How to pay less corporation tax in the UK?

What is Corporation Tax?

Corporation tax is a tax on the profits of limited companies and other organisations such as clubs, societies, and associations. The profits on which corporation tax is charged include trading profits and investment profits. The rate of corporation tax is currently set at 19%. However, from April 2023 onwards, the main rate of Corporation Tax will rise from 19% to 25%. Although the current 19% rate will still apply if your profits are £50,000 or less, your company will pay more tax on profits above this level.

How can I reduce my corporation tax bill?

Reducing corporation tax can be beneficial for the success of any business. There are a few ways to do this, such as claiming expenses, utilising tax reliefs, implementing tax planning strategies and making use of tax allowances. Expenses that can be claimed include business travel, while tax reliefs such as R&D tax relief and capital allowances can also help reduce your corporation tax bill. Additionally, tax planning strategies can help you reduce your corporation tax bill. For example, timing when to make certain payments or profits can also help to reduce corporation tax. Finally, utilizing tax allowances such as the annual investment allowance can also help to reduce corporation tax.

Smart strategies to cut down your corporation tax bill

1. Claim eligible expenses: Certain expenses, such as business travel, can be claimed as a deduction from profits when calculating corporation tax. Make sure to keep accurate records of all expenses incurred in the running of your business.

2. Utilise tax reliefs: Tax reliefs, such as R&D tax relief and capital allowances, can be used to reduce corporation tax. These reliefs can be complex, so it's important to consult with a professional to ensure that you're making the most of them.

3. Implement tax planning strategies: Tax planning strategies, such as timing when to make certain payments or profits, can also help to reduce corporation tax. This can be done by bringing forward or postponing certain income and expenses.

4. Make use of tax allowances: Utilising tax allowances, such as the annual investment allowance, can also help to reduce corporation tax. This can be done by investing in plant and machinery, or other qualifying assets.

Business Expenses

It is important to note that not all expenses can be claimed against Corporation Tax and some expenses may have restrictions on how much can be claimed. It's always best to consult with a professional accountant to ensure that you are making the most of all available tax reliefs and allowances and your records are accurate.

• Staff costs: Salaries, wages, and benefits paid to employees, including pension contributions.
• Rent and rates: Rent for business premises and rates (local taxes) paid on the property.
• Insurance: Cover for fire, theft, liability, and other types of insurance.
• Utilities: Gas, electricity, and water bills for the business premises.
• Travel: Costs of business travel, including fuel, parking, and accommodation.
• Repairs and maintenance: Costs incurred for the repair and maintenance of business premises and equipment.
• Advertising and marketing: Costs incurred for advertising, promotion, and marketing of the business.
• Professional fees: Legal, accounting and other professional fees.
• Bank charges: Bank charges incurred in the course of running the business.
• Depreciation: Depreciation of business assets such as machinery, equipment, and vehicles.

How to keep accurate records?

Keeping accurate records is crucial for the preparation of a company's annual accounts and compliance with tax regulations. Accurate records make it easier to prepare the company's annual accounts, complete the corporation tax return and ensure compliance with tax regulations. Records to keep include invoices, receipts, bank statements and other financial records. Keeping records tidy and organised can make it easier to find the information you need. This can be achieved by using accounting software, creating a filing system and regularly reviewing and updating your records. As a professional LOYALS accountant, we can assist you in keeping accurate records and ensure compliance with tax regulations. Contact us today to learn more about how we can assist you with reducing your corporation tax bill and ensure a hassle-free experience.

How to pay my corporation tax bill?

Make sure you pay HM Revenue and Customs (HMRC) by the deadline. They may charge you interest if you do not pay on time. They’ll pay you interest if you pay your tax early.