Small businesses are the backbone of the UK economy, contributing to job creation, innovation, and economic growth. However, running a small business can be challenging, especially when it comes to managing finances and taxes. Fortunately, there are several tax breaks available for small businesses in the UK that can help ease the burden and save money. In this article, we will discuss six tax breaks that every small business owner should know about.

1. Small Business Rate Relief

The Small Business Rate Relief (SBRR) is a government scheme that provides relief on business rates for eligible small businesses. Business rates are taxes paid on non-domestic properties, such as offices, shops, and warehouses. Under the SBRR, small businesses with a rateable value of less than £15,000 can receive a 100% relief, while those with a rateable value between £15,000 and £51,000 can receive a tapered relief. This can result in significant savings for small businesses, especially those operating in expensive areas.

2. Research and Development Tax Relief

Innovation is crucial for the growth and success of any business, and the UK government recognizes this by offering tax relief for research and development (R&D) activities. Small businesses can claim R&D tax relief if they are working on a project that seeks to achieve scientific or technological advancement. This relief can be claimed as a deduction from the company’s taxable profits or as a cash payment for loss-making businesses. It is a valuable tax break that can encourage small businesses to invest in research and development, leading to growth and competitiveness.

3. Capital Allowances

Capital allowances are tax deductions that businesses can claim on certain assets, such as equipment, machinery, and vehicles. These allowances can be claimed as a percentage of the asset’s cost, reducing the taxable profits and, therefore, the tax bill. Small businesses can claim the Annual Investment Allowance (AIA), which allows them to claim 100% of the cost of qualifying assets, up to a certain limit. For the tax year 2021/2022, the AIA limit is £1 million, providing a significant tax break for small businesses investing in assets.

4. National Insurance Contributions (NICs) Holiday

The NICs holiday is a tax break introduced by the government to encourage job creation in the UK. Under this scheme, eligible small businesses can claim a holiday from paying employer NICs for the first ten employees they hire in their first year of business. This can result in savings of up to £5,000 per employee, making it easier for small businesses to expand and create jobs.

5. Seed Enterprise Investment Scheme (SEIS)

The Seed Enterprise Investment Scheme (SEIS) is a tax relief designed to encourage investment in small, early-stage companies. Under this scheme, investors can receive income tax relief of up to 50% on investments of up to £100,000 in qualifying businesses. This can be a significant incentive for small businesses looking to raise funds and grow their business. Additionally, investors can also benefit from capital gains tax relief and inheritance tax relief under the SEIS.

6. Entrepreneurs’ Relief

Entrepreneurs’ Relief is a tax break that allows business owners to pay a reduced rate of capital gains tax (10%) when they sell all or part of their business. To be eligible for this relief, the business owner must have owned the business for at least two years and must hold at least 5% of the company’s shares. This tax break can be beneficial for small business owners looking to sell their business and retire or move on to new ventures.

In conclusion, small businesses in the UK can benefit from various tax breaks that can help them save money and grow their business. These tax breaks are designed to support and encourage small businesses, recognizing their contribution to the economy. As a small business owner, it is essential to be aware of these tax breaks and take advantage of them to reduce your tax bill and invest in your business’s growth. Consult with a tax professional to determine your eligibility and make the most of these tax breaks for your small business.