UK Small Business Tax Planner: All-in-One Tax Liability Estimator

Calculation runs based on standard HMRC rules.

Deductions are calculated and adjusted accordingly.

Frequently Asked Questions

What expenses can a small business deduct to reduce tax?

To reduce your Corporation Tax (for companies) or Income Tax (for sole traders), you can deduct business expenses, provided they are incurred ‘wholly and exclusively’ for the purposes of your trade. Allowable expenses include: stock and raw materials, office rent, utility bills, business insurance, professional fees (solicitors, accountants), software subscriptions, marketing and advertising costs, employee salaries, and business travel. You cannot deduct personal expenses, client entertainment costs, or capital assets like buildings and machinery (which must be claimed through capital allowances instead). Keeping detailed digital records and receipts is mandatory under HMRC’s Making Tax Digital (MTD) rules.

How should a startup plan and budget for tax liabilities?

Failing to plan for tax is one of the most common reasons small businesses fail. You should set aside a fixed percentage of your monthly net profits in a separate business savings account to cover your tax liabilities. A good target is to set aside 20% to 25% of profits for Corporation Tax, and if you are VAT-registered, set aside the net VAT collected from customers. Additionally, directors should budget for personal dividend tax, which is paid annually via Self Assessment. Utilizing capital allowances (like the Annual Investment Allowance), claiming R&D tax credits, and setting up pension contributions as corporate expenses are highly effective ways to lower your business tax bill legally.