5 Tax-Saving Tips for Manchester Entrepreneurs Preparing Their Personal Tax Returns

It can be a stressful time for entrepreneurs, as we approach the tax filing deadline especially when you’re managing your own business and finances.

Whether you’re self-employed or running a limited company, there are several ways to legally reduce the amount of tax you pay. To give you a helping hand we have outline seven effective tax-saving tips for Manchester entrepreneurs to keep more of their hard-earned money.

Tax-Saving Tips for Manchester Businesses

1. Claim All Allowable Business Expenses

As an entrepreneur, you are entitled to claim business expenses that are “wholly and exclusively” for your business. These can include office supplies, marketing costs, software subscriptions, and even a portion of home office costs if you work from home. Claiming all allowable expenses reduces your taxable profits, meaning you’ll pay less tax.

Key Tip: Keep accurate records of receipts and invoices throughout the year, and ensure they are clearly separated from personal expenses to avoid confusion.

2. Utilize the Annual Investment Allowance (AIA)

The Annual Investment Allowance (AIA) allows entrepreneurs to deduct the full value of qualifying business assets, such as equipment, machinery, and computers, from their profits. For the 2024/2025 tax year, the AIA limit is set at £1 million, meaning you can claim up to this amount in eligible assets each year.

Key Tip: If you’re planning on purchasing large equipment for your business, it may be worth doing so before the end of the tax year to maximise this allowance and save on tax.

3. Take Advantage of Pension Contributions

.Contributing to a personal or workplace pension can be an excellent way to save on your tax bill while securing your financial future. Pension contributions reduce your taxable income, meaning you’ll pay less tax overall. For entrepreneurs, pension contributions are particularly beneficial if you are in a higher tax bracket, as you can claim tax relief at your marginal rate of income tax.

Key Tip: Basic-rate taxpayer will receive 20% tax relief on pension contributions, while higher-rate taxpayers can receive up to 40%. So ensure that contributions are made on time.

4. Use the Dividend Allowance

If you operate through a limited company, paying yourself via dividends rather than salary can be a tax-efficient strategy. Dividends are taxed at a lower rate compared to income tax, and there is a dividend allowance, meaning the first £1,000 of dividend income is tax-free in the 2023/24 and £500 for 2024/25 tax year. Above this amount, dividends are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate), which is still lower than the equivalent income tax rates.

5. Make Use of Capital Gains Tax Allowances

Entrepreneurs who sell business assets, shares, or property may be liable for Capital Gains Tax (CGT) on the profits. However, each individual is entitled to a tax-free CGT allowance, which is £3,000 for the 2024/2025 tax year. To minimize your CGT liability, think about the timing of the gift in connection with the tax year.

Key Tip: Save tax by gifting assets to your spouse or civil partner by utilize their personal allowance and make use of this allowance by spreading the sale of assets over multiple tax years.