How would you like to keep more of your hard-earned cash?
Well, let’s be honest. Although paying tax is necessary, keeping the NHS running and roads in decent shape, that doesn’t mean handing over more than you need to.
The smartest business owners know how to be tax efficient while staying on the right side of HMRC. Here’s how you can do the same — and maybe treat yourself to an extra takeaway or two with the savings.
Watch: How to Pay Less Tax as a Business Owner (Legally!)
Want the full breakdown in under 10 minutes? Watch the video here:
Claim Every Legitimate Business Expense
Running a business costs money, and most of those costs are legitimate business expenses that can reduce your taxable income. Here are some common tax-deductible costs:
- Office essentials — Laptops, Software, Stationery, Phone bills — and yes, even that fancy ergonomic chair counts
- Travel — Fuel, Train fares, Taxis to business meetings — but sadly not your weekend trip to Ibiza
- Freelancers & Contractors — Graphic Designers, Copywriters, Virtual Assistants — because, let’s be honest, you can’t do everything yourself
- Marketing — Website hosting, Facebook ads, email software — even that “one-time” Canva Pro upgrade you keep renewing
To make sure you claim everything you’re entitled to, keep digital receipts and track expenses with an app like QuickBooks or FreeAgent. Or, if you prefer old-school methods, a shoebox labelled “Receipts” works too.
Use the Trading Allowance (AKA Free Money)
If your Self-Employed income is less than £1,000 per tax year, you don’t have to declare it or pay tax. It’s basically free money from HMRC — and we don’t get a lot of that.
If your Self-Employed earnings are low, claim the Trading Allowance and enjoy a tax-free bonus. Maybe you could spend it on something fun, like a day out with the kids.
Claim Your Home Office Costs
If you work from home, you can deduct a portion of household expenses, such as:
- Rent or mortgage interest
- Electricity, Heating, Water
- Broadband
And, even if you can’t be bothered with all the calculations, HMRC even offers a simplified flat rate.
Whichever method you use, deduct what’s fair for your work-from-home setup or use the flat rate. Just don’t try to claim for the entire house — unless you want a visit from HMRC.
Contribute to a Pension and Get Free Money from the Government
Investing in a pension not only reduces your taxable income — the Government also tops up your contributions. Basic rate taxpayers get a 20% boost, while higher earners can claim even more. It’s like getting a bonus for looking after yourself.
Set up or top up a private pension and enjoy that sweet, sweet tax relief. Future-you will thank you while sipping cocktails on a beach somewhere.
Split Income with Your Spouse, if Applicable
If your Partner earns less than you do, you might be able to share the tax burden and lower what you owe. The Marriage Allowance lets one partner transfer £1,260 of their Personal Allowance to the other.
If you run a business, paying your partner a fair salary can be tax efficient
So, if you’re married, check up whether income splitting could save you tax —and maybe cover a nice date night.
Write Off Big Purchases with the AIA
Do you need new business equipment? Under the Annual Investment Allowance (AIA), you can deduct the full cost of items like Laptops, Tools and Machinery from your taxable profits. That means your shiny new MacBook Pro could be saving you money.
It’s important to buy necessary business equipment before the tax year ends, though, in order to maximise deductions. Just don’t go overboard — HMRC might raise an eyebrow if you try to claim a jet ski as a “business expense”.
File Early, Stress Less
Do you leave Tax Returns until the last minute? Classic mistake. Filing early helps you:
- Plan ahead for payments
- Avoid penalties
- Spot extra deductions in time
So, mark your calendar, file early and enjoy peace of mind, while everyone else is panicking in January.
Hire an Accountant (Seriously, It’s Worth It)
A great Accountant can save you far more than they cost. They know the tax code inside out, so they can uncover deductions you’d miss and ensure you stay compliant with HMRC. And they deal with all the boring paperwork, so you don’t have to.
If you’re earning well, get an Accountant — the best investment you’ll ever make. And no, your mate Dave who’s “good with numbers” doesn’t count.
Keep More of Your Money
There’s no reason to overpay HMRC, when legal tax-saving options exist. Use the strategies I’ve outlined, keep solid records and seek professional advice where needed.
Want expert guidance? Grace Certified Accountants can help you keep more of what you earn. Get in touch today, and let’s make sure you only pay what’s fair — no more, no less. Not to mention maybe freeing up some cash for that holiday you’ve been eyeing.