Ten tips to improve the profits of your business

Sean Rustrick • 31 August 2023

Making a good profit is the lifeblood of any business, especially for small to medium-sized businesses (SMBs). It determines how sustainable and successful your business is and how much it can grow. Today's markets are very competitive, so in this blog post, we will explore ten effective strategies for you to quickly think about and implement to improve the profitability of your business . By understanding the purpose and need for each strategy, businesses can make informed decisions and drive positive change to increase their profits.


1. Reduce your costs:

Cost reduction is an essential method for SMBs to improve profitability. By identifying and eliminating unnecessary expenses, you can optimise your operations and increase your bottom line and end up with more money in the bank! For example, regular checks of your costs and outgoings can help identify areas where expenses can be reduced, such as excessive energy consumption or inefficient processes.


  • Example: A review of standing orders and direct debits can reveal payments for services that are no longer used or required.


2. Purchase efficiently:

Efficient purchasing goes hand in hand with cost reduction. By negotiating better prices with your suppliers, exploring bulk purchasing options, or seeking out alternative supplier contracts, a business can reduce their various costs.

 

  • Example: Regularly review your overheads and see whether your current supplier or another supplier can requote or offer discounts for the same service.


3. Increase your sales:

Increasing sales is a fundamental way to increase profits. You can achieve this by focusing on obtaining new customers and making sure existing customers are happy with your service and fees, improving them as necessary. For instance, you can use targeted marketing campaigns to reach your ideal customers or offer discounts to incentivise repeat purchases. Additionally, using social media platforms and online marketplaces can expand your customer reach and boost sales.


  • Example: Offering limited-time promotions or discounts can incentivise customers to make more frequent purchases, boosting sales and revenue for a restaurant.


4. Streamline your operations:

Streamlining operations involves improving workflows and processes to increase efficiency. By identifying bottlenecks, eliminating redundancies, and automating repetitive tasks, your business can save time and resources. This allows you to allocate your resources more effectively, which leads to  improved profitability.


  • Example: Integrating a cloud-based inventory management system can automate stock tracking, reducing inventory holding costs for a manufacturing company.

 

5. Target your marketing:

Targeted marketing is a powerful way to maximise the return on marketing budgets. By identifying your target customers and tailoring your marketing efforts accordingly, your business can reach more of the people who want what you’re offering and reduce wasteful spending.


  • Example: A local bakery could target its marketing efforts towards nearby residents through direct mail campaigns or localised social media advertising.


6. Upsell and Cross-sell:

You can increase average transaction values and boost your profits by encouraging customers to purchase a comparable higher end product than the one in question. In addition, some customers may be unaware of the other services you provide, so by offering complementary products or services during the sales process, you can encourage them to spend more. For example, a software company could offer premium features or add-ons to their basic package, providing additional value to customers while increasing revenue.


  • Example: An IT service company can offer additional features or upgrade options to existing customers, thereby increasing the average transaction value and profitability.


7. Enhance your customer service:

We all appreciate great customer service and this is crucial for your business to build loyalty and generate repeat business. By investing in employee training programmes and implementing customer feedback systems, you can improve your business’ service quality. This leads to higher customer satisfaction, your customers remain loyal to you and ultimately, your profits improve.


  • Example: Providing exceptional after-sales support and timely resolution of customer queries can increase customer satisfaction, loyalty, and repeat business for a service-based business.


8. Diversify your revenue streams:

It can be risky for a business to rely on a single source of revenue. Diversifying revenue streams can provide stability and reduce potential losses. Businesses can explore new product lines, expand into different markets, or offer additional services to existing customers.


  • Example: A fitness studio could introduce online classes or sell branded merchandise to diversify its income streams.


9. Optimise your pricing:

Pricing plays a crucial role in profitability. Analyse market trends, see what other people charge and conduct pricing experiments to find the best price point for your business’ products or services. Many businesses, especially small ones, quite often underprice the great product or service they supply.


  • Example: A software-as-a-service (SaaS) company could offer different pricing options to cater for different customer needs.

 

 10. Invest in training and development:

Investing in training and development programmes for employees can yield long-term benefits. If you enhance the skills and knowledge of the people who work for you, your business can improve its productivity, customer service, overall performance and staff satisfaction. This leads to increased efficiency, reduced errors, and improved profits.


  • Example: A retail store could provide sales training to its staff to improve upselling techniques and customer satisfaction.


So, to sum up …..

