Running a small business comes with its challenges. There’s so much to manage, from clients or customers to financial management. But you shouldn’t lose sight of something that can save you a surprising amount of money – tax planning.

What tax relief is available for small businesses? Let’s take a look. You might be surprised at what you could be claiming.

Allowable expenses

At a minimum, small businesses should be claiming their allowable expenses, which are day-to-day business costs that you can deduct from your pre-tax profit, reducing your tax bill in turn.

Again, allowable expenses are costs you incur in your business day-to-day. That leaves you with a lot of potential expenses to deduct, including the following:

• • Office costs: Running a business comes with various office-related expenses, all of which can be claimed as allowable expenses to reduce your tax bill. These include rent for office premises, utility bills like electricity and water, and maintenance costs to keep the office in working order. If you work from home, you may also be able to claim a proportion of your household bills as business expenses, based on how much space and time you dedicate to work.

• Uniform: If your business requires you to wear a specific uniform or protective clothing, you can claim the cost as an allowable expense. However, the rules are strict: the clothing must be exclusively for work purposes. For example, a branded uniform or safety gear like helmets and steel-toed boots would qualify, but everyday clothing, such as jeans or shirts that could also be worn outside of work, would not.
• Travel costs: When travelling for business purposes, you can claim a variety of related expenses. These include fuel costs for business journeys, train fares for attending client meetings or conferences, and accommodation if you need to stay overnight. It’s important to note that commuting costs – travelling between your home and your regular workplace – are not allowable. Only travel directly related to business activities qualifies for tax relief.
• Staff costs: If you employ staff, many related costs are deductible. This includes salaries, employer National Insurance Contributions (NICs), and pension contributions you make for your employees. Training costs are also generally allowable, provided the training directly relates to the business and helps your staff develop skills relevant to their roles. For example, a marketing course for your team would be deductible, while unrelated courses would not.
• Professional fees: Small businesses often rely on external professionals for specialised services, and the good news is that many of these costs are allowable expenses. Fees paid to accountants for bookkeeping or tax planning, solicitors for legal advice, or consultants for specific projects can all be deducted from your pre-tax profit. Be sure to keep detailed records and invoices for these services to support your claims.

You may be able to deduct the cost of some expenses you use for work and personal use, such as your mobile phone contracts – but only the portion that you use for your business.

Capital allowances

Claiming capital allowances is similar to claiming allowable expenses: with them, you can deduct the cost of business expenses from your pre-tax profit. This time though, you can deduct the cost of larger and long-lasting assets. There are multiple capital allowances for you to claim, including:

Annual investment allowance (AIA)

You can claim the cost of most plant and machinery (an asset used by a business for the purpose of carrying on the business) but not business cars. Computers are considered to be machinery. You can claim costs of up to £1 million per year.

100% first-year allowance

In addition to the AIA, you can claim 100% of the cost of certain environmentally friendly equipment, such as electric vehicles or energy-efficient machinery, in the year of purchase.

Full expensing and 50% first-year allowance

Only available to companies, this allowance allows you to claim all of the cost of main rate plant or machinery. You can claim half of the cost of special rate plant or machinery.

Main rate plant and machinery is the default type of capital asset. Special rate plant and machinery include:

• parts of a building considered integral – known as ‘integral features’
• items with a long life
• solar panels
• thermal insulation you’ve added to a building

cars with CO2 emissions over a certain threshold – check the threshold for your car, which depends on the car and when you bought it.

R&D tax credits

For small companies focused on innovation, research and development (R&D) tax relief can be a game-changer. This allows you to deduct some of the costs of a project that seeks to make an advance in science or technology. For example, your project might seek to develop a new product, process or service – or improve existing ones.

Under the SME R&D scheme, small businesses can claim up to 86% of their qualifying R&D costs in addition to the regular 100% to make a total 186% deduction.

If your company makes a loss, you can claim a tax credit, which is worth up to 10% of the surrenderable loss or 14.5% if you’re claiming for an accounting period beginning on or after 1 April 2024 and your R&D expenditure is at least 30% of your total expenditure.

Employment Allowance

The Employment Allowance allows eligible small businesses to reduce their annual NICs by up to £5,000. This limit will increase to £10,500 from April 2025.

Save more, invest smarter with expert advice

Effective tax planning can make a significant difference to your small business’s finances, reducing your tax bill and freeing up funds to reinvest in growth, staff, or equipment. By understanding the various tax reliefs available – from allowable expenses to R&D tax credits – you can ensure you’re not leaving money on the table. Navigating tax relief opportunities can be complex, so seeking expert advice can help you maximise your claims and stay compliant with HMRC rules. If you’d like support with your tax strategy, we’re here to help. Get in touch to ensure you’re making the most of every opportunity.

If you need help with your tax strategy, get in touch with us. We’ll help you claim all the tax relief you’re entitled to, leaving you with more money to invest in the business.