According to a new study, almost half (46%) of SMEs in the UK admit to having a “very poor” understanding of the government tax relief available to them. This means a huge number of small business owners could be paying over the odds when it comes to the tax they pay each year.

SMEs are the lifeblood of the UK economy, with small businesses accounting for 99.3% of all private-sector businesses at the start of 2015. Small and medium-sized businesses employed 15.6 million people and created a combined annual turnover of £1.8 trillion – 47% of all private sector turnover in the UK.

Tax receipts from small business are hugely important to the UK economy, but individual businesses should take advantage of all the legitimate areas of tax relief available to them; otherwise, they could be putting their own operations under undue strain. Using advances such as cloud accounting packages can help streamline your financial record-keeping and tax reporting, but it certainly helps if you have at least a basic knowledge of the range of tax relief available to you.

Research from Direct Line for Business found that more small business owners rated themselves as having a “very poor” understanding of the tax reliefs available to them than any other level. A further 18% thought they had “below average” understanding, while the same proportion thought their understanding was “average.” Only 5% thought they had an “above average” understanding, and just 6% claimed to have a “very good” understanding of the tax relief measures applicable to their businesses.

Nick Breton, head of Direct Line for Business, said: “This research highlights that there is a lack of awareness of the benefits available to small business owners which can ultimately impact the development and growth of their business. The research shows SME owners do not know whether they are eligible for any tax relief measures, so we would encourage them to do some research and seek help if necessary to make sure they are taking full advantage of the benefits.”