Top Tips for Reducing Corporation Tax

At Black & White Accounting, we understand that every business wants to maximise profits and minimise unnecessary tax liabilities. Corporation tax is a major expense for companies in the UK, but with smart planning and strategic decision-making, you can reduce your tax bill legally and efficiently. Here are our top tips for reducing your corporation tax liability.

1. Take Advantage of Allowable Expenses

Make sure you’re claiming all legitimate business expenses. These include:

• Staff wages and salaries
• Office rent and utilities
• Professional fees (e.g., accountants and solicitors)
• Marketing and advertising costs
• Travel expenses

By ensuring all allowable expenses are deducted before calculating taxable profits, you can significantly lower your corporation tax liability.

2. Make Use of Capital Allowances

If you purchase assets such as machinery, vehicles, or office equipment, you can claim capital allowances. The Annual Investment Allowance (AIA) lets you deduct the full cost of qualifying purchases up to a certain limit, reducing your taxable profits.

3. Consider R&D Tax Credits

If your business invests in innovation, research, or development, you could qualify for Research & Development (R&D) Tax Credits. This government scheme rewards businesses that create new products, processes, or services, allowing them to claim back a percentage of their R&D expenditure.

4. Pay into a Pension Scheme

Contributions to employee pension schemes are tax-deductible. Making employer pension contributions can reduce taxable profits while providing a valuable benefit for employees and potentially helping with staff loyalty and retention.

5. Efficiently Structure Your Business

If your company structure is inefficient, you might be paying more tax than necessary. Consider:

• Whether incorporating a holding company could provide tax advantages
• Whether salary and dividend splits for directors/shareholders could reduce liabilities
• Using a group structure to offset losses between companies
• Is a limited company the right structure for you

6. Use Losses to Your Advantage

If your business has made a loss, you can offset it against past or future profits. Carrying back losses to previous years can result in a tax refund, while carrying forward losses can reduce future corporation tax liabilities.

7. Claim Tax Relief on Charitable Donations

If your business donates to charity, you can claim corporation tax relief on the amount donated. This not only benefits good causes but also helps lower your overall tax bill.

8. Review Director’s Remuneration

Directors should carefully consider how they take their earnings. A combination of salary, dividends, and benefits can be more tax-efficient than just taking a salary. Optimising director’s pay can help reduce personal and corporate tax liabilities.

9. Stay on Top of Deadlines and Compliance

Missing tax deadlines can result in penalties and interest charges. Ensure you:

• File corporation tax returns on time
• Pay any tax due promptly
• Keep accurate records to support tax relief claims

Final Thoughts

Effective tax planning can make a huge difference to your company’s bottom line. By implementing these strategies, you can reduce your corporation tax bill while staying fully compliant with HMRC regulations.

At Black & White Accounting, we specialise in helping businesses maximise tax efficiency. Get in touch with our expert team today and let’s find the best tax-saving strategies for your company!

Need expert tax advice? Contact us today!