When establishing and working a small enterprise, it’s fairly often “all hands-on deck”, with all efforts targeted on the day-to-day working of the enterprise. It’s simple, subsequently, to overlook about areas reminiscent of tax aid which don’t come beneath the each day administration of what you are promoting. Nevertheless, forego these tax breaks and you can miss out on methods by which you can also make what you are promoting extra environment friendly and aggressive.
Quite a few tax breaks are relevant to small companies, some that are business particular and a few that are usually relevant to all SMEs.
If what you are promoting meets the HMRC-qualifying standards, these tax breaks might considerably decrease your tax invoice, making what you are promoting extra worthwhile and environment friendly with little further effort in your half.
The next tax breaks can be found to SMEs so let’s have a look and see if what you are promoting may very well be eligible:
Employment Allowance
If what you are promoting has staff which you pay via PAYE, Employment Allowance is value as much as £10,500 off your employer’s Class 1 Nationwide Insurance coverage invoice per tax 12 months. It reduces your employer’s Nationwide Insurance coverage invoice every time you run your payroll till the £10,500 is used up otherwise you attain the tip of the tax 12 months, whichever comes first.
You may solely declare this in opposition to Class 1 Nationwide Insurance coverage which you’ve got paid, however you possibly can nonetheless declare it even when your Nationwide Insurance coverage invoice is lower than £3,000 per tax 12 months.
Most companies, charities and CASCs (Neighborhood Newbie Sports activities Golf equipment) are eligible for this allowance, together with these which make use of a care or help employee for private care. You may’t declare that is you utilize any home, family or private employee except it’s for care or help work. The opposite circumstances which might make you ineligible embody Private Service Corporations (PSCs) working inside IR35 guidelines, companies which do greater than half of their work for the general public sector (such because the NHS), and people corporations with a sole director and worker who’re paid over the Secondary Threshold of £157 per week.
It’s actually easy to assert Employment Allowance – you simply want to assert this via your payroll software program by coming into “sure” into the Employment Allowance indicator subject. In case your small enterprise outsources its payroll, ensure you ask your payroll supplier to do that for you.
Annual Funding Allowance (AIA)
This allowance is a part of your Capital Allowances and means that you can deduct the complete worth of a qualifying AIA merchandise out of your earnings earlier than tax, though chances are you’ll have to pay tax later for those who go on to promote the merchandise.
You may declare this on most plant and equipment belongings, together with integral options of buildings, sure fixtures, alterations to put in plant and equipment (though not for repairs) and for the price of demolishing plant and equipment. You may’t declare AIA on vehicles or on gadgets which have been given to you or what you are promoting, or gadgets owned for any pre-business motive though you might be able to declare writing down allowances on these which might can help you deduct a proportion of their worth per 12 months out of your earnings.
As of 2025, the AIA quantity is ready at £1 million – as a way to stimulate enterprise funding and encourage companies to spend money on their plant and equipment. Previous to this enhance, the AIA quantity was £200,000 and the allowance quantity tends to fluctuate.
Small Enterprise Charges Aid
If what you are promoting property has a rateable worth of lower than £15,000, it is best to have the ability to declare Small Enterprise Charges Aid, which operates on a sliding scale so that companies with a rateable worth of lower than £12,000 would pay no enterprise charges and people with a rateable worth of £15,000 or above wouldn’t be entitled to any aid on their enterprise charges. For instance, if what you are promoting property has a rateable worth of £13,500 you’d be entitled to 50pc off what you are promoting charges invoice.
You may solely declare this when you have one sole enterprise property though for those who purchase a second property, you’d have the ability to maintain your entitlement for 12 months. To assert this charges aid, you want to contact your native council.
There are different types of charges aid, even for those who aren’t eligible for Small Enterprise Charges Aid – for instance, what you are promoting property is perhaps eligible for Rural Charges Aid if it’s a protected enterprise (reminiscent of the one store or put up workplace in your rural space). Otherwise you is perhaps eligible for a ‘Retail Low cost’ (Retail, hospitality and leisure aid), which In case you’re eligible, might get you 40% off what you are promoting charges payments for the 2025 to 2026 billing 12 months (1 April 2025 to 31 March 2026). You would want to contact your native council to examine about eligibility.
