Tax Tips for Small Business Owners

Small business owners have several tasks to take care of, including creating a business plan, handling legal and compliance responsibilities, managing marketing and sales, and much more. Thus, it’s no surprise they often miss tax deadlines or lose the financial data required to submit their returns. 

One thing that can prepare you for tax season is ensuring that all your documents, receipts, etc., are correctly organised. In addition, you need to start using the various resources and tools available to facilitate new entrepreneurs. In this article, we share some more essential tax tips for small business owners that you can use to ensure you pay your taxes on time. 

Learn the Financial Jargon 

Many taxpayers feel they need a new dictionary to comprehend their tax returns. Unfortunately for small business owners, the accounting world comes with its terminology. Thus, it’s a good idea to learn jargon that will help you understand your organisation’s position. 

Here are brief definitions for some standard terms you might come across on your balance sheet:

Net Sales: The total profit earned after subtracting all the expenses from the total revenue

Revenue: The money earned through the sale of products or services

Cost of Goods Sold: The cost of producing the products your business sells

Gross Profit: The amount left after deducting the Cost of Goods Sold from the total revenue

Keep Up with Bookkeeping 

An excellent way for small business owners to minimise the stress during the tax season is to keep up with bookkeeping throughout the year. With a wide variety of accounting software available, business owners must stop depending on manual, time-consuming tasks that leave room for mistakes. 

You can use comprehensive options such as QuickBooks to automate essential bookkeeping functions, such as:

  • Tracking income and sales
  • Tracking expenses
  • Managing inventory 
  • Preparing and sharing invoices

When you have all your financial data updated and saved in a single place, you can claim tax refunds and avoid penalties due to incomplete or incorrect tax returns. 

Separate Personal and Business Finances

From the start, small business owners need to separate their business and personal expenses. Distinguishing between the two will help you claim deductions on your tax return and back up those claims if the HMRC decides to conduct an audit. 

Here are some steps you can take to segregate your personal and business finances:

  • Open separate bank accounts for your business and use a credit card only for business reasons. That will help you keep track of your expenses while boosting your borrowing power and increasing your credit score. 
  • Do not combine personal and business expenses. For instance, if you’re purchasing stationery for your business and home simultaneously, ask for two different receipts. 
  • Draw a specific salary from your business account every month. That is going to help you figure out how your income is going to get taxed. 

Learn About Tax Deductible Expenses

It is worth mentioning that the lower your business’s profitability, the less tax you will have to pay at year-end. That is because one way to legally lower profit is by claiming business-related items as an expense. 

Various expenses are tax-deductible, depending on the nature of your organisation and its ongoing requirements. Here are some of the most common tax-deductible expenses:

  • Travel costs for work travel such as transport fares and petrol 
  • Office costs such as internet and phone bills
  • Subcontractor costs and salaries
  • Raw material and/or stock for resale 
  • Marketing and advertising costs
  • Financial costs such as insurance or bank charges

Note that all these expenses must be made solely for business purposes instead of personal use. 

Record All Business Expenses

Several small businesses claim less than half of their business expenses, partly because they need a dependable system to document expenditures while on the go. Without properly recorded receipts, entrepreneurs forfeit valuable tax deductions, forgoing cash they could invest into their business. 

Using a mobile application to track mileage, record receipt data, and create expense reports, you can benefit from claimable business expenses. Additionally, a lot of these tools sync with your all-in-one accounting software. 

Check If You Are Eligible for Tax Relief

There are several tax reliefs available to facilitate business growth. You can see which of the following you might be eligible for. 

Research and Development (R&D)

The UK government allows your organisation to claim tax credits for research and development work. However, several small business owners still need to take advantage of this scheme that aims to reward innovation. It is estimated that the total amount of unclaimed tax relief owed to SMEs across the UK equals £84 billion. 

Patent Tax Relief

Another way to earn the rewards of innovation is by claiming tax relief on profits earned through patented inventions. Again, you will need the assistance of an accountant. However, this is undoubtedly worth looking into if your business has Patents.

Employment Allowance

If you presently pay Class 1 National Insurance, you can save up to £3,000 per year from this bill. 

Business Rates

If you own a property with a rateable value of less than or equal to £15,000, you can get tax relief for your business. In many cases, you can lower the business rates bill to zero. 

Use Online Accounting Software

Online accounting software such as QuickBooks, Xero, SageOne and FreeAgent can save you plenty of time and make your life easier at year-end. They even let you access your records from anywhere at any time. Moreover, you can use this online accounting software to link your bank accounts and submit your self-assessment and VAT returns from within the software front-end. 


Tax season is stressful for small business owners who prepare, file, and pay their taxes. Use the tips mentioned above to prepare yourself for the upcoming tax season. Whether you are checking if you are eligible for tax relief or looking for sound accounting software, the best time to start planning is today. 

Contact ISA Consortium, we offer various accounting , tax and bookkeeping services to help you focus on your business goals. Contact us for more information!

Book your free appointment with ISA Consortium

For more information and professional advice, please get in touch for a free appointment. We will discuss all the needs of you and your business, and head you in the right direction for future business .

All this and more

We offer all the above as part of our full Tax Services and Accounting and can also help you with Capital Gains Tax, Inheritance Tax, Retirement Planning, even filling out your Self-Assessment Tax Returns for you.


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