The Top 10 Tax Reliefs Most UK SMEs Overlook
- Yashi Shrivastav
- Oct 10
- 8 min read
Running a business often feels like juggling deadlines, HMRC forms, and endless admin. In that busy swirl, it’s all too easy to miss out on valuable tax reliefs designed to save you money and support your growth. Every year, UK SMEs overpay simply because the rules are hidden in jargon or scattered across complex guidance. To bring clarity, we’ve created a straightforward list of the top 10 tax reliefs UK SMEs most often overlook, so you can focus on building your business while keeping more of what you earn.
1) Full Expensing (and the 50% First-Year Allowance)
For companies making significant investments in new equipment, full expensing is one of the most generous reliefs currently available. It allows you to deduct 100% of the cost of qualifying plant and machinery in the year of purchase, giving your cashflow an immediate boost.
Special-rate assets, such as integral building features, qualify for a 50% first-year allowance, with the remainder written down through normal capital allowances. These reliefs only apply to companies and are restricted to new, unused assets.
AMS tip: If you’re planning major purchases, it’s worth thinking carefully about timing. Buying just before your year-end could bring forward valuable reliefs and lower your tax bill sooner. Make sure you keep supplier invoices and evidence that the asset is new, as HMRC checks on this are strict.
How to claim in quick steps:
Buy new, unused qualifying plant or machinery.
Time purchases around your year-end to bring forward relief.
Keep supplier invoices as evidence the assets are brand new.
Apply the full deduction in your corporation tax return.
2) Annual Investment Allowance (AIA)
The Annual Investment Allowance is often overlooked but remains one of the most straightforward and widely available capital allowances. It lets businesses, including sole traders and partnerships, deduct up to £1 million per year on qualifying plant and machinery. This relief can cover everything from new computers to manufacturing equipment and second-hand assets, which don’t qualify under full expensing rules.
AMS tip: For many UK SMEs, AIA is the quickest and simplest way to secure immediate tax reliefs. Where purchases don’t meet the criteria for full expensing, or where the business structure doesn’t allow it, AIA ensures that valuable investment isn’t left out.
How to claim in quick steps:
Identify qualifying plants and machinery (new or second-hand).
Make sure your total spend stays within the £1 million limit.
Record purchases with accurate invoices and receipts.
Deduct costs in your accounts and claim through your tax return
You may also like: The ultimate small business tax deduction guide
3) Structures & Buildings Allowance (SBA)
If you’ve invested in commercial property, such as constructing a warehouse, office, or factory, the Structures & Buildings Allowance lets you claim 3% of qualifying costs each year for over three decades. While it’s not as immediate as AIA or full expensing, it provides long-term tax savings and is particularly valuable for businesses with large property investments.
AMS tip: To make the most of SBA, keep detailed records of when the building was first brought into use. That date sets the start of your allowance, and any delay in logging it could mean missed claims over time.
How to claim in quick steps:
Confirm the property is non-residential and qualifies.
Record the date it was first brought into use.
Keep evidence of construction or refurbishment costs.
Deduct 3% of those costs annually for 33⅓ years.
4) Employment Allowance
Payroll is one of the biggest ongoing costs for UK SMEs, and the Employment Allowance offers a valuable saving by reducing your employer’s National Insurance bill. From April 2025, eligible employers can save up to £10,500 per year, a significant boost for small businesses with staff. It’s worth remembering, however, that single-director companies with no other employees don’t qualify.
AMS tip: Many UK SMEs miss out simply because they haven’t activated the tax reliefs in their payroll software. By enabling this at the start of the tax year, you’ll benefit from reduced liabilities straight away rather than waiting until year-end.
How to claim in quick steps:
Check your business is eligible (not a single-director company).
Activate the allowance in your payroll software.
Apply the £10,500 annual saving against your NI bill.
Reassess eligibility each year as staff numbers and costs change.
You may also like: Bookkeeping and Taxes: When to Pass the Torch?
5) Research & Development (R&D) Tax Relief
R&D tax relief is one of the most powerful incentives for innovative businesses, yet many UK SMEs wrongly assume they don’t qualify. From developing new processes in construction to testing prototypes in manufacturing or software development, the scheme covers a wide range of activities. Since April 2024, the UK now has a single merged scheme with an additional uplift for R&D-intensive UK SMEs.
AMS tip: The key to a strong claim is good documentation. HMRC is scrutinising applications more closely, so keep project notes, evidence of trials, and cost records. Done correctly, R&D relief can provide a substantial cash injection or reduce your corporation tax bill.
How to claim in quick steps:
Review projects for innovation or problem-solving work.
Keep project notes, trial evidence, and cost records.
Separate qualifying R&D expenditure from general costs.
Submit a claim with supporting documentation in your CT600.
You may also like: Navigating Tax and Compliance for SMEs
6) Patent Box
If your company owns or develops patented technology, the Patent Box regime could reduce your corporation tax rate on profits from those inventions to just 10%. With the main rate of corporation tax now at 25%, the difference is substantial. Even one qualifying patent can open the door to these savings, making it worth exploring if your business invests in intellectual property.
AMS tip: Mapping revenues to patents can be tricky, so planning ahead is vital. If you think you may qualify, speak to us early so that your systems capture the right information from the outset.
How to claim in quick steps:
Confirm your company owns or develops a UK or EU patent.
