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Reducing Corporation Tax
What is Corporation Tax?
Corporation Tax is the tax that is due on business profits and on any gains made from investments or from a business selling its assets. It applies to all UK limited companies (plus foreign companies with UK offices) and is collected by the government.
If your company is registered with Companies House, you will be paying Corporation Tax at the rate appropriate to your company profits. As profits grow, it can become a more actively managed consideration, with various ways to reduce this liability within HMRC rules.
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Corporation Tax at a glance
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Corporation Tax is paid by UK limited companies on taxable profits
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The rate applied depends on the level of profit generated
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Allowable costs and reliefs reduce taxable profit before tax is calculated
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Corporation Tax is separate from personal tax paid by directors or shareholders
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As profits increase, Corporation Tax often becomes more relevant to wider planning decisions
How much is Corporation Tax
The latest Corporation Tax rates are:
- 25% for profits of £250,000 or over
- 19% for profits of £50,000 or less
If business profit is between £50,000 and £250,000, the company can claim Marginal Relief which serves as a gradual increase in Corporation Tax rates from the lower rate of 19% up to 25%.
Certain business expenses are tax-deductible, such as rent for the business premises, property insurance, and day to day office-running costs. You can find a full list of HMRC allowable business expenses on the gov.uk website.
Common Corporation Tax mistakes
- Focusing only on headline tax rates rather than taxable profit
- Treating Corporation Tax as a once-a-year compliance task
- Retaining surplus cash without considering longer-term implications
- Reducing tax in ways that restrict access to capital or flexibility
- Failing to review Corporation Tax as the business grows or changes structure
Reduce Corporation Tax
Successful business owners know that the more successful their business, the higher their Corporation Tax liability will be.
There are a number of legal ways that business owners can reduce their Corporation Tax bill. These include making additional pension contributions, making charitable contributions, and investing in research and development.
In practice, Corporation Tax is often considered alongside wider decisions about profit retention, reinvestment, and long-term business planning.
Reduce Tax, Retain Control
Reduce Corporation Tax using the Small Self-Administered Scheme (SSAS) and Family Investment Companies, as part of a Lifetime Business Tax Plan, whilst retaining control and access to capital for the business.
Tax Planning 
SSAS