Corporation Tax is charged at 19% (and up to 25% for business with profits over £50,000) on the taxable profits of UK limited companies. Naturally, many business owners look for smart, legitimate ways to reduce this burden. Below are some of the most effective—and often overlooked—ways to reduce your Corporation Tax bill.
Pay Yourself a Salary
Paying yourself a salary as a director is not only tax-efficient from a personal tax perspective, but it's also a deductible business expense. This means the salary reduces your company’s taxable profit - and therefore, your Corporation Tax liability.
The business needs to be PAYE registered in order to pay what would be deemed a tax efficient salary so if you are not already registered, chat with out accountants to find out more.
Make Pension Contributions
Your limited company can make pension contributions directly into a SIPP (Self-Invested Personal Pension). These contributions are tax-deductible for the business and can significantly reduce your Corporation Tax bill.
You can usually contribute up to £60,000 per year, and may be able to carry forward unused allowance from the previous three years.
Speak with an Ember accountant before making contributions to ensure they’re tax-efficient and within the allowable limits.
Claim for Annual Events (Like Christmas Parties)
HMRC allows companies to claim the cost of annual events - even if you're a sole director. You can claim:
£150 per director, plus
£150 for a guest (e.g., a partner)
While this is often referred to as a Christmas party allowance, the event can happen at any time of the year.
📌 Category to use in Ember: Other Small Expenses
Take Advantage of Trivial Benefits
As a director, you're entitled to claim up to £300 per year in trivial benefits, provided:
Each benefit is no more than £50
It's not cash or a cash voucher
It isn’t a reward for work or performance
We recommend claiming six £50 vouchers across the year, for maximum benefit.
📌 Category to use in Ember: Other Small Expenses
Don’t Forget Out-of-Pocket Expenses
If you’ve paid for business expenses personally, don’t forget to record and reclaim them in Ember. These costs reduce taxable profit and you can reimburse yourself from the company’s bank account.
Claim for Medical Check-Ups
One annual health check-up per director is allowable as a business expense. However:
General treatments aren’t deductible
Only work-related treatment (e.g., an injury related to your duties) may qualify
📌 Category to use in Ember: Employee benefits
Eye Tests & Glasses
You can claim for:
Routine eye tests
Glasses, if used wholly and exclusively for business purposes (e.g., screen use for work)
📌 Category to use in Ember: Employee benefits
Claim Use of Home as Office
If you're using your home to run your business, HMRC allows a flat-rate claim of £6 per week (£312 per year) without needing receipts or calculations.
📌 Category to use in Ember: Rent & use of home
Consider Relocation Costs
If you're relocating for business reasons, some relocation expenses may be allowable. This can be complex, so we recommend speaking with an Ember accountant to ensure eligibility and correct treatment.