Improving profits is essential for the long-term success of any business. By considering these ten strategies, your business  can optimise its operations, increase sales, reduce costs, and enhance customer satisfaction and retention. It's important to remember that profitability requires a holistic approach, focusing on multiple business areas simultaneously. By continuously evaluating and adapting these strategies, SMBs can thrive in today's competitive landscape.

HMRC Trap

by Sean Rustrick • 28 July 2025
Interest rates have risen and the personal savings allowance (PSA), the amount on which 0% tax applies to savings income, has frozen at £1,000 and £500 per tax year for basic rate and higher rates. If in 2023/24 you received interest exceeding the PSA, you don’t normally submit a self-assessment tax return, you haven’t received a P800, you should contact HMRC now to notify them you may owe tax. This also applies for 2024/25, but you have until 5th October 2025 to tell HMRC.

Trivial Benefits

by Sean Rustrick • 21 July 2025
A trivial benefit is something that costs the employer little, which they give to their employees as a perk of their job. A perk counts as trivial and is exempt from income tax and NI as long as it costs the employer no more than £50 and meets other conditions. This £50 includes both the price of the item/service and all the related costs. If a gift is shared by employees and you can’t work out the exact cost, you can use the average to determine if the exemption applies. It would not be counted as trivial (even if it is less than £50) if it is part of a salary sacrifice, paid in cash or a voucher that can be converted to cash, part of the employee’s contractual earnings or if it is in recognition for services performed as part of employment duties. The trivial benefits exemption exists to allow employers to reward employees tax and NI free and to reduce paperwork and admin for both employers and HMRC. So give us a call on  01622 738165  and let us help you today!

Accelerating Pension Relief

by Sean Rustrick • 14 July 2025
Did you know that contributing to a registered pension scheme qualifies for income tax relief? You can pay into a workplace pension or set up your own, but either way you will be entitled to relief dependent on the rate of income tax you pay. If you are a higher (40%) or additional (45%) rate taxpayer you can claim further income tax relief on personal pension contributions (this includes contributions to workplace pension that is deducted from your pay!). If you are not in self-assessment (only have PAYE income) you can claim this extra tax relief through HMRC’s new online form. You can access this by logging into the Government Gateway and then supply proof that you’ve paid contributions (your pension company can give you this). HMRC will then make an adjustment to your tax code so you receive the income tax relief. If you are registered for self-assessment, you can simply claim it on your tax return. Remember you will have to wait until the end of the year to do this! If you have PAYE income, you can get the tax relief faster by logging into your HMRC personal tax account and updating your tax code (remember to report the pension contributions on your tax return!). Not sure if you are entitled to the extra tax relief or how to get it? Give us a call on  01622 738165  and the team will help you out.

High Income Child Benefit Charge

by Sean Rustrick • 7 July 2025
High Income Child Benefit Charge (HICBC) uses the income tax system to get back child benefits from couples when one or both of them have an annual income of over £60,000. HMRC has announced that from August 2025 if you pay tax through PAYE and are liable to HICBC you have to report it through a new online service. So if you were previously filling out a self-assessment form, ask HMRC to remove you from the self-assessment system and collect the HICBC from your PAYE income. This is a new system so there is a high risk of over or underpayments and will be under review for a period of time. Not sure how this will affect you? Give us a call on  01622 738165  and we can talk you through the change.

Income Splitting with Alphabet Shares

by Sean Rustrick • 30 June 2025
Can you reduce your tax and NI bill if you give your spouse shares in your company? Usually this would be the case, however it isn’t always guaranteed! If your spouse has other income that places them in a higher tax bracket it would increase the bill! To get around this you can use alphabet shares. Alphabet shares are “ordinary shares” but they have a different designation. For example ordinary A shares, ordinary B shares etc. This means that the company can declare a dividend at one rate for A shares and another for B shares. So if one shareholder in a company has more income than another, the first shareholder can be paid a lower dividend to keep their income within the income tax basic rate band. These shares must be issued correctly. They must be sent to Companies House within 15 days with a Form SH01 within 30 days of issuing the new shares. HMRC aren’t always a big fan of alphabet shares, so make sure your paperwork is in order when declaring a dividend- it will either be a director’s resolution for an interim dividend or a shareholders’ resolution for a final dividend. First time you have heard of alphabet shares? Worried about issuing them yourself? Give us a call on  01622 738165  and Rustrick Accountants will sort it out for you.

