How to Reduce Your Corporation Tax Bill in 2024/25
With corporation tax rates now at 25% for businesses earning over £250,000, companies must find tax-efficient strategies to minimise their tax liability. Whether you’re a small business or a growing enterprise, careful planning can reduce your corporation tax bill while staying compliant with HMRC regulations.
Here’s everything you need to know about saving tax and maximising reliefs in 2024/25.
1. Claim Full Capital Allowances
Businesses can deduct the cost of capital assets (equipment, machinery, IT systems) from their taxable profits using capital allowances.
Key Tax Reliefs for 2024/25:
Full Expensing (100%) – Businesses can immediately deduct the full cost of new plant, machinery, or IT equipment.
Annual Investment Allowance (AIA) – £1 million limit – 100% tax relief on qualifying equipment purchases.
50% First-Year Allowance – Applies to special rate assets (e.g., heating, ventilation systems).
Check eligible assets for capital allowances:
Capital Allowances – GOV.UK
2. Use the Super-Deduction (Before It Ends!)
The super-deduction scheme, which allows businesses to claim 130% tax relief on investments, ended in March 2023. However, businesses that entered contracts before this date but paid after may still be eligible.
Speak to a tax advisor to see if your purchases qualify!
3. Pay into Company Pensions
Employer pension contributions are tax-deductible, reducing your corporation tax bill while boosting directors’ and employees’ retirement savings.
Pension contributions reduce taxable profits (as long as payments are reasonable).
Contributions must be paid before the company’s year-end to be deductible.
More on workplace pensions:
Employer Pension Contributions – GOV.UK
4. Claim R&D Tax Relief
If your company invests in research and development (R&D), you may qualify for R&D tax credits, allowing businesses to reduce their corporation tax bill or receive a tax rebate.
SME Scheme: Claim up to 86% of qualifying R&D costs as tax relief.
RDEC (for larger companies): Claim 20% of R&D expenditure as a tax credit.
See if your business qualifies:
R&D Tax Relief – GOV.UK
5. Make the Most of Losses
Carry Forward Losses – If your company made a loss, you can carry it forward to offset future profits and reduce tax.
Group Relief – If you run multiple companies, losses from one business can offset profits from another within the same group.
Carry Back Losses – Businesses can carry back losses up to 3 years, reclaiming tax already paid.
More on loss relief rules:
Corporation Tax Loss Relief – GOV.UK
6. Pay Dividends Instead of Salary
Dividends are taxed at a lower rate than salary payments.
They do not attract National Insurance contributions (NICs).
The first £500 in dividends is tax-free (2024/25).
Example Tax Saving:
If a company pays its director a £12,570 salary + dividends, it can remain below the higher tax band while maximising tax efficiency.
Dividend tax rates for 2024/25:
Dividend Tax – GOV.UK
7. Use the Employment Allowance
Small businesses can claim up to £10,500 off their employer’s National Insurance bill.
Available to businesses with NIC liabilities below £100,000.
Apply via payroll software or HMRC.
Claim the allowance here:
Employment Allowance – GOV.UK
8. Make Charitable Donations
Donations to registered charities are tax-deductible.
Reduce taxable profits while supporting a good cause.
Donations must be paid before the company’s year-end to qualify.
See eligible charities:
Charity Tax Relief – GOV.UK
Final Thoughts: Reduce Your Tax Bill Legally
With corporation tax now at 25% for higher-earning companies, businesses must proactively manage tax planning to maximise deductions and reduce liabilities.
Key Actions to Take Now:
Review capital allowances & full expensing claims.
Check if your business qualifies for R&D tax relief.
Optimise salary vs. dividends for directors.
Claim loss relief and employment allowances.
Make tax-efficient pension contributions.
Need Help Reducing Your Corporation Tax?
At Merranti Accounting, we specialise in corporate tax planning, business structuring, and compliance. Our expert team can help you identify tax-saving opportunities and ensure full HMRC compliance.
Contact us today to minimise your tax bill legally!
