5 Common Tax Deductions that Small Business Owners Often Overlook

Business Numbers Blog - 5 Common Tax Deductions that Small Business Owners Often Overlook

They say that only two things are certain in life: death and taxes. Paying tax is inevitable, but there are things you can do to reduce the percentage of your income that the taxman takes. As a small business owner, the likelihood is that you're paying too much tax, which is why we've put together a list of the most overlooked deductions to help you reduce your bill.

Of course, you need to be on top of your bookkeeping to claim the following tax deductions. So get into the habit of updating your records and filing your receipts and invoices in a well-organised system.

1. Startup Expenses

Money is usually tight during startup, and every penny counts, but many small business owners overlook startup costs. Please don't assume that it's too late to claim; in the UK, for example, limited companies can claim relevant startup expenses for up to seven years before the business officially begins operations. Just because you've been in business for a few years doesn't necessarily mean you've missed the boat.

2. Home Office Expenses

If a room in your home functions as your primary place of business, you may be able to claim a home office deduction. Expenses such as gas, internet and electricity will usually be deductible based on the percentage of your home used for work and for how long. Therefore, to calculate this deduction, it's essential to keep a record of how many hours you work each month.

You will also be able to claim expenses such as office furniture, although again, you will have to calculate the usage portions. For example, if you buy an office chair for £100 and use it exclusively for work, you can claim the full amount. However, if you use it for personal reasons 30% of the time, you will only be able to deduct £70 from your taxable income.

3. Carryovers

Business owners often overlook capital and net operating losses as tax deductions. However, it's possible to carry these losses into future tax years to reduce taxable income. With so many small businesses suffering from the covid-19 pandemic, this is a deduction to make a note of. Carryovers can be used to reduce either the company's or the owner's income. It's best to speak to your accountant about how your business can best benefit from this type of tax deduction. 

4. Losses on Bad Debts

Suppose your business loses money due to a customer who won't pay or an employee who quit after receiving advance wages or loans to clients that your business can not collect. In that case, you may be able to claim this amount as a tax deduction. You will have to prove that you have taken reasonable steps to collect this amount but have been unable to do so. Of course, this situation is less than ideal, but it may help soften a bad debt's impact.

5. Education and Training

It's a good idea to invest in your employees, and you should be able to deduct the cost of doing so. Many business owners overlook the fact that educating and training their employees is a deductible tax expense, so keep a careful record of your spending in this area to receive a smaller tax bill.


We would all like a smaller tax bill, so be aware of these often overlooked deductions to ensure that you only end up paying what is necessary. It's important to keep careful track of your expenses to take advantage of all potential tax deductions. If you're unsure whether an item qualifies for tax deductions, be sure to speak to your accountant or bookkeeper so that you don't make a costly mistake.


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