Clients often ask us how they can save on their corporation tax. We have written this article to highlight five ways you can do this.

However, there are many other ways as well, which depend on your personal circumstances, so it’s always worth talking to your accountant to check if there is more that you can do to reduce your tax liabilities.

What is corporation tax?

Corporation tax in the UK is a tax on the profits of limited companies and other corporate entities. It's levied on their profits from their business activities, both in the UK and abroad.

You must pay Corporation Tax on profits from doing business as:

• a limited company
• any foreign company with a UK branch or office
• a club, co-operative or other unincorporated association, for example, a community group or sports club

The current corporation tax rate 2023/24 for company profits is 25%.

If your company made more than £250,000 profit, you will pay the main rate of Corporation Tax.

If your company made a profit of £50,000 or less, you will pay the ‘small profits rate’, which is 19%.

Ways to save on corporation tax

• Claim business expenses – ensure that you record all your business expenses to claim them back. This includes when you use your personal car for business purposes.

• Owner salaries – Operating as a Limited Company means that you should be paying yourself a salary. By paying your salary, you reduce your profits and, therefore, pay less corporation tax

• Pensions – Often, people don’t realise that having a company pension scheme can be a very tax-efficient way of extracting funds from the company. Director and staff pension schemes are tax-deductible for the company.

• Capital allowances on business cars – Although historically cars have not been particularly tax efficient but now electric cars can attract 100% tax relief on their cost, thus lowering profits.

• Capital expenditure – You can optimise the use of the Annual Investment Allowance. This gives full tax relief in the year of acquisition of up to £1m spent on assets and equipment.

If you would like to discuss how to reduce your corporation tax liabilities and explore how to save on your tax bill, then contact us by calling 01623 490 120 or email This email address is being protected from spambots. You need JavaScript enabled to view it.