Small businesses, big wins: How to take advantage of tax reliefs

For small and medium-sized enterprises (SMEs), effective tax planning is essential for protecting your finances, ensuring compliance, and unlocking opportunities to optimise your tax position.

However, many SMEs fail to claim the tax reliefs they are entitled to.

These reliefs could make a huge difference to your financial position, particularly in the wake of rising employment costs due to increases in employer National Insurance Contributions (NICs) and National Minimum Wage (NMW) rates.

Research and Development (R&D) tax credits

If your business is undertaking research and development (R&D) activities, you could claim relief on qualifying expenses.

R&D tax credits provide relief against qualifying R&D work carried out by limited companies, making them a great way to access financial support for innovative projects.

For a project to qualify, it must seek an advance in science and/or technology in an overall field, and there must be scientific or technological uncertainty involved.

Qualifying projects could include, for example, building prototypes of a new medical device or improving workflow automation.

Even better, a project does not have to be finished, successful, or even profitable to qualify for R&D tax relief.

This makes the scheme a fantastic, cost-effective way for SMEs to push the boundaries of their sector and boost innovation.

Business allowances

There are a range of business allowances available that can minimise your tax liability.

Employment Allowance enables qualifying businesses to reduce their National Insurance (NI) liability.

The Autumn Budget 2024 announced an increase in Employment Allowance from £5,000 to £10,500 – meaning that eligible businesses will effectively be able to deduct £10,500 from their NI bill.

Capital allowances enable you to deduct some or all the value of an item from your profits before you pay tax.

For example, Annual Investment Allowance (AIA) enables you to claim up to £1 million on qualifying equipment, machinery, or business vehicles.

100 per cent first-year allowances permit you to claim the full amount for equipment, vehicles, and machinery in the year it was bought.

You can also claim capital allowances on activities and assets such as renovating business premises in disadvantaged areas, patent rights, and intellectual property about industrial techniques.

Butterworth Barlow can help you determine which capital allowances you are eligible for and assist you with your claim.

Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief (BADR) is a tax relief designed to reduce the Capital Gains Tax (CGT) when business owners sell qualifying assets.

BADR is great for small business owners because it provides substantial tax savings on qualifying disposals.

If you’re reading this before April 2025, you could cut your CGT rate to 10 per cent on up to £1 million of lifetime gains, compared to the standard rate of up to 24 per cent for additional rate taxpayers.

However, the Autumn Budget 2024 announced significant changes to BADR.

After April 2025, the BADR rate rises to 14 per cent, before climbing to 18 per cent in April 2026.

Business owners should review their exit strategies and consider selling businesses or shares sooner rather than later, to benefit from the current lower rate.

If you’re preparing to sell your business or pass it on, we’ll ensure the transition is as tax-efficient as possible, safeguarding your hard-earned wealth.

Tax advice you can trust

Tax planning isn’t just about saving money – it’s about creating clarity, certainty, and opportunities for growth.

That’s why we’re proud to be more than just accountants – we’re your partners in success.

Our expert tax specialists work with SMEs to implement tax-efficient strategies that reduce liabilities while ensuring full compliance with HMRC regulations.

We provide solutions tailored to your business’s needs, ensuring that every recommendation supports your goals.

Our team is approachable, professional, and always focused on helping you achieve your financial goals.

Together, we’ll build a foundation for your business to grow, expand, and flourish.

If you’re ready to take advantage of business tax reliefs, get in touch today.