Land Remediation Relief

by Sean Rustrick • 23 June 2025
The government wants to build over 1m new homes by 2029. They need land to do this and have decided to start to clean up brownfield sites. But where does Land Remediation Relief (LRR) come into this? At the moment, the government is deciding whether LRR should be continued, so if you do qualify- time could be of the essence! LRR is a corporation tax (CT) deduction of 150% when a company cleans up contaminated land and buildings in which they have a major interest (freehold/leasehold interest of at least seven years). The CT relief depends on whether the company holds the land as stock or a capital asset and which band of CT is applicable. Loss-making companies can only access a maximum tax credit of 24% of the LRR spend. But watch out for the exclusions! Contamination due to living organisms, air or water does not qualify (apart from Japanese knotweed, radon and arsenic). This means that any costs relating to drainage, mine shaft grouting and protection of land from soil, gases or flood waters is excluded. Any contributor to the contamination (including a connected party!) is also ineligible, this also includes any failure to act (even if the pollution was accidental!). As long as the work either prevents or mitigates the effects of harm (this could be removal, containment or treatment of contamination) there is no “prescribed” method of how to do it. However, only the additional costs incurred to carry out the remediation work will qualify for CT relief. Any costs must be borne by the company and not subsidised (i.e land was discounted due to the contamination). LRR offers a maximum tax relief of 37.5% of the qualifying spend (including capital costs) but it must be submitted within two years of the accounting period end. This is a tricky topic so give us a call on  01622 738165  to make sure it is done properly!

Travel Expense Exemptions

by Sean Rustrick • 16 June 2025
Should you be deducting tax and NI from your employees’ travel expenses? You must decide if job-related expenses are exempt from tax and NI contributions. If they are, the expense can be paid or reimbursed to an employee without reporting it to HMRC. If it isn’t exempt, you must treat the payment as either earnings or a benefit in kind. For a travel expense to be exempt, it must happen whilst the employee is doing their job or is visiting a location that isn’t their normal place of work for the purpose of performing their job. If the employee’s journey is between their home and their permanent workplace, it is called ordinary commuting and if you pay the costs, they are taxable and liable to NI. This can get a bit confusing, get in contact with us on  01622 738165  and we can help you decide what the best course of action is for you.

Rollover Relief could save you Capital Gains Tax

9 June 2025
You can reduce your capital gains tax liability by using proceeds from the sale of one asset to reinvest in the purchase of a new asset- this is called Rollover Relief. To qualify for Rollover Relief, you have to get rid of an old asset (which was used only for trade purposes) and then get a new asset (that will only be used for trade purposes). If you are a sole trader, you can use the new asset for a different trade but there must not be a gap longer than three years between these trades. Qualifying assets include buildings, land, plant and machinery used for your trade, but will not include shares and securities. Rollover Relief can be claimed if the proceeds of the old asset are used to enhance the value of other trade assets immediately, or if you use the proceeds to acquire a further interest in another asset (that is already used for trading purposes). You will get the full Rollover Relief if you reinvest all of the proceeds of your asset sales, if you only partially reinvest, then the relief will be proportionate. If you reinvest in a depreciating asset (an asset with a predictable life of 60 years or less e.g. machinery) there will be special rules. Any rolled-over gain from the depreciating asset is not deducted from the cost of the replacement asset, instead it is frozen until the replacement asset is no longer being used for trade purposes, or ten years from the acquisition of the depreciating asset. The new asset must be acquired 12 months before the disposal of the old asset or three years after the disposal. A claim has to be made within four years after the end of the tax year when the disposal happened or the new asset was acquired. Give us a call on  01622 738165  and we can help you decide if Rollover Relief is right for you!

New PAYE procedures are being overlooked

by Sean Rustrick • 4 June 2025
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1 Person Companies

by Sean Rustrick • 2 June 2025
Did you know that the Employment Allowance (EA) has more than doubled? It now stands at £10,500! EA is the amount that employers can deduct from their annual NI bill. But why has it increased so drastically? Basically it is to soften the blow of the increase to employers’ NI rate (to 15%) and the lowering of the point at which employers must start paying NI on an employee’s salary (£5,000 per annum). Watch out! Employers may be excluded from entitlement to EA if the company only has one employee who is also a director and the only person paid by the company. It doesn’t matter how many shareholders/directors a company has, what matters is who is paid above the secondary earnings threshold. So how do you get around this? Simply pay another person just enough to prevent the exclusion from applying to the company! Even if this is just for one week in a tax year, you will qualify for the full £10,500! It is a simple solution and a very easy thing to capitalise on! Make sure you aren’t missing out by giving us a call today on  01622 738165  - we will be more than happy to help you.