Finance

Tax advantages for new businesses

New businesses may be able to cut their tax bill by claiming capital allowances, tax credits for research and development, and stamp duty relief.

Guide

2 min read

1. Overview

New businesses can benefit from a variety of tax allowances and reliefs which could cut their tax bill.

They include capital allowances for investment in equipment and premises, tax relief and credits for spending on research and development and stamp duty relief on residential properties in disadvantaged areas.

But you won't automatically receive these tax advantages. You need to find out what you can claim and then apply for them.

2. Tax advantages for new businesses: the details

There is a range of tax advantages which businesses may be able to use to reduce their tax bill.

Regional Employer National Insurance contributions (NICs) holiday for new businesses

New businesses that start up in specific targeted areas may be able to get a substantial reduction in their employer NICs. Download frequently asked questions on the NICs holiday from the HM Revenue & Customs (HMRC) website (PDF, 46K).

Capital allowances available to all businesses

If you buy an asset - eg a car, tools, machinery or other equipment - for use in your business, you cannot deduct your expenditure on that asset from your trading profits. Instead, you may be able to claim a capital allowance against that expenditure.

Capital allowances are also available for expenditure on converting space above commercial premises to flats for short term renting, donations of used business assets to charity, assets for research and development, and certain other items.

Capital allowances are available to sole traders, self-employed persons or partnerships, as well as companies and organisations liable for Corporation Tax. They are available to both new and existing businesses.

Equipment lent to employees

Tax and National Insurance contributions are not payable on the value of any office services, equipment and consumables used by employees for business purposes. The benefit must be provided in the employer's premises and any private use of the benefit by employees must not be significant. Where the benefit is provided elsewhere (for example to enable the employee to work from home) the benefit must be used for business purposes and any private use of the benefit must not be significant.

Tax relief and credits for research and development

Research and Development (R&D) Relief is a Corporation Tax relief that may reduce your company or organisation's tax bill by more than your actual expenditure on allowable R&D costs.

Alternatively, if your company or organisation is small or medium-sized, you may be able to choose to receive a tax credit instead, by way of a cash sum paid by HMRC.

R&D Relief can only be claimed by companies and organisations that are liable for Corporation Tax.

Enterprise investment scheme

HMRC's Enterprise investment scheme helps certain types of small unquoted companies to raise capital by providing tax relief for investors in these companies.

Business Gateway can offer you further starting up advice and information. Contact us on 0300 013 4753.

Get the support you need right now

You can connect with us through the contact form, call us or contact your local Business Gateway office.

Contact us
Find my local office

You might also be interested in

VAT: the basics

VAT is a tax that is charged on some goods and services. Regardless of your business structure, you will have to register for VAT with HM Revenue & Customs if your VAT taxable turnover is more than £85,000 in the previous 12 months, or will soon go over this limit.

Dealing with excise goods

When excise goods are moving within the European Union in excise duty-suspension, the movement must take place between persons and premises that have been approved for that purpose by the competent authorities in the Member State where they are based.

Capital allowances

If you use traditional accounting, your purchase of assets such as machinery, equipment, structures and buildings will not be deducted from your income in the same way as business expenses. However, when working out your taxable profits, you may be able to claim capital allowances against the cost of buying these assets, which reduces your tax bill.