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10 Ways to Minimise Corporation Tax

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With corporation tax rates rising in 2023, business owners need to get savvy on legally minimising their company’s tax liability. Reducing corporation tax payments can boost cash flow and profits to reinvest in growth. 

Understand the New Corporation Tax Rates and Thresholds

As of April 2023, the main CT rate applicable depends on annual profits:

  • 19% for profits under £50,000
  • 25% marginal relief for profits £50,000 to £250,000
  • 25% flat for profits over £250,000

The thresholds get shared between associated group companies, so structuring multiple firms won’t avoid higher rates.

Contribute to Company Pension Plans

Pension contributions qualify for corporation tax relief. With the 2023/2024 annual allowance now £60,000, payments into directors’ or employees’ pension plans can massively cut tax bills.

Bring in Director Loans

Directors charging commercial interest on loans they make to their companies create deductible expenses that reduce corporation tax. However, interest rates are reasonable to HMRC.

Maximise Use of Capital Allowances

Writing down allowances enables companies to get tax relief on investments in equipment, machinery, company cars, and more over time. Allowances like the annual investment allowance and 100% first-year allowance provide immediate tax write-offs on capital spending.

Carefully Expense Operating Costs

Get clear processes to capture all valid business expenses for corporation tax deductions – no matter how small. Business miles, travel, subscriptions and assets used for work all qualify.

Claim Tax Credits for R&D Spending

If your company spends money on developing new and innovative products, processes, or services, you may be eligible to receive cashback for up to 33.5% of the costs through the R&D tax relief scheme. This scheme aims to encourage and support businesses investing in research and development by providing financial assistance to offset some costs. This can be a valuable opportunity for companies looking to innovate and grow, as it can help reduce the financial burden of developing new ideas and bringing them to market.

Explore Other Specialist Reliefs

Companies that meet certain niche criteria can take advantage of a range of lesser-used tax reliefs. These include tax breaks for creative industries and the patent box scheme.

Pay Corporation Tax Early

Paying tax bills before deadlines scores interest from HMRC, supplying modest returns. Just remember that any interest received then sees taxation itself.

Employ Family Members

Putting partners, children, or parents on the payroll allows for the extraction of profits as justifiable staff costs rather than dividends. Salaries naturally reduce profits that are chargeable for corporation tax, too.

Don’t Miss Tax Return Deadlines

File on time and pay on time. Simple but vital. Late submissions or payments invite surcharges and interest costs that diminish profits.

Structure affairs proactively and explore legitimate tax minimisation strategies in advance from our business tax accountants expert advice. And ensure complete transparency with tax authorities to ensure good compliance. Follow these tips to maximise after-tax income year after year.

Disclaimer

Our blogs and articles are for information only. If you need help with your specific tax problem or need advice for your business please call us on 0800 135 7323