Business owner? Don't forget tax credits!

Tax credits are something that most accountants don't like to deal with. They are often considered as social benefits and therefore something that is outside of the scope of their offering. It is difficult however to advise properly on the tax affairs of an individual or a company without taking child and working tax credits into account. Indeed, many decisions you can take as a business owner will have consequences on eventual tax credits and your bottom line.

It is often assumed that tax credits are only available to the unemployed or the very low earners. What people forget is that there are some instances where your earnings can be very low for a limited period (say you start a new business or you incur exceptional capital expenses). In that case there is no reason not to claim this extra government money. Especially since, because tax credits are based on income and not capital, it is possible to be in a situation where you have significant capital gains, inheritance income or just savings and where you are still entitled to those subsidies.

Top tax saving tips for the self-employed

The most frequent question I get when I meet clients starting their new business is how to reduce their taxes. Obviously this is a loaded question and most of the work we do is geared towards insuring that our clients pay their fair share but not more! There are hundreds of ways you can reduce your tax liability but if you can do just 5 things, here they are:

1. Incorporate

When you start your own business, you have basically 2 options: run your business as a sole trader (or a partnership) or setup a limited company. The sole trader option can seem quite attractive since it's quite simple to administer. However, using a limited company can bring significant tax savings since companies are not subject to National Insurance. As a matter of fact, for a company with annual profits of £80,000 the overall tax savings can be as much as £5,000 per year.

The Seed Enterprise Investment Scheme

This new tax advantaged form of venture capital scheme was announced at the Autumn Statement 2011; it will be focused on smaller, start up companies and will provide a form of relief similar to the EIS Scheme. This scheme will make tax relief available to investors who subscribe for shares and have less than a 30% stake in the company.

The main points to note are as follows:

• The type of company this applies to is one that has less than 25 employees with assets of up to £200,000 who are preparing to carry on new business

Getting grants in the UK

The UK government has set aside more than two billion pounds in funding programmes (grants and loans) for financing small businesses. Free government grants are available to help you start-up, expand or improve your business, if you are eligible. Unfortunately finding the right grant can be extremely tedious as there is no official repository of all available grants and reliefs available. They are many kinds of financial aids available:

Grants and Subsidies
When you receive this money, you don't have to pay it back. It's yours to use under the terms of the grant. The national and regional governments know that it's tough for small businesses to bring new products to market, make your company more efficient, or hire employees. So they provide billions of pounds a year to aid UK product innovation and grow small businesses.

The national and regional governments also recognise that some regions and business sectors need more economic development support than others. Businesses across the country are eligible for some of the billions of pounds in funding allotted for this development. Small businesses accessing grant programmes enjoy a bonus benefit: once you've successfully received funding, you're more likely to get additional grants from the same agency because you meet their program requirements.