How To Reduce Your Corporation Tax Bill 

As a business owner in the UK, you’ve likely felt the pressure when the calculation for corporation tax arrives. You’ve grown your company, worked hard, and then the taxman knocks.  

At Carter Collins & Myer, we see that scenario all the time. The goal isn’t simply paying less tax; it’s making smart decisions, so you retain more profit legally, ethically, and in compliance with the law.  

If you’d like to talk this through, tailor-made for your business, call us on 01706 225 617 or email enquiries@uk-ccm.com. 

What Is Corporation Tax And Why Does It Matter? 

Corporation tax is the tax your limited company pays on its taxable profits. Since April 2023, the main rate in the UK is 25% for companies with profits over £250,000, with a small profits rate of 19% for those making £50,000 or less, and marginal relief between.  

Understanding how to reduce corporate tax requires understanding how profits are calculated and what deductions and planning opportunities exist. 

Five Smart Ways To Reduce Corporation Tax 

Here we dive into practical, proven strategies you can implement. Each reduces your company’s tax bill in an entirely legal way when correctly applied. 

1. Claim All Allowable Business Expenses

    

Make sure your company claims everything it legitimately can: rent, utilities, marketing, professional fees, travel, training and more. These expenses reduce your taxable profits, thus reducing your corporation tax. 

2. Use Capital Allowances & Investment Incentives

    

If you buy qualifying plant, machinery or equipment, you may claim full cost through allowances such as the Annual Investment Allowance (AIA). That reduces profit now, with lower corporation tax. 

3. Optimise Director Salary & Dividend Mix

    

For many owner-managed companies, drawing a modest salary and taking dividends can reduce the total tax burden (personal and corporate). Also, a salary is deductible for corporation tax, so structuring this well matters. 

4. Use Pension Contributions & Employee Benefits

    

Employer pension contributions and certain employee benefits can reduce company profits, subject to corporate tax, while building wealth for you or your team. These must be genuine and documented. 

Also, look at salary sacrifice or benefits-in-kind arrangements where appropriate. 

5. Plan Year-End Timing & Company Structure

    

If you anticipate a high profit year, you may bring forward deductible costs or delay income (within reason) to reduce taxable profit in that accounting period. Also consider your company’s structure: group relief, associated companies, and year‐end. 

How Do We Help You Reduce Corporation Tax? 

At Carter Collins & Myer, we don’t just file your returns. We become your strategic partner in tax planning and financial strategy. Here’s what our services include: 

• Detailed review of your accounts and profit forecasts to identify opportunities for tax savings. 

• Advising on structure, salary & dividend strategy, timing of investments and expenses. 

• Making sure your company remains fully compliant with HM Revenue & Customs rules, avoiding penalties while reducing tax. 

• Interlinking our services: e.g., our tax-planning team works alongside our bookkeeping and payroll services, so nothing is missed. 

(For more on our tax advice & compliance offering, see our dedicated page on Tax Advice and Compliance.) 

Common Mistakes That Can Cost You 

• Leaving deductible costs unclaimed due to poor record-keeping. 

• Investing after year-end when bringing forward costs could have saved tax. 

• Drawing too high a salary too early and reducing corporation tax relief. 

• Ignoring changes to rules such as associated companies or thresholds for corporation tax. 

• Relying on generic advice rather than tailored to your business sector and size. 

Bringing It All Together: Your Next Steps 

Reducing your corporation tax bill isn’t about tricks; it’s about thoughtful planning, good records, timely action and professional advice. If you’re committed to keeping more of your company’s hard-earned profit, we’re here to help. 

Call us today on 01706 225 617 or email enquiries@uk-ccm.com. We’ll book a free consultation, review your current year situation, and help design a tax-efficient plan tailored to your business. 

Let us handle the complexities of tax planning, so you can concentrate on growing your business with peace of mind. 

FAQ 

Q1: What is the corporation tax rate in the UK? 

A1: For many private limited companies, it’s 25% for profits over £250k, 19% for profits up to £50k, with relief in between. 

Q2: Can I reduce corporation tax by paying myself a higher salary? 

A2: Yes, a salary is deductible, so it reduces company profit subject to tax, but you must balance that against personal tax and NICs. 

Q3: Are pension contributions tax-deductible for the company? 

A3: If they’re employer contributions and made correctly, yes, they reduce company profits and corporation tax liability. 

Q4: Does investing in new equipment help reduce corporate tax? 

A4: Yes, qualifying plant and machinery can be claimed under allowances (e.g., AIA), reducing taxable profits. 

Q5: When should I start planning how to reduce corporate tax? 

A5: As early as possible in the year. Good planning two to three months before your year-end often gives the best results. 

Q6: Can I reduce corporation tax by working from home or using my home as an office? 

A6: Yes, if you use part of your home for business purposes, you can claim a proportion of costs like utilities and internet. It must be reasonable and properly recorded. 

Q7: How do R&D tax credits help reduce corporation tax? 

A7: Research and Development (R&D) tax credits allow eligible companies to claim enhanced deductions or cash refunds for innovation-related spending, lowering corporation tax significantly. 

Q8: Do charitable donations lower my corporation tax bill? 

A8: Yes, donations to registered charities are tax-deductible, reducing your company’s taxable profits. Always keep records and ensure the charity is HMRC-recognised. 

.