22 August 2023

5 ways to reduce corporation tax

Running a successful business is rewarding, but let’s face it, nobody loves paying taxes. If you’re a UK business owner, you’re probably aware of the corporation tax charged on your company’s profits. But did you know there are legal ways to reduce your corporation’s tax bill? In this article, we’ll discuss five smart ways to save on corporation tax in the UK.

1. Make the Most of Allowable Expenses

The number of expenses you can write off to lower your corporation tax might surprise you. Some examples include office costs, travel expenses, employee salaries, and advertising costs. Ensure you keep accurate records and receipts of all your business expenses so you can claim them when it’s time to file your corporation tax return. A skilled accountant can help you identify and maximise your allowable expenses, making sure you don’t miss out on any tax savings.

2. Claim Capital Allowances

Capital allowances are a great way to reduce your corporation’s tax bill by claiming tax relief on the cost of certain assets you purchase for your business. These assets can include machinery, equipment, and vehicles. It’s essential to keep track of all assets you buy and maintain proper documentation so that you can make accurate claims. Remember, claiming capital allowances can be complex, and a professional accountant can help you navigate the process and ensure you’re making the most of this tax-saving opportunity. If you need with your taxes, from basic compliance and filing to tax advice and strategy, consider hiring an accountant.

3. Utilise Research and Development (R&D) Tax Relief

If your business is involved in innovative projects and research, you could qualify for R&D tax relief. This tax incentive is designed to encourage businesses to invest in research and development projects that seek to advance knowledge or capabilities in their field. R&D tax relief can reduce your corporation tax bill significantly, so it’s worth exploring whether your business activities are eligible. An accountant with expertise in R&D tax relief can help you determine your eligibility and make a successful claim.

4. Take Advantage of the Patent Box Regime

The Patent Box is a tax relief scheme that allows UK companies to pay a reduced rate of corporation tax on profits generated from patented inventions. If your business holds patents or has patents pending, you could benefit from the Patent Box regime. This tax incentive can be a little complex, so it’s wise to seek the assistance of an accountant who can guide you through the process and help you claim the reduced tax rate.

5. Incorporate Your Business

If you’re operating as a sole trader or partnership, it might be worth considering incorporating your business as a limited company. By doing this, you can take advantage of the lower corporation tax rates in the UK compared to income tax rates for sole traders and partners. Incorporation also offers additional benefits, such as limited liability and a more professional image. Again, an accountant can help you assess whether incorporating your business is the right move for you and guide you through the process.

Need help with reducing your corporation tax?

Reducing your corporation tax bill in the UK is achievable by utilising working strategies. Whether you´re a new business, a fast-growing business, or an established business, our firm can help you be tax efficient every step of the way.

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