As tax regulations continue to evolve, businesses must stay proactive when it comes to managing their tax liabilities. With careful planning and awareness of available reliefs, companies can significantly reduce their corporation tax bills while remaining compliant.
Here are some key strategies to consider for the 2025 tax year:
Make the Most of Tax Reliefs
The UK government provides various tax reliefs to encourage investment and innovation. Maximising these can lead to significant savings:
- Annual Investment Allowance (AIA): Businesses can deduct the full value of qualifying capital expenditures, such as machinery and equipment, from their taxable profits, up to a specified limit.
- Research and Development (R&D) Tax Relief: If your business is investing in innovation, it may qualify for R&D tax relief, allowing you to claim a portion of development costs against your tax liability.
- Patent Box: Companies that generate profits from patented inventions may be eligible for a lower rate of corporation tax on those earnings.
Claim All Allowable Expenses
Reducing taxable profits is easier when businesses ensure they are claiming all legitimate expenses, including:
- Office and business costs: Rent, utilities, and supplies should be fully accounted for.
- Travel and subsistence: Business-related travel, accommodation, and meals can be deducted where applicable.
- Professional services: Legal, accounting, and consulting fees are allowable business expenses.
Good record-keeping is essential to substantiate expense claims and avoid issues with HMRC.
Plan Ahead for Corporation Tax Payments
Paying corporation tax early can be financially beneficial. HMRC may offer interest on early payments, providing a small return on your money while ensuring you avoid late payment penalties.
Reassess Company Vehicles
If your business uses vehicles, reviewing how they are owned and expensed can lead to tax savings.
- Company-Owned Vehicles: Keeping vehicles under the company’s name can allow fuel, insurance, and maintenance costs to be deducted.
- Mileage Allowance: If employees use personal vehicles for business purposes, they may be eligible to claim mileage allowances, reducing taxable profits.
Accurate records of vehicle use are essential to avoid unnecessary tax charges.
Utilise Pension Contributions
Contributions to employees’ pensions, including directors’ pensions, are usually tax-deductible for businesses. Making pension contributions is a tax-efficient way to withdraw profits from a company while benefiting employees.
For Professional Corporation Tax Advice, Look No Further
With tax laws subject to frequent updates, consulting a qualified accountant or tax adviser can help identify the best strategies for reducing corporation tax in line with current legislation. Professional guidance ensures compliance while helping businesses optimise their tax efficiency.
By planning ahead and making full use of available tax reliefs, businesses can reduce their corporation tax burden and reinvest savings into growth and development.
Here at Nordens, we offer expert advice and assistance with all of your business needs: from your everyday accounting to Advisory, Tax, Audit and more. If you need support with any of the above or just want to speak to a member of the team, get in touch today.
