurance). Find out which one suits you the most before filling.
Discuss Tax Saving Strategies with Tax Accountant:
Work out with your tax accountant to determine your ROI as it is in how your accountant assists you with planning your tax-saving strategy using business and personal tax saving tips.
Look for Any Errors in your Accounting for the Year:
Allow your accountant to keep a check of your accounts and look for any errors, it will be useful to your tax accountant in finding the ways to reduce tax. It is important that you need precise and accurate books to submit to your tax accountant to file your taxes.
Plan for Next Year in Advance:
Planning on how to save tax in advance seems like a brilliant idea as you should start gathering the tax data that you will require one year from now. Being organized and coordinated, helps the process go much smoother. It is essential to focus on details and ensure you are filing an accurate tax return. Maintaining a good relationship with your accountant prevents the probability of misunderstandings and guarantees the process runs without any hassles.
Tax laws are progression of incentives for entrepreneurs and small businesses, and it is not difficult to take advantage of the opportunities when you know how the laws can work in your favour.
Reducing your expenses is a significant and tedious process. As you know that 2020 was not an ideal year for some, 2021 brings opportunities for those individuals who plan accordingly. Do not allow yourself to be stuck in doing the same things you have always done and eventually failed. The time has come to rethink your tax saving strategies and set yourself up for your best tax year.