Home Business Help: How To Pay Less Taxes For Your Side Gig

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It’s no secret that many people in the UK start home businesses while they’re employed elsewhere. After all, they still need to pay the bills until their businesses become self-sufficient and can provide an income.

You’re likely reading this article today because you have a side gig at home, perhaps as a freelancer or doing something else in your spare time, but you want to avoid most of your secondary income ending up in the hands of HMRC!

With that in mind, it’s worth exploring the following methods of lowering your tax liabilities and making your side business a more tax-efficient one. Here’s what you need to know:

Open Up A Business Bank Account

The trouble with using your personal bank account for business transactions is that you end up with complicated records for tax purposes.

Can you wholeheartedly separate all business transactions from your personal account? Thankfully, opening a business account isn’t complicated or expensive.

For example, the online bank Monzo lets you set up a business account in minutes and for a low monthly fee compared with traditional High Street banks. Plus, such accounts let you forecast your business income easily via your smartphone.

Set Up A Limited Company

Did you know that a limited company offers many benefits for most sole traders – even if they are the only employee in their businesses?

For instance, if things go wrong with your business, you usually are only personally liable for some business debts. Most importantly, your tax burden can often be significantly lower by running your business as a limited company.

Another advantage, of course, is how you’ll appear as a more professional brand to prospective clients.

Enrol For Applicable Tax Credits

Most people know about tax credits, and millions take advantage of them for specific situations, such as parents with young kids in tow. But did you know that tax credits also exist for businesses?

R & D tax credits are one prominent example of making your brand more tax-efficient. They can reduce your tax liability if you’re developing a new product or service that doesn’t exist on the market.

It’s worth researching which types of business tax credits exist that you could use.

Offset Business Expenses Against Your Income

There’s a reason why bookkeepers, accountants, and even business coaches tell entrepreneurs like yourself to keep accurate records of all expenses. Most costs can be offset against your business income, effectively reducing your tax liability.

HMRC gives examples of acceptable expenses, such as business mobile phone contracts, office leases, equipment purchases, and so on.

Even taking a client out to lunch is a valid business expense. Keep complete expenditure records and apply applicable expenses on your tax returns.

Hire An Accountant

Last, but not least, it’s worth hiring an accountant to manage your tax affairs when your business can afford to do so. That’s because they will know the best (and legal) ways to reduce your tax liability!

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