Most businesses wait until tax deadlines are close before looking at their finances—but that’s often too late to reduce Corporation Tax. Effective Corporation Tax planning happens before your year-end, not after it. With the right approach, you can make smart financial decisions that lower your tax bill and improve business efficiency.
This guide covers simple and legal strategies UK limited companies can use to reduce Corporation Tax liability. If you’re not yet clear on how Corporation Tax works or what the filing process looks like, you may want to review this complete guide to Corporation Tax return filing before moving ahead
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1. Advance Business Expenses Where Possible
Planning any major purchases or recurring costs for early next year? Buying them now—before your year-end—means you can claim the expense in the current accounting period.
Eligible business costs include:
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Office equipment and software
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Prepaid business rent or insurance
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Marketing, advertising, and subscriptions
These costs reduce taxable profit and therefore lower the Corporation Tax due.
2. Make Employer Pension Contributions
Employer contributions to pensions (for directors or staff) are classed as allowable business expenses and are deductible for Corporation Tax purposes.
Ensure contributions are:
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Paid before the year-end
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Within the annual allowance limits
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Properly documented
This strategy supports retirement savings while reducing your current tax bill—an ideal step in professional Corporation Tax planning.
3. Optimise Director Salary and Dividends
How you pay yourself as a director can have a major tax impact. A low salary (within personal allowance limits) combined with well-timed dividends often results in the most tax-efficient outcome.
Before your year-end, consider:
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Is your salary aligned with National Insurance thresholds?
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Could paying a dividend now reduce higher-rate tax later?
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Have all dividends been formally declared and recorded?
Getting year-end tax advice from a qualified accountant helps ensure you don’t overpay Corporation Tax—or personal tax.
4. Use Capital Allowances and the AIA
If you're planning to invest in machinery, IT equipment, or commercial vehicles, you may qualify for the Annual Investment Allowance (AIA), which allows full tax relief in the year of purchase (up to £1 million).
Making these purchases before your year-end means faster tax relief and lower taxable profits for the current year.
5. Write Off Bad Debts
Outstanding invoices that are unlikely to be paid should be reviewed before the year ends. If reasonable efforts have been made to collect the amount and it’s genuinely irrecoverable, you can write it off—reducing profit and tax owed.
Make sure proper documentation and communication records are kept to justify the write-off.
6. Carry Out a Year-End Review
A pre-year-end financial check can uncover:
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Unclaimed expenses
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Stock that has fallen in value
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Inaccurate asset values
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Missed pension or salary adjustments
A tax accountant offering Corporation Tax planning services in the UK can help you identify these opportunities in time to take action.
Waiting until tax deadlines are near often limits your options. Instead, act now—while you still have time to make strategic decisions. Whether it’s claiming allowances, adjusting payments, or reviewing your records, proactive Corporation Tax planning helps you stay compliant and save money.
For tailored year-end planning support, it’s worth speaking to a trusted tax professional who understands your business and UK tax laws in detail.
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