Nobody wants to pay more tax than they need to.

But reducing your Corporation Tax bill isn’t about finding clever loopholes or making last-minute decisions when your accounts are due. Often, it’s simply about making sure you’re claiming what you’re entitled to and planning ahead.

If you run a limited company, here are five areas worth looking at.

1. Don’t Miss Legitimate Business Expenses

Let’s start with the obvious one – because it’s also one businesses can easily get wrong.

Generally, expenses incurred wholly and exclusively for the purposes of your business can be deducted when calculating taxable profits, although there are exceptions and special rules for certain expenses.

That can include things such as:

• Office and premises costs
• Business insurance
• Advertising and marketing
• Professional fees
• Staff costs
• Business travel
• Software and subscriptions
• Training costs in appropriate circumstances

Small expenses might not feel particularly significant at the time, but over a full financial year they can soon add up.

Jenner’s Tip: Keep on top of your records throughout the year rather than trying to remember what everything was several months later. Good bookkeeping doesn’t just make life easier – it can help make sure legitimate expenses aren’t missed.

2. Make the Most of Capital Allowances

Buying equipment, machinery or other assets for your business?

Don’t automatically assume you’ll simply claim the cost in the same way as an everyday business expense.

Capital allowances can provide tax relief on qualifying business assets, and there are several different allowances available.

The Annual Investment Allowance (AIA), for example, currently allows businesses to deduct up to £1 million of qualifying expenditure from taxable profits.

Companies may also be able to benefit from full expensing on qualifying new and unused plant and machinery, while other allowances may apply depending on what you’re buying and how it will be used.

The rules can get complicated – particularly with vehicles and different types of equipment – so it’s worth checking the tax treatment before making a significant purchase.

Jenner’s Tip: If you’re planning a large business purchase, speak to your accountant before you buy it rather than waiting until your year-end accounts are prepared. Timing can matter.

3. Consider Employer Pension Contributions

Pensions aren’t necessarily the first thing that springs to mind when you think about Corporation Tax, but they can form part of sensible tax planning.

A limited company can make employer pension contributions for directors and employees. Where the relevant conditions are met, these can usually be treated as a business expense and therefore reduce the company’s taxable profits.

There can also be benefits for the individual receiving the pension contribution.

However, pension rules, contribution limits and individual circumstances all need to be considered, so this isn’t something to do simply because you’ve read that it can save tax.

Jenner’s Tip: Think about the bigger picture. Good tax planning isn’t always about getting more money out of the business today – sometimes it’s about deciding the most effective use of company money for the future.

4. Check Whether Your Business Qualifies for R&D Tax Relief

Mention Research & Development and many business owners immediately think:

“That’s not us – we don’t have people in white coats working in a laboratory!”

But R&D for tax purposes can be broader than people expect.

If your company has worked on a project seeking an advance in science or technology and had to overcome scientific or technological uncertainty in doing so, there may be an R&D claim to consider.

The R&D tax relief rules have changed considerably in recent years, including the introduction of the merged R&D expenditure credit scheme and Enhanced R&D Intensive Support.

Eligibility isn’t simply about whether your business considers itself “innovative”, though. Claims need to meet specific conditions and be properly evidenced.

Jenner’s Tip: Don’t automatically assume you qualify – but don’t automatically assume you don’t either. If your business has spent money developing or significantly improving technology, products or processes, ask the question.

5. Plan Before Your Company’s Year End

Possibly the simplest tip on this list – and one of the most important.

Don’t wait until your company’s financial year has finished before thinking about tax.

Reviewing your position beforehand gives you time to understand your expected profits and consider whether there are legitimate actions you were already planning that could affect the company’s tax position.

For example, you might need to consider:

• Planned equipment purchases
• Pension contributions
• Bonuses
• Capital expenditure
• Available reliefs
• The timing of genuine business expenditure

The right decision will depend on the business. Spending £10,000 purely to save some Corporation Tax doesn’t magically make you £10,000 better off!

Jenner’s Tip: Tax planning works best when it’s actually planning. Talk to us before your year end rather than after it.

What Rate of Corporation Tax Does Your Company Pay?

The main Corporation Tax rate is currently 25%.

Companies with profits of £50,000 or less may qualify for the 19% small profits rate, while companies with profits between £50,000 and £250,000 may be entitled to Marginal Relief.

Those thresholds can be affected where companies are associated with other companies, so don’t assume the headline figures automatically apply to your business.

What About Patent Box?

For some innovative businesses, there is another relief worth knowing about.

The Patent Box regime can allow qualifying companies to apply an effective 10% Corporation Tax rate to certain profits attributable to qualifying patented inventions and other qualifying intellectual property.

It’s a specialist area and certainly won’t apply to every company, but for businesses developing and exploiting patented technology it can be valuable.

Could Your Business Be Paying More Corporation Tax Than It Needs To?

Being tax-efficient isn’t about avoiding tax. It’s about understanding the rules, claiming the reliefs you’re entitled to and making informed decisions at the right time.

And that’s where planning makes a difference.

Rather than looking at your Corporation Tax bill once the year is over and wondering whether anything could have been done differently, talk to us beforehand.

At Jenner’s Tax and Business Advisors, we can help you understand your company’s tax position, identify relevant reliefs and allowances and plan ahead.

Because paying the right amount of tax is important.

Paying more than you need to isn’t.

If we can help, get in touch today.

At Jenner’s Tax & Business Advisers, we help you stay one step ahead and make sure you’re not missing opportunities or paying more tax than you need to.

📞 Call us on 01432 379988
Or contact us here to arrange a quick review.