Elect into the Patent Box regime via your corporation tax return.
Map patent-related revenues carefully in your accounts.
Apply the 10% tax rate to qualifying profits.
7) Land Remediation Relief
Land Remediation Relief (LRR) is aimed at companies that take on contaminated or long-derelict land and invest in cleaning it up. It offers an enhanced deduction of 150% of qualifying costs, or a payable tax credit if you’re loss-making. This makes it particularly valuable for property developers and businesses in construction.
AMS tip: Eligibility depends on the land’s condition when acquired. Keep surveys and engineers’ reports from the point of purchase to strengthen your claim and ensure compliance with HMRC rules.
How to claim in quick steps:
Identify if land was contaminated or derelict at purchase.
Retain survey reports and engineering assessments.
Separate qualifying remediation costs from general spend.
Claim 150% (owner-occupier) or 150% incl. 50% uplift (developers).
You may also like: What to Do If You Receive an HMRC CIS Return Enquiry?
8) VAT Flat Rate Scheme
The Flat Rate Scheme (FRS) is designed to make VAT simpler for smaller businesses with VAT-exclusive turnover of up to £150,000. Instead of tracking VAT on every purchase and sale, you apply a flat percentage rate based on your sector. For some UK SMEs, this leads to lower overall VAT payments, but it’s not always the cheapest option.
AMS tip: Always run a side-by-side comparison before joining the scheme. While it reduces admin, you lose the ability to reclaim input VAT on most purchases, except certain large capital items. For businesses with high expenses, the standard VAT scheme may be more cost-effective.
How to claim in quick steps:
Check your VAT-exclusive turnover is under £150,000.
Apply to HMRC to join the Flat Rate Scheme.
Use your sector’s percentage rate on VAT-inclusive turnover.
Compare annually with standard VAT to ensure best value.
You may also like: A Simple VAT Survival Guide for First-Time Entrepreneurs
9) VAT Bad Debt Relief
Late payments are a common frustration for UK SMEs, but few realise they may be able to reclaim VAT already paid to HMRC on invoices that remain unpaid after six months. This is known as Bad Debt Relief and can provide much-needed cashflow support.
AMS tip: Many businesses forget to claim simply because they don’t track when debts become eligible. A good practice is to set a recurring six-month review in your finance system to identify unpaid invoices and trigger VAT reclaims on time.
How to claim in quick steps:
Track unpaid invoices in your accounting system.
Check when invoices have been overdue for 6 months.
Write off debts in your books as uncollectable.
Reclaim VAT on your next return using Bad Debt Relief rules.
You may also like: When are Corporate Taxes Due? 2025 Deadlines
10) Business Asset Disposal Relief (BADR)
If you’re planning to sell all or part of your business, Business Asset Disposal Relief could reduce the capital gains tax on your profits to just 10%, up to a lifetime limit of £1 million. This relief can be hugely valuable for owner-managers looking to exit their business, but eligibility is strict and requires forward planning.
AMS tip: Make sure you meet the conditions around shareholding, directorship, and trading status well in advance of a sale. BADR is about preparation, waiting until you’re ready to sell is often too late to make changes.
How to claim in quick steps:
Review your shareholding, directorship, and trading status early.
Plan the sale well before disposal to meet BADR conditions.
Dispose of shares or business assets under qualifying rules.
Claim BADR via your Self Assessment tax return.
Frequently Asked Questions
1) What tax reliefs can small businesses claim in the UK?
UK SMEs can claim reliefs such as the Annual Investment Allowance (AIA), Employment Allowance, R&D tax reliefs, Business Asset Disposal Relief (BADR), and VAT Bad Debt Relief. Each helps cut costs and improve cashflow, if claimed correctly.
2) How do I know if my business qualifies for R&D tax relief?
If you’re developing new processes, solving technical problems, or testing improvements, you may qualify. It’s not just for tech firms, many UK SMEs across construction, manufacturing, and software are eligible. Good records are key.
3) What’s the difference between AIA and full expensing?
Full expensing applies only to companies buying new, unused equipment, allowing 100% deduction upfront. AIA covers both companies and sole traders, applies to new and second-hand kit, and is capped at £1m per year.
Let AMS Simplify Tax Reliefs for Your Business
Tax shouldn’t feel like a maze of rules and red tape. At AMS, our focus is always on clarity and confidence. We map your spending and activities against the reliefs available, ensuring you claim what’s rightfully yours without overstepping HMRC rules. Because we handle everything, from bookkeeping and payroll to tax compliance and financial management, you get consistency across the board. And with our fixed-fee structure, you know exactly where you stand.
Your Next Steps:
1. Review your business activities: Which of these reliefs could apply to you?
2. Put reminders in place: Set up checks around year-end purchases, VAT debt reviews, and payroll reliefs.
3. Get expert support: Working with a trusted partner like AMS means peace of mind, knowing that nothing is missed.
Final Takeaway
Tax reliefs are opportunities created to help UK businesses invest, grow, and succeed. The real challenge is navigating the rules and making sure you don’t miss out.
That’s where AMS steps in. we keeps accounting simple and tax reliefs maximised, so you keep more of your hard-earned money while focusing on what matters most: growing your business.
Ready to find out which tax reliefs your business could be missing? Get in touch with AMS today and let’s make your accounting simple and your savings bigger
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