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Iceni Magazine | June 25, 2024

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4 Ways To Reduce The Tax Burden On Your Small Business

Tax Burden

Taxes are a tough subject for many new business owners, especially when sustaining their business while avoiding legal conflicts.

As a result, many small business owners default since they lack sufficient funds for taxes and business development. However, avoiding paying taxes is unethical and can land you in trouble. Fortunately, you can do a few things to reduce the tax burden on your small business, including the tips below.

1. Employ a family member

Employing a family member can be one of the finest decisions when starting or growing a small business. How does this affect your taxes? Hiring a family member protects your income from taxes since the money you give to family members is not taxed. Whether you employ your children or a sibling, the firm can develop consistently without giving the IRS the most profits. You may use the internet to learn everything you can about the IRS’s requirements for business owners.

2. Adjust your business structure

Your business model may impact how much taxes you pay to the government. To reduce your taxes, you must modify your business model and choose one that gives you more leverage over taxable income. Even a small firm without workers may be required to pay a share attributed to your employees. To prevent falling into this trap, create a business model that allows you to remove your firm’s obligation to pay employee taxes. A corporate structure may be the most tax-efficient system depending on your company’s future intentions, the stage of the organisation, and the risk environment it is operating in. On the other hand, you might consider using a limited company structure if you’re self-employed to reduce your income tax rate burden.

3. Stay organised

One of the simplest ways to lower your tax bill is to organise your financial records and documentation for easy accessibility when filing your taxes. Staying organised involves keeping meticulous income, spending, deductions, and credit records. Staying on top of every transaction throughout the year allows you to comply with local and federal tax requirements. Managing your records lets you track your due business tax liabilities properly. This way, you can avoid overpaying or underpaying your taxes. The latter could lead to potential fines and penalties. Organising the required documentation will help make tax season quicker and less stressful.

4. Take advantage of tax deductions and credits

Tax credits and deductions might help you lower your tax liability annually. They are immediately applied to the total taxes payable, whereas deductions reduce the taxable income at the year’s close. Many small companies qualify for several benefits and deductions, including those for hiring veterans or individuals of specified groups, such as minorities or the challenged. You may consult a tax or financial specialist to know which benefits and deductions apply to your company to drastically decrease your annual tax burden. For instance, capital allowances tax advisers can help you find opportunities to claim thousands of pounds in capital allowances.

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