Tips to reduce your corporation tax bill

Although we’ve yet to reach the year-end, it’s always good to plan ahead when it comes to managing your taxes.

All companies are required to pay corporation tax on any profits made during their accounting period. The rate for company profits in 2017/18 is 19%.

While most companies will pay the same rate of tax, there are allowances and deductions available depending on your situation. These can give you a better picture on your profits and ensure you’re not paying more tax than you need to.

In this blog post, we provide tips that could reduce your tax bill.

Reducing your tax bill

It’s possible to deduct the costs of running your company from the profits you make before tax when you prepare your annual accounts.

Here are some guidelines to achieve this:

Capital allowances

You can claim capital allowances on some of the assets within your company, such as equipment or machinery.

For each item that is a classed by HMRC as plant and machinery (this includes commercial vehicles), you can deduct some or all of the value from your pre-tax profits using the annual investment allowance.

The allowance is £200,000 and provides 100% tax relief for qualifying expenditure incurred for 12-month periods from 1 January 2016.

Pension contributions

Employers making pension contributions can usually reduce taxable profits. Relief is given in the chargeable accounting period in which contributions are made.

R&D tax credits

If your company has undertaken research and development work it can qualify for R&D tax relief.

There are 2 types of relief you can claim – the small or medium-sized enterprise scheme or the RDEC scheme.

The former offers relief of 230% on allowable R&D costs. This means for every £100 of qualifying costs, your company can lower its profits subject corporation tax by an extra £130 in addition to the £100 spent.

Talk to us

These are just some of several different strategies to assist your year-end tax planning. If you would like to discuss corporation tax, feel free to get in touch with us.