When you are a limited company, your organisation is going to be responsible for paying corporation tax on the yearly profits that you bring in. These taxes can be quite high, but you will be happy to know that there are a number of different ways you are able to reduce your final tax bill. As such, you are going to need to make sure that you are aware of the different methods of tax relief out there.

Throughout this article, we are going to be discussing some of the most effective ways that you can reduce the amount of corporation tax you and your business will pay in the United Kingdom. You need to ensure that when carrying out these steps, you are still operating within the guidelines of HMRC, and as such, you should be sure to seek professional advice if you are unsure about anything.

Pay Yourself a Tax-Efficient Remuneration

Since you are the owner or the director of a limited company, you have the ability to reduce your liability for corporation tax by paying yourself a salary (or a combination of salary and another type of payment) that is allowable merely as a business expense. There are a few different types of remuneration out there, but some are a lot more efficient than others. This is from a personal and professional point of view. As such, be sure to consult with experts about what these different types are and what the pros and cons of the different ones are.

Claim All of the Costs Involved in Making Sales

One of the best ways that you can make sure you are reducing the amount of corporation tax you pay is by claiming for a wide range of different expenses that occur as a result of running your business. There are a number of different categories when it comes to expenses, but one of the major and most common is the cost of sales. Sales costs encompass every cost you incur as you are trying to manufacture or buy different products that will eventually be put up for sale. You will also be able to claim for all of the different costs that you incur when you try to market your products and services. Some of the most common costs that you’re likely to incur will include:

The price of raw materials
The cost of operations
The cost of buying different products you’ll use for resale
Storage of products as well as distribution and logistical costs
Costs for marketing and promoting your products
Any discounts you provide to retailers, wholesalers and distributors

Claim All of the Necessary Costs for Overhead

Similar to the above, another incredibly common form of expense that you can claim for is overhead. This category is much wider when it comes to allowable expenses, and it will cover every cost involved in the running of your business. These costs most often include:

The wages and salaries of yourself and employees
Benefits for employees like contributing to their pension, insurance and benefits
Any payments that get made to contract workers, freelancers and consultants
The costs involved in communication like broadband charges and telephone bills
The amount you are charged for the rental of your premises, as well as maintenance and cleaning costs
Energy and utility charges
Insurance premiums
Office costs like the amount you need to pay for stationary and other office supplies
Bank charges such as interest on loan repayments
Legal fees and other professional fees
Travel costs
Depreciation for fixed assets

Invest in Programmes for Training and Development

Another good tip when it comes to saving on corporation tax is investing in training and development programmes. You can do this in a number of ways, but one of the most effective is by paying for courses (external and internal) that will benefit you and your employees. When you do this, you are going to be able to deduct any related expenses that you incur from your profit calculations. There are also a number of other advantages that come with doing this because you are going to be helping your workforce develop and advance.

Set Up a Pension Fund for Your Company

A great employee benefit that you can set up for your business is a company pension scheme. This is where both you, employers and employees will all be responsible for making contributions to that pension scheme. Any contributions that you make as an employer will be classed as an allowable expense and, therefore, will be deducted from your business’s profits.

Make Investments for Research and Development

It is essential that your business makes investments in research and development because, in doing so, you will be making sure your organisation stays on top of the market and the future of your business is secure as a result. Not only that, but there are valuable corporation tax benefits involved too. HMRC will allow you to claim tax relief for a number of different costs that pertain to research and development. These include the following:

Materials and assets
Any overheads that pertain to research space
The cost of licences, copyrights and franchising rights
Software and the development of software
Staff hired to carry out that research (these costs can be full or partial depending on how much time they spend on research)
External research staff
Contracted research services

Do You Need Advice on Your Businesses Finances?

There are a number of different ways that you are able to reduce the amount of corporation tax that your business needs to pay. If you would like to find out more about what your organisation can do in order to limit the amount of tax you pay, then it might be worth asking Leading UK for some assistance. We will be able to help navigate you through some of the complex guidelines laid out by HMRC. If you have any questions or would like any more information then please do not hesitate to get in touch.