Small business tax relief: what you need to know in 2016

Finance and legal

27 June 2016

Nobody loves filling in their tax return. But taking the time to understand the tax breaks potentially available to your business could save you some serious cash.

To help you get started, we’ve outlined some of the most relevant reliefs below.

Small business rate relief

Depending on the rateable value of the property your business operates from, you could be eligible for relief on your business rates. Until March 2017, properties with a rateable value of £6,000 or less receive 100% relief, and from £6,001 to £12,000 the scale slides from 100% to 0%. To apply or find out more about rates for small businesses, get in touch with your local council.

Employment allowance

As an employer, you can claim up to £3,000 off your National Insurance bill through your payroll software. Use the Employers National Insurance calculator to find out more about you employment allowance eligibility.

Annual investment allowance

This capital allowance lets you claim corporation tax relief on eligible purchased assets up to a value of £500,000. The amount is claimed on your company tax return.

Marginal relief

If your profits are between £300,000 and £1.5m you can claim marginal relief in your online company tax return. This will reduce your corporation tax rate in proportion to your earnings. Take a look at Gov.uk for an online tool that will help you calculate the rate of relief your business may be eligible for.

Entrepreneurs’ relief

If you’re a sole trader or business partner who’s sold a business that you’ve owned for at least a year, you’re eligible for entrepreneurs’ relief. This charges capital gains tax at just 10%.

The patent box

This allows you to apply a lower corporation tax rate of 10% to earnings from any patented inventions or exclusively licensed-in patents. You don’t have to rely solely on the patented invention for your income, though – the tax relief is applied to the percentage of earnings that came from the patent.

Research and development tax relief

All small and medium-sized enterprises with a turnover of under €100m or a balance sheet under €86m are eligible to apply for a research and development tax relief of up to 230% on corporation tax. To claim it, you’ll need to explain how your research project relates to your trade and how it seeks to advance knowledge or capability in a field of science or technology. You can also claim R&D Tax Credits instead of carrying forward any losses if you qualify for the overall tax relief.

Creative industry tax reliefs

A group of six corporation tax reliefs applying to film, animation, high-end television, children’s television, video games and theatre. These all require you pass a cultural test administered by the British Film Institute and once certified, films and plays are entitled to deduct up to 80% of expenditure, while animation, video game and television activities can deduct up to 100%. Tax relief claims must be filed with your company tax return.

EIS and SEIS

Finally, if you’re looking to the future and thinking of financing growth in your small business, it’s worth considering the Enterprise Investment Scheme (EIS) or the Seed Enterprise Investment Scheme (SEIS). Although neither of these schemes will give your business any tax relief, they do incentivise potential investors with attractive tax breaks.

Business Funding

Discover other ways to finance your business using our interactive guide to the pros and cons of business funding…