Corporation Tax is the tax due on business profits that Limited companies are required to pay to HMRC every year. Tax is charged at rates ranging from 19% to 25% depending on how much profit your business earns. Read our guide on how corporation tax is calculated to learn more.
Below is a list of some ways to reduce your Corporation Tax, and it is best to discuss with a qualified accountant to ensure you are maximising your savings:
- Salary is a tax deductible expense, so as well as being tax efficient for the majority of directors to take a small salary out of the business you will also receive Corporation Tax relief.
-Pension contributions can be paid through the limited company directly to a SIPP(Self Invested Personal Pension). You can normally contribute up to £60,000 a year into your pension as well as being able to carry forward unused pension contributions for the three prior years. This can make a significant dent to your Corporation Tax bill. It's worth discussing with an accountant to confirm the best amount to withdraw.
-Christmas parties are also claimable. This is even for companies with one director. HMRC allow you to claim £150 per director plus another £150 for a plus one. In reality this does not need to be a Christmas party, but you can claim up to £300 for an event and claim tax relief on this. Please categorise as Other small expenses.
-Trivial benefits - As a director you can claim for trivial benefits of up to £300 per year. Each benefit has to be £50 or less. For example, you can claim for a voucher of your choice for £50, six times a year. Please categorise as Other small expenses.
-Out of pocket expenses - Ensure you are adding these to your Expenses (limited companies)/Manual Entries (sole traders) section in Ember. These will attract tax relief and you can then reimburse yourself from the business account.
-Medical health check ups once a year are claimable as an expense. However any treatment required would not be unless the treatment directly relates to an injury or health issue relating to your company.
-Eye checks are claimable as are a pair of glasses assuming these are being used wholly and exclusively for business purposes.
-Use of home can be claimed. HMRC currently allow £6 a week/£312 annually to go through as an expense for using your home for work.
-Relocation costs - If you are relocating due to your business do discuss with an accountant how much you can claim.