12 ways to reduce your Corporation Tax bill in 2024
No one wants to pay more tax than they have to. That’s why accountants spend much of their waking hours looking for legal ways to reduce their clients tax liability, whether that’s income tax, capital gains, inheritance or your Corporation Tax bill. This week, we look at twelve ways you can legally reduce your Corporation Tax bill and keep more money in your business.
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Maximise your business expense deductions to lower your Corporation Tax bill
One of the best ways to reduce your Corporation Tax bill is to identify and claim all allowable business expenses. Expenses must be wholly and exclusively for business purposes for you to deduct them as a legitimate cost of doing business. Each year review your expenses with your accountant to ensure that you are deducting everything that’s allowable for corporation tax.
Don’t forget that costs such as the staff entertaining can be claimed up to a maximum of £150 per person. Our helpful blog gives you the lowdown on exactly how this allowance works. -
Claim R&D tax relief
If your company works in science and technology and you invest in research and development, you may be able to claim R&D tax relief. There are two schemes depending on your company size– SME R&D tax relief and R&D expenditure credit (RDEC).The rules get updated quite frequently so ask your accountant about this.
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Patent Box
To encourage companies to innovate, there is a scheme called Patent Box. This lower rate of Corporation Tax (currently 10% for 2023/24) is applied to profits generated from patented inventions.
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Use your capital allowances
Capital allowances enable your company to invest in new equipment, machinery and vehicles and to deduct the cost of these to reduce corporation tax. There are different types of capital allowances and you may be able to claim more than one type.
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Claim relief on charitable donations
Donations to charity can lower taxable profits. You can donate in a few different ways – by giving cash, equipment, trading stock, land, property, shares, employees on secondment or sponsorship payments. How you claim these allowable deductions depend on the type of donation you are making.
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Draw a tax-efficient combination of salary and dividends
Directors should use their personal allowances effectively to ensure they draw the maximum in salary to reduce taxable profits.
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Make pension contributions to cut your Corporation Tax bill
Employer pension contributions for directors and employees are allowable deductions against Corporation Tax bill. Setting up a pension scheme can be a great way to reduce your bill and plan for your financial future.
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Employee share schemes
The costs of setting up and maintaining an employee share scheme can be deducted for Corporation Tax purposes. Get advice from your accountant on the best structure for your employee share scheme.
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Claim creative industries relief
If your business is in television, radio, film, video games, animation, theatre, orchestra, museum or an art gallery, you may be able to claim one of the tax reliefs for creative industries.
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Offset losses against future profits
If you make a loss, you can carry this forward for offset against future profits. Make sure this is not forgotten when you are preparing the next year’s accounts.
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Get claims in on time
Make sure you don’t miss and deadlines for making relief claims such as R&D Tax relief, Patent Box or capital allowances.
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File and pay on time
Avoid additional costs of fines, penalties and interest payments by ensuring you submit all returns on time and pay tax due on time.
Planning and professional advice for your Corporation Tax bill
If you’d like to review your current Corporation Tax position to make sure that you are claiming all allowable expenses, reliefs and deductions possible, get in touch on 01322 250001 or complete our online contact form. We offer a no-obligation chat about our business accountancy services designed to help you minimise your tax bill and increase your productivity and profitability.
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