“In my experience small businesses want to pay the amount of tax that they have to pay but no more, no less,” says tax expert John Shewan, formerly of PwC.
There are legitimate ways to minimise the tax you pay, he says. How best to do this will depend in part on your business structure — sole trader, partnership or company.
“Make sure your business structure lines up with you own personal family circumstances and with your commercial objectives. What I mean by that is you don’t want to rush off and form a company unless you really have to. It may well be best just to operate as sole trader.”
Make sure you claim all the business expenses you’re entitled to, and also consider how you structure your debts — interest from business loans is tax deductible.
“One of the most common mistakes I see small businesses making is to have their own private debt against their property [eg a home mortgage], but they have equity, their own money, tied up in their business.
“They’re better to try and structure that in a way that ensures they match their borrowings against their business assets and can deduct the interest. That can save them up to a third of the interest cost.”