SME R&D Tax Aid
R&D (analysis and growth) reliefs can be found to companies which create or considerably work in direction of advances in science and expertise, though these advances need to influence the general subject by which you might be working inside, not simply what you are promoting, they usually received’t be allowed if they’re merely utilizing a sure expertise in your business for the primary time.
There are numerous advisers on the market claiming that R&D reliefs will be claimed by companies that are completely past the scope of science and expertise, however it is best to use warning if making an attempt to assert R&D Aid on this manner as HMRC’s standards are maybe stricter than some would assume.
Of specific curiosity to small companies is SME R&D Aid, which is relevant to companies with lower than 500 employees and a turnover of lower than €100m or a stability sheet complete beneath €86m. In case you are eligible for this aid, you possibly can deduct an additional 86pc of your qualifying prices out of your yearly revenue in addition to the conventional 100pc deduction. If what you are promoting is loss-making, you possibly can declare a tax credit score of as much as 14.5pc of your surrender-able loss. Your qualifying prices can embody employees prices in addition to consumable gadgets, subcontractor prices and software program charges however you possibly can’t embody capital expenditure or lease and charges.
Inventive Industries Tax Aid (CITR)
If what you are promoting is in one of many artistic industries, chances are you’ll be entitled to assert one among a sequence of tax reliefs aimed on the artistic enviornment.
These industries and reliefs are as follows:
Movie (FTR)
Excessive-end tv (HTR)
Youngsters’s TV (CTR)
Video video games (VGTR)
Animation (ATR)
Theatre (TTR)
Orchestra (OTR)
Museums and galleries exhibitions (MGETR).
So as to be eligible for any of those reliefs, companies concerned within the movie, TV, or Video Video games sectors, need to move a cultural take a look at administered by the BFI, but when profitable this will can help you deduct between 80pc and 100pc of qualifying expenditure relying on the artistic business by which what you are promoting is predicated.
Your corporation have to be chargeable for Company Tax so as to have the ability to declare any of those reliefs.
Seed Enterprise Funding Schemes (SEIS)
Lastly, while not a tax break as such, small companies may additionally have the ability to profit from SEIS, which is a type of enterprise capital scheme designed to attract funding into what you are promoting. If what you are promoting’s scheme is eligible, you can obtain a most of £250,000 in funding.
These schemes present tax aid in your buyers – nonetheless, each buyers and the enterprise want to satisfy sure HMRC standards to learn from the tax break and SEIS tax aid will be withdrawn if yours or your buyers’ circumstances change sooner or later.
An organization can use the SEIS scheme if it:
is established within the UK
carries out a brand new qualifying commerce
is just not buying and selling on a recognised inventory change on the time of the share challenge
has no preparations to develop into a quoted firm or a subsidiary of 1 on the time of the share challenge
doesn’t management one other firm (except that firm is a qualifying subsidiary)
has not been managed by one other firm for the reason that date of being integrated
So as to be eligible to funding beneath SEIS, what you are promoting will need to have lower than 25 full time staff, gross belongings of lower than £350,000, and never be a member of a partnership.
Because of the situations set by HMRC to make sure that these schemes are tax compliant, it’s smart to hunt steering, both from HMRC who’ve a particular division to cope with enterprise capital schemes, or from a specialist consultancy.
Vital influence
Whereas not each SME shall be eligible for every one among these tax breaks, the place these are relevant to what you are promoting, they will make a big influence on the profitability and longevity of what you are promoting, particularly in making an attempt financial situations.
David Redfern is director of DSR Tax Claims
Additionally see: How can my small enterprise profit from tax reliefs accessible?
Initially revealed in 2019 – Up to date with new standards and thresholds knowledge in 2025.
