Corporation Tax · Guide

How can a company director reduce Corporation Tax?

In short: by moving profit into tax-advantaged structures before it is taxed. Employer contributions into a SSAS are deductible against Corporation Tax, and a Lifetime Business Tax Plan shelters surplus cash from the 40% charge.

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Reviewed June 2026 HMRC registered scheme administrator
Company director reviewing Corporation Tax strategy
£25,000
Corporation Tax saved on a £100,000 contribution
What it is

It is a tax on profit - and timing is everything

Corporation Tax is the tax a UK limited company pays on its profits - currently 25% for profits over £250,000, with a tapered rate between £50,000 and £250,000.

It is charged on trading profit, investment income and chargeable gains. The key point for planning is timing: tax is due on profit the company has made, but contributions into a registered pension scheme are an allowable business expense - so they reduce the profit on which Corporation Tax is charged, in the same accounting period.

The hidden problem

Why retained profit is taxed twice

Cash left sitting in the company is taxed once as profit, and again when you eventually take it out - and it can expose the company to a further Inheritance Tax charge.

Many successful directors build up surplus cash with no plan for it. That cash has already been taxed, will be taxed again on extraction, and - if it tips the company into looking like an investment company rather than a trading one - can cost the family Business Property Relief on death.

Key takeaways
  • Corporation Tax is charged on profit, not on cash you keep in the bank.
  • Pension contributions reduce taxable profit in the year they are paid.
  • Surplus cash creates a second and third tax problem if left unmanaged.
The options

The four legitimate routes

For most owner-managed companies, these are the compliant ways to reduce the bill. Tap each to see how it works.

SSAS

Employer pension contributions

Contributions into a SSAS are deductible against Corporation Tax, reducing this year's bill while the funds stay invested under your control - in property, a loanback, or other permitted assets.

FIC

A Family Investment Company

A Family Investment Company pays Corporation Tax on its profits, but the dividends it receives from its investments are largely exempt - so investment income can be reinvested and compound within the company. Its strengths are long-term family wealth planning, keeping control across generations, and Inheritance Tax mitigation.

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Capital allowances and reliefs

Making full use of the allowances and statutory reliefs the company is already entitled to claim - the foundation any good plan starts from.

LBTP

A Lifetime Business Tax Plan

Combines a SSAS and a Family Investment Company so the two work together across tax, investment and succession - the most complete route for directors with surplus cash.

The big one

The 40% surplus-cash trap

If retained cash grows large enough that HMRC could treat your company as an investment company rather than a trading one, the company can lose Business Property Relief - exposing its value to a 40% Inheritance Tax charge.

A Lifetime Business Tax Plan removes the grey area: surplus cash is moved into the plan, the trading company's status is protected, and the cash is sheltered and put to work - rather than quietly becoming a 40% liability.

Explore the Lifetime Business Tax Plan
Surplus cash building up in a company
Corporation Tax calculator

See what you could save

Move the slider to your SSAS contribution and see the Corporation Tax saving.

Annual contribution £60,000
£0£100k£200k
Corporation Tax saved this year
£15,000
Saved over 10 years
£150,000
Into your pension
£600,000
Illustrative only at 25% Corporation Tax. Actual savings depend on your company's circumstances.
Book a call to confirm your saving
A worked example

£100,000 of surplus profit

Contributed before the year end, instead of left to be taxed.

Surplus profit £100,000
Corporation Tax at 25% if retained £25,000
Corporation Tax after a £100,000 contribution £0
Tax saved this year £25,000

Illustrative figures only. Your position depends on your profit, allowances and circumstances. Not personal tax advice.

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Which route suits your company?

Question 1 of 3

Do you own or run a UK limited company?

Do you have surplus cash, profits, or old pensions to put to work?

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Your result

A SSAS looks like a strong fit

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FAQs

Common questions on reducing Corporation Tax

The questions directors ask us most often.

Yes. There are several well-established, HMRC-compliant ways to reduce your Corporation Tax liability - including making employer pension contributions, using the Annual Investment Allowance, claiming all allowable expenses, and structuring your business efficiently. TLPI can review your position and identify which options are most valuable for you.

Contributions made by a company into a pension scheme (including an SSAS) are generally deductible for Corporation Tax purposes, provided they pass HMRC's "wholly and exclusively" test. Contributing £50,000 into an SSAS, for example, reduces taxable profit by £50,000 - saving up to £12,500 in Corporation Tax at the 25% rate. The money remains accessible to you as a pension.

The main rate of Corporation Tax is 25% for companies with profits over £250,000. A small profits rate of 19% applies to profits of £50,000 or below. A tapered rate applies between those thresholds.

The most efficient extraction strategy for most directors combines a modest salary (up to the National Insurance threshold), dividends (which do not attract National Insurance), and employer pension contributions (which reduce Corporation Tax and do not count as personal income). The optimal mix depends on your personal tax position and the company's profit level.

Before the end of your accounting year is the most important time - once the year closes, many planning opportunities are lost. TLPI recommends a review at least three months before your year-end so that any strategies can be implemented in time to take effect.

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