5 Ways to Reduce Small Business Startup Tax

Money is tight when your small business is in a startup phase.

The last thing you want is not to miss out on reclaiming expenses you incur as you start to build your small business.

But while you’re busy managing a team, working on developing your services, marketing your business, and doing all the other things new business owners need to do, it’s common to forget about the finances.

In such situations, you need to know the circumstances in which you can possibly reduce your tax.

For details specific to your startup, it is always advisable to consult a tax advisor; a professional will spare you the stress of doing your tax.

In the meantime, have a look at the following tax credits, reliefs and incentives to help you reduce your startup tax,

1. Claim pre-trade costs

It’s widespread to assume that you can claim for expenses only after you start your business.

But the fact is that you can claim relevant expenses for up to 7 years before the business startup begins its operations.

Have a look at some areas where startup expenses may be tax-deductible:

  • web domain & internet fees
  • computers & software
  • professional services
  • travel cost

Tablets and laptops can be a grey area for expenses because their portability means they are often used for work and personal purposes.

If you are confident that you can justify the expenditure based on your business need, you should be fine to claim these.

Professional services can include the costs related to accounting and legal advice, such as drafting of contracts and company formation.

Try to maintain an accurate record of pre-trading and running costs, including VAT receipts.

2. Claim Business insurance expenses

You can also claim the cost of your business insurance policies as limited company expenses, so long as they are used strictly for business purposes.

Allowable expenses for insurances include:

  • Public Liability Insurance
  • Professional Indemnity Insurance
  • Vehicle Insurance (if you are using a vehicle for business)
  • Employers’ Liability Insurance
  • Contents Insurance
  • Directors and officers insurance
  • Office content insurance
  • Storage unit insurance- usually relevant for E-commerce businesses

3. Advertising and marketing expenses

The promotion of your startup is an integral part of building momentum for your new business. So, the following are claimable on your business expenses:

Such expenses can be for one-off promotions or ongoing costs, so long as the investment relates solely to business purposes.

4.  Home office expenses

Generally, most businesses run on their own property or rented property, but it is also possible to run your business from home.

If you run your business from home, then you are able to claim a percentage of your home office costs and utility bills as business expenses.

On the other hand, you may need to work out what rooms you use for your business needs and the amount of time they are used for work purposes.

You will also be able to claim back other costs related to working from home, so long as they’re incurred solely for the purposes of business such as:

  • lighting
  • heating
  • postage & printing

5. Claim your salary

If your business startup is a limited company and you are a director, it is normal for you to pay yourself compensation as an employee of your own business.

That amount of salary and the corresponding National Insurance Contributions can be claimed as allowable expenses.

Final thought

Having read about these reliefs, you will now have a basic understanding of how a small business startup can reduce tax liability.

Most of business owners can easily overlook one or more of these items, so keep this article handy and make sure you are always holding on to your receipts for your expenditures.

However, it is always advisable to take the guidance of an accountant or a tax adviser to save both the tax and time.

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2 thoughts on “5 Ways to Reduce Small Business Startup Tax”

  1. Many people feel that accountants are just there to do the number crunching and provide reports. An accountant’s professional role is to advise and assist in the effective management of a company. Accountants play multiple roles in a business: gathering information, reporting financial results, and preparing taxes. Accountants also help businesses establish internal controls and identify risks and opportunities through research and analysis.

    • Great point, Jerry. Accountants play a key role in the success of your business. Starting out, business owners often wear the accounting hat themselves (I’ve been there), which can be challenging!


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