Optimising Your Business Tax Strategy for 2025

21st December 2024

With 2025 fast approaching, now is the ideal time for UK businesses to review their tax planning strategy. By adopting a proactive approach to financial management, you can reduce your tax liabilities and make the most of your financial resources.

Our dedicated taxation specialists have highlighted key strategies to help optimise your business’s tax position and prepare for the year ahead.

 

Small Business Tax Strategies

By reviewing key areas such as business structure, allowances, and investment schemes, small businesses can optimise their tax position and ensure they are well-prepared for the year ahead. Here are some of the key areas you should consider for your 2025 tax strategy:

 

Extracting Profit in a tax efficient way

Many business owners will be looking towards profit extraction as a way of reaping the rewards of their hard work. However, it requires careful planning to make sure it’s as tax efficient and well timed as possible.

Salary, pension contributions or dividends are typically the main methods of extraction, with tax free allowances available, but its important to get professional advice to ensure you minimise tax liabilities while maintaining compliance with HMRC regulations.

 

Ensuring you have the right business structure

The structure of your business impacts your tax liabilities. In the UK, the most common types of business structures are sole traders, partnerships, and limited companies, each with different tax implications.

Choosing the right structure can have significant tax advantages, and it is often worth speaking with a specialist tax adviser about corporate tax, to find the most tax-efficient option for your business.

 

Reducing National Insurance Contributions with the Employment Allowance

In the Autumn budget, it was announced that employer national insurance contributions (NICs) will be increasing to 15% in April 2025.

The Employment Allowance is designed to support smaller businesses with an annual NIC bill under £100,000. Eligible employers can claim up to £5,000 off their annual NIC bill, making it an effective way to manage payroll costs.

 

Utilising the Annual Investment Allowance for new equipment

The Annual Investment Allowance (AIA) offers businesses 100% tax relief on qualifying equipment or machinery investments up to £1 million. Eligible items include machinery, tools, computers, and office equipment.

The AIA helps reduce tax bills by allowing businesses to deduct the cost of qualifying assets from profits, encouraging investment in growth.

 

Utilising holding companies to protect assets

For groups of companies, transferring excess funds or valuable assets like property to a holding company, you can shield them from the financial risks if one trading entity encounters difficulties.

A holding company also can enhance tax efficiency, enabling intra-group dividend payments without triggering further tax liabilities and providing opportunities for tax-efficient investment planning. Supporting sustainable growth and financial stability.

 

Acting before the Business Asset Disposal Relief rates increase

The Business Asset Disposal Relief (BADR) allows qualifying business owners to pay a reduced Capital Gains Tax (CGT) rate of 10% on the disposal of certain business assets.

This rate will increase from April 2025 to 14%, with a further increase to 18% the following year.

So, if you’re contemplating selling your business or liquidating assets, it would be beneficial to review your business structure before the increased rate comes into effect in April.

 

Using the SEIS and EIS schemes to attract investment in your business

The Seed Enterprise Investment Scheme (SEIS) and Enterprise Investment Scheme (EIS) are an effective way for startup businesses to attract investment, by reducing the risk for these investors through significant tax reliefs.

The SEIS scheme provides up to 50% income tax relief on investments up to £100,000 per tax year, making it ideal for very early-stage businesses.

EIS offers up to 30% income tax relief for investments up to £1 million per tax year, plus the deferral of capital gains tax on any profits reinvested through EIS.

 

Exploring Capital Allowances for Property Investments

Capital allowances can provide significant tax relief for businesses investing in property. These allowances allow you to deduct the cost of qualifying property-related expenses, such as renovations, refurbishments, and certain fixtures, from your taxable profits.

The Government also offer a range of enhanced reliefs on energy-efficient building improvements such as heat pumps and solar panels.

 

Why Choose Edwards Accountants to support with your tax saving strategy?

We combine years of expertise with a personalised approach to deliver effective corporate tax advisory and planning services to businesses of all sizes.

Interested in discussing your options with one of our expert team? Get in touch today, and find out how we can help you maximise your business tax planning strategy.