All businesses pay taxes. Some will pay more, and some will pay less. Several factors back it. The size of your business, the structure, and the profit margins decide what you pay to the government. Before you know how to save your income, you need to check the various types of taxes.
The Federal government collects business income taxes, employment taxes, and self-employment taxes, to name a few. The states collect corporate taxes and franchise taxes. The list is not exhaustive. A different set of guidelines regulates C-corporations, S-corporations, LLCs, and Sole Proprietorship businesses.
You will find C-corporations and sole proprietorship firms paying the exact structure of income taxes, as well as the same deductions. C-corporations cannot get any tax exemptions if it distributes dividends. In the case of the S-corporation and the LLC, the business income passes through the business owner and is then assessed.
Sometimes, understanding taxes can get cumbersome. Tax reliefs, exemptions, and credits are various forms of assistance that the government provides businesses to improve the economy. Read the ways to reduce your Federal and State tax liability for your business.
Tax Relief on Business Assets
Good knowledge of taxation norms can help you save your business profits from incessant taxation. One such tax relief comes in the form of a capital grant on commercial property assets. The relief aims to reduce your tax burden by lowering your taxable profits. Now, most businesses have bought a business place, machinery, and business transport this way.
It also incorporates computers, HVAC systems, sanitary wares, furniture for the office, and more. You can also claim it on refurbishments of the said possessions. The area is quite essential for business owners, but complex too. The smart move is to consult an expert in some instances.
If you are an employer, you can avail yourself of the National Insurance Relief. It can help you save up to 4,000 pounds. By claiming this, you pay fewer employers Class 1 National Insurance. If you have a tax liability of 100,000 or less in the previous year, under the Class1 scheme, you are also eligible to claim.
Most businesses with employees can avail of this scheme and those that pay Class 1 national insurance. In case you pay to charities, the same can be taken into account. The first option is to pay via the HRMC Basic PAYE Tools. Moreover, you can claim these by using your payroll software as well. You need to claim it every year.
Annual Investment Allowance
Annual investment allowance is available till 2022. The government has announced a 1 million cap on this scheme. This is another variety of tax relief on business assets. It also allows you to deduct the cost of machinery and plant from your profits. Your business is eligible for this if you use computers and cars for your business.
Moreover, you can also get relief based on the depreciation of your existing machinery. Fixtures are also included. You can now claim the relief through a Self-Assessment tax return. There is some good news for companies that have or will invest in plants and machinery from 1st April 2021 to 31st March 2023 since they’ll become eligible for a 130 percent super deduction. That seems to be great tax relief.
Research and Development Tax Relief
Your business can get relief in taxes in this category if it is a Limited company. You must be working on innovation and science projects. There is no requirement to prove if the study is successful or not. Your actions directed at the greater good are enough for you to claim such relief.
You must have less than 500 staff, a 100 million Euro turnover or less facilitates your application. Moreover, you can also apply for this tax relief if you made a loss of at least 14.5 percent of the surrendered loss.
Creative Industries Tax Relief
There are eight different Corporation tax reliefs under this scheme. They include Film tax, high-end TV tax, animation tax, children’s TV tax, video game tax, orchestra tax, museum and galleries tax. If your company is responsible for film production from start to end, you can claim relief under this section.
There is another qualifier for this. You need to pass the British Film Institute’s cultural test to be eligible to apply. It requires all movies, plays, and theatricals to be marked British.
These are a few of the tax reliefs that you can claim on your business. The governments are taking care to ensure that the economy develops fast. Moreover, the pandemic has also paved the way for more relaxation.
Learn about options to give your business the push amidst slow and uncertain times. However, while calculating tax and implementing relaxations, do thorough research and ensure all that is done is current to avoid penalties.