Running a successful company means looking after many responsibilities at once, and corporate tax planning should never be treated as an afterthought. Taking a proactive approach helps businesses make the most of current reliefs, stay compliant and keep more of what they earn. Below, we outline some practical ways to strengthen your tax strategy under the applicable allowances and rates.
Make the most of current rates and allowances
The main rate of corporation tax remains at 25% for businesses of a certain size. This rate can have a direct effect on your bottom line, so it is important to plan ahead. For instance, the annual investment allowance (AIA), which allows you to claim tax relief on certain qualifying plant and machinery, currently remains set at up to £1m per year. By timing your major purchases and ensuring they qualify for the AIA, you can boost your savings and manage your cashflow.
Allowances do not exist indefinitely. Failure to use them within the permitted deadlines can mean missing out on valuable relief. It is worth double checking your expenditure and seeking advice on whether different forms of capital investment might increase your allowance claims.
Keep accurate records
The best tax strategies rely on reliable information. Maintaining accurate, up-to-date records of sales, costs and capital investments gives you a clear picture of your tax position throughout the year. Digital accounting software can track transactions, generate reports and store documents in one place. This not only makes your year-end calculations more efficient but also protects you in case of an inquiry from HMRC.
If record-keeping feels time-consuming, consider assigning specific tasks within your team or seeking outside support. Small errors can lead to penalties or lost relief, so every detail matters. Our goal is to help you avoid these issues so you can concentrate on running your business with confidence.
Choose the right structure
Choosing the right structure for your business can bring real benefits in terms of tax. A limited company, for example, can sometimes offer greater flexibility with the way you draw income, usually through a combination of salary and dividends. However, a partnership or sole trader arrangement may be more suitable in other cases.
Each structure has its own rules, and those rules can evolve, which makes it important to keep your company’s status under review. The structure you picked years ago may not be the most efficient one for you now, especially if your business has grown. We help clients re-examine their options and stay in line with current legislation.
Consider research and development incentives
Research and development (R&D) incentives remain popular among eligible businesses. These reliefs are designed to encourage innovation by rewarding spending on projects that aim to create new products or improve existing ones. Thousands of organisations in the UK claim R&D tax credits each year; if your company invests time and funds in science or technology projects, you may qualify for significant tax savings.
Understanding the eligibility criteria is essential. For instance, the research must focus on resolving scientific or technological uncertainties. If you think your project might fit, contact a professional for guidance. We can clarify the conditions and help you file the right claims so you receive everything you are entitled to.
Plan for dividends and directors’ salaries
Company owners often choose to pay themselves a low salary topped up by dividends. This approach can reduce national insurance contributions, but it requires careful planning to stay compliant. You should ensure you set a fair salary, and you must follow legal steps for issuing dividends.
Changes in dividend allowance rules mean you should review your strategy each year. By staying aware of shifts in allowances or rates, you can adjust your plans to preserve profits and avoid unnecessary taxes. Some businesses manage these tasks in-house, while others leave them to professional accountants. Either way, it pays to act before the end of each tax year to avoid last-minute decisions.
Stay up to date with legislation
Tax regulations regularly evolve. Rates, thresholds and reliefs may be adjusted in future Budgets, and it is sensible to keep an eye on announcements from the Treasury. HMRC updates its guidance whenever new rules come into effect, and these changes can affect whether your business qualifies for specific relief.
Ignoring changes can lead to oversights and missed opportunities. An annual review can help you adapt your processes and take advantage of new allowances. While we believe it is possible to handle much of this yourself, many clients find that professional advice provides peace of mind and helps them avoid common mistakes.
Watch out for common pitfalls
There are a few errors that we often see.
- Missing deadlines: If you miss filing or payment dates, you may face penalties or interest charges. Mark these deadlines on your calendar or use automated reminders.
- Failing to claim eligible reliefs: You could be paying more tax than necessary if you overlook reliefs such as the AIA or R&D credits. A regular review of your expenditure helps you avoid leaving money on the table.
- Not reviewing director loan accounts: If you withdraw money that is not recorded as salary or dividends, you might create a director loan, which has tax consequences if not handled properly.
- Overlooking VAT: VAT is another area where businesses can lose track of changes, especially when dealing with different rates or supplies. Make sure you file accurate returns and keep relevant documentation.
Act early and seek professional guidance
Acting early is one of the best ways to optimise tax planning. By reviewing your accounts, forecasting future profits and considering major investments in good time, you gain control. This helps you spot opportunities to arrange spending around your accounting period or accelerate necessary purchases.
Professional support can also boost your tax efficiency. Accountants and advisers keep up with changing regulations and work to identify relevant reliefs for your circumstances. At John Potter & Harrison, we aim to build a long-term relationship with our clients, offering clear advice and flexible solutions that fit your business style. Our priority is to help you stay compliant and save as much tax as possible.
How we can help
At John Potter & Harrison, we take a people-focused approach. We explain technical matters in plain language and offer tailored guidance based on your situation. Whether you are planning investments, claiming relief or trying to decide if your business structure needs adjusting, we can assist you. We pride ourselves on our honesty and practical support, which we believe fosters long-lasting partnerships.
If you have questions about how your business can better use current reliefs or would like a professional review of your tax plan, our door is always open. Let us help you take the right steps to maximise savings and comply with the rules that apply to you.
Moving forward
Corporate tax planning is an important element of doing business in the UK. By using available allowances, keeping proper records and staying aware of any adjustments to regulations, you reduce your liabilities and improve your growth potential. Although tax legislation can change, the rewards of planning in advance remain consistent.
Whether you prefer to manage your finances in-house or want extra support, paying attention to corporate tax planning can lead to significant savings over time. We encourage you to start now, review your strategy and stay on top of any developments.
Get in touch with us today to discuss how we can help you with your corporate tax planning strategies.