Starting a construction company can be daunting. There are many licenses and fees to consider, and the whole process can quickly get expensive. Thankfully, you can make up for such complications by taking advantage of some small business tax deductions.
You may have more opportunities to save than you initially think. Here are seven tax hacks to consider when planning your budget.
1. Make AIA Deductions
The annual investment allowance (AIA) is the most basic small business tax deduction to file. It allows you to claim up to £1 million in tax relief from items you have purchased for your brand.
Generally speaking, you can deduct 100% of the value of any qualifying machinery or property you bought from your profits in the same tax year as the purchase. Things you buy for personal use that you also use in your organisation do not count. However, you can partially claim the value of these items in some cases, so always double-check with a tax authority.
2. Apply for Business Rate Relief
As a small business, you may also qualify for small business rate relief (SBRR). SBRR lowers your local council business rate if your enterprise owns property under a certain value.
A property’s rateable value must be under £15,000 to qualify for SBRR. Those under £12,000 will not have to pay anything, and those between £12,001 and £15,000 will face varying rates, with higher-value properties incurring higher taxes. You can also only claim the full SBRR if you only use one property, but you may be able to get smaller relief if you own multiple.
3. Claim Employment Allowances
The employment allowance is another key small business tax deduction to consider. You can take up to £5,000 off your National Insurance bill simply by paying staff. The scheme only applies if your National Insurance Class 1 liabilities are below £100,000 a year, but that should not be an issue as a smaller entity.
Further support is available for unique types of hires. For example, you can avoid National Insurance contributions for 12 consecutive months after hiring a veteran. You can also get an additional tax break by hiring an apprentice.
4. Deduct Pre-Trading Expenses
New business owners have an extra option for relief. You can deduct some capital costs and losses you may incur while setting up your organisation before you start making income. These may include legal fees, necessary equipment purchases and advertising costs.
Some items you used before running it but now use for commercial purposes qualify here. You can also claim these expenses up to seven years after you start trading, but be sure to check with tax authorities to be certain of what you can and cannot deduct.
5. Do Not Overlook Foreign Tax Opportunities
In today’s digital, interconnected world, many companies operate in multiple countries — even small ones. Those that do should look for tax breaks in the other countries where they have branches or customers.
For example, operations in the U.S. can deduct the entire purchase price of equipment if they use it for business purposes 50% of the time or more. You can claim up to $1.16 million — around £887,600 — under this credit. Remember — state, regional and city tax schemes may apply, too.
6. Consider Going Green
While construction is not typically an eco-friendly field, you can achieve extra tax savings by embracing green practices. The U.K. has a few environment-oriented tax breaks you may qualify for.
Enterprises in high-emissions sectors can claim a discount on the Climate Change Levy by establishing an agreement to lower emissions with the Environment Agency. Alternatively, you can get a tax credit for using a low-emissions or electric vehicle in your business. In Scotland and Wales, you can get an interest-free loan to install energy-efficient upgrades, which may not reduce your taxes but may offset some costs.
7. Donate to Charity
Finally, you can get small business tax deductions by donating to charitable causes. These donations can include monetary gifts, equipment, land, sponsorship and more, so you may not necessarily have to pay more to qualify for the relief.
Keep in mind that any organisation you give to must be a qualifying charity, so do your research before donating. You also may be unable to claim some other credits if you claim relief from charitable giving. Consequently, it is best to compare all your options to see which offer the most savings.
Small Business Tax Deductions Deserve Attention
Running a new company can be expensive, but it does not have to be as costly as it seems at first. There are many ways to save money by reducing your tax burden.
These seven tax hacks are not the only possible sources of relief but offer some of the most significant and widely available savings opportunities. Review your business and read the fine print of each to determine what applies to you and see how you can save the most money.
