Ten tips to reduce corporation tax

Corporation tax is a fact of life for businesses, but you can minimise your bill by taking some straightforward steps, according to JAMIE PUGH of our accounts department.

There's no reason to pay more corporation tax than you absolutely have to. Here are my top ten tips for keeping your annual bill to a minimum:

1. Claim all business expenses

Try to make sure you record every expense, no matter how small (they add up!). You can claim the tax back at the end of the year.

Car mileage is just one such expense. Being able increase expenses by 45p per mile for every business-related mile driven will reduce your profits, so you don't have to pay as much tax. As long as the purchase is 100% related to the business, it can be claimed.

will reduce your profits, so you don't have to pay as much tax

2. Pay directors a salary

Comparatively the tax rate for dividends is lower than the tax rate for salary, but make sure to use a combination of a salary and dividends, so that you are taking advantage of your personal allowance and the lower tax bands.

3. Pension contributions

Another way of increasing expenses so your taxable profits are smaller is by paying into your employees' pension schemes.

4. Offer share schemes to employees

You can reduce your tax by offering your employees shares in the company. This can also increase employee performance and retention. The link below suggests different types of schemes, so you can work out which one would suit you best. https://www.gov.uk/tax-employee-share-schemes

5. Claim Creative Industries Relief

If your business comes under one of the following categories, then you can claim tax relief: film, TV, theatre, orchestra, animation, video games and exhibitions.

6. Host a staff party or event

Up to £150 per employee can be tax deductible for your company and tax free for your employees. That'll put a smile on their faces.

7. Research and development allowances

Expenses that are related to any R&D undertaken by the business can be subject to tax relief. The company will either have a reduction in tax or receive a cash payment.

8. Work-from-home allowance

If you or your employees work from home, you can claim up to £6 per week on household bills that may have increased. You don't need to provide evidence of your bills increasing up to £6. You can claim more than £6, but will need to provide evidence of your bills increasing.

9. Get HMRC to pay you interest

If you're in a good position and can pay your tax early, then HMRC should pay you 0.5% interest on your tax for paying early. This will be from when you pay to the payment deadline, so the earlier the better.

10. Don't miss your deadlines

Sounds basic, but it's easy to get carried away with your busy working life and end up missing a tax payment deadline, which can come with some nasty penalties and interest. 

If you would like to find out more about how to reduce your corporation tax, or how we can help your business, please contact us on 0115 955 550 or email enquiries@pagekirk.co.uk.