Running a small business in the UK means navigating unique financial challenges. Tight profit margins, limited administrative resources, and rising costs – from energy bills to software subscriptions – can put serious pressure on your cash flow.
The good news is that there are practical, under-the-radar ways to cut costs and improve cash flow that most small companies overlook entirely, especially those with no property, minimal staffing, and no access to larger tax breaks like capital gains or R&D relief.
We’ve rounded up 10 of the best-kept secrets to significantly cut costs and boost your cash flow, specifically tailored to small UK businesses trading as limited companies. Here’s what you need to know.
1. Tap into trade associations and sector buying groups
Many trade bodies and chambers of commerce offer significant discounts on:
- Business insurance
- Card payment processing
- Utilities
- Legal & HR support
- Software packages (Adobe, Microsoft, Xero)
Associations like the Federation of Small Businesses (FSB) or your local Chamber of Commerce can provide exclusive deals and legal helplines ideal for directors with limited internal resources.
Why it’s overlooked
Many people think these bodies are only for larger, high-turnover firms, or fear the membership fees outweigh the value. Often, one discounted service more than covers it.
2. Reclaim VAT through voluntary registration (if under £90k)
Even if your company turns over less than the £90,000 VAT threshold, you can voluntarily register for VAT to:
- Reclaim VAT on expenses like stock and office supplies, software, hosting, ads, training and business travel
- Use the VAT Flat Rate Scheme (see #3)
- Improve your image and appeal to larger clients who expect to trade with VAT-registered companies
Why it’s overlooked
Directors assume VAT registration causes administrative headaches. But with the right accounting software, it’s straightforward and can improve margins.
3. Use the VAT Flat Rate scheme – but reassess your category
The VAT Flat Rate Scheme could reduce your VAT burden if your business spends relatively little on goods. You pay a fixed percentage of your gross turnover depending on your sector.
Example categories:
- “Computer and IT consultancy”: 14.5%
- “Publishing”: 11%
- “Retail not listed elsewhere”: 7.5%
With this scheme, you also keep the difference between the VAT you charge customers and what you pay to HMRC. So, carefully choosing or reviewing your category could mean paying less VAT than you collect.
However, if you fall into the ‘limited cost trader’ category, be aware that it may end up costing you money. There are also a few surprising items that don’t count towards your costs, such as software that is downloaded rather than bought on disk.
Why it’s overlooked
Many businesses are in the wrong category or haven’t reviewed their VAT rate since registering.
4. Apply for local authority micro-grants (£500–£5,000+)
Lots of UK councils, Growth Hubs and LEPs (Local Enterprise Partnerships) offer small business grants for:
- Digital improvements (e.g. website, e-commerce, CRM)
- Energy efficiency upgrades
- Equipment or software purchases
- Job creation or skills development
Many of these schemes apply to trading limited companies, even those with little to no staff.
Why it’s overlooked
These grants are often hyper-local and poorly advertised. Regularly monitoring your local Growth Hub can pay off.
Author's Tip
Try searching: “[Your County] Growth Hub small business grants”
5. Use receipt scanning & expense apps to maximise deductions
Limited companies must track business expenses carefully and provide evidence for Corporation Tax purposes. Don’t rely on manual spreadsheets. Instead, you may wish to consider using apps like:
They allow directors and staff to scan receipts and categorise them in real time, ensuring real deductible expenses aren’t missed.
However, be sure to read user reviews before choosing an app, because some systems don’t scan as well as others and may miscategorise certain things.
An alternative option is to connect your accounting package (e.g. QuickBooks or Xero) to your business bank account. This will help you keep track of cash flow.
Why it’s overlooked
Directors often “put off” tracking small receipts, leading to lost deductions at year-end. Using an app or connecting your accounting package to your bank account can simplify expense management, compliance, and recovery.
6. Explore faster business finance options — not just banks
Traditional loans are hard to come by for small companies, but new digital funding sources include:
- Funding Options by Tide – short-term working capital
- Clifton Private Finance – monthly recurring revenue (MRR)-based lending
- Uncapped – revenue growth and marketing financing
Outstanding invoices? Use invoice finance platforms like Kriya (formerly MarketFinance) or FundInvoice.co.uk to access a percentage of the money you’re owed.
Why it’s overlooked
Directors assume external finance = complex loans or long-term debt. These alternatives are more flexible and tailored to SME cash-flow needs.
7. Switch to fintech payment providers to lower transaction fees
If you accept card payments, ditch the legacy POS and merchant accounts. Use new platforms like:
You’ll benefit from no monthly rental fees, lower transaction percentages, and digital records integrated with bookkeeping software.
Why it’s overlooked
Most small companies inherit merchant accounts from their bank and don’t shop around, but better solutions exist for modern, mobile companies.
8. Use “working from home” deductions (accurately)
If you’re running your limited company from home, full- or part-time, you can apportion relevant home expenses per HMRC’s rules. Options include:
- Flat-rate method (up to £6 per week)
- Actual cost basis (a proportion of household expenses, such as utilities, broadband, phone bills, insurance, etc.)
- Creating a formal rental agreement between you and your limited company to claim a proportion of fixed costs, such as mortgage interest, rent, and Council Tax
Directors can charge home-working costs to their limited company as business expenses. This applies to general employees as well. The best method will depend on your circumstances.
However, you can only claim tax relief if you need to work from home rather than choosing to. For example, if you have a place of business where you normally work, but you choose to work a day or two per week at home because it’s convenient, you cannot claim these expenses.
Why it’s overlooked
Many directors think it doesn’t apply to limited companies, but this is a legitimate charge when utilised and documented appropriately.
9. Audit recurring software and service subscriptions
Your limited company may be inadvertently paying for:
- Unused software licences
- Duplicate tools (e.g. design, project management)
- Overpriced accounting, email, or hosting services
Set a quarterly task to review your business banking or use tools like Cledara or Spendesk to flag underused SaaS spend.
Also, when you receive a renewal quote for software and service subscriptions that you want to keep, it’s worth contacting the providers to see if you can negotiate the price and get a better deal.
Why it’s overlooked
Directors sign up for tools quickly during growth or setup phases, but often forget to cancel when they’re no longer used.
10. Switch to free digital business banking
If your company is still paying £6–£10 per month in bank fees for basic transactions, consider switching to:
- Starling Bank (Business)
- Mettle (by NatWest)
- Tide
- Monzo Business
These business bank accounts are fee-free for small companies. They also integrate well with accounting tools and offer real-time alerts, which help save admin time.
However, many banks offer free banking for the first year or two and then switch to a fee basis thereafter. If you accept payment by bank transfer from clients, choose carefully because changing banks later can be painful.
Why it’s overlooked
Many directors worry about ‘new banks’ or stick with traditional institutions from habit, even when digital ones offer a better service for less.
Author's Tip
Compare Energy and Telecom Deals for Micro-Businesses
Even if your business is home-based or mobile, you might still qualify for better business rates on:
- Electricity and gas
- VoIP phone systems
- Broadband
Use SME-specific comparison sites like Bionic, Love Energy Savings, or SwitchPal.
So, there you have it…
You may not qualify for eye-catching tax breaks or grants as a small UK limited company. However, the real opportunities to save money come from small, strategic decisions, such as replacing outdated suppliers, better use of software, or reclaiming underused allowances.
Taken together, even a 10–15% improvement in operational efficiency can make a big difference to your bottom line.
- The UK’s Business Growth Service: A game-changer for SMEs
- New tax year 2025-26: key changes for businesses
- Salary or dividends? Crack the code to paying yourself tax-efficiently
If you haven’t already set up your business, 1st Formations is here to help. You can form your company online starting from our homepage, and you’ll be ready to trade within 24 hours.
Thanks for reading. Please leave a comment if you enjoyed this post, and read more 1st Formations blogs to discover tips and information for ambitious entrepreneurs.
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