Increasing your profits isn’t all about making more sales. Running a tax-efficient business means you take home a bigger financial reward for your hard work – but still keep the tax man happy.
Here are five ways to reduce your corporation tax:
1. Pay yourself a salary
This is one of the most simple ways to reduce your corporation tax bill, but it’s amazing how many small business owners don’t do it.
When you pay yourself a salary, it counts as a genuine business expense. You’re also entitled to a tax-free personal allowance of up to £12,500. If you’re not taking a salary from elsewhere, it makes sense to capitalise on this.
2. Start a pension
Do you have a pension? If not, we recommend you start one.
Not only does it put some of your income away for when you’re older, but it’s also tax efficient. The amount gets deducted from your company’s taxable profits.
3. Check if you’re entitled to industry tax relief
There are still a variety of tax reliefs available to business owners, especially those in the creative industry.
For example, the Museums and Galleries Exhibition Tax Relief (MGETR). This provides relief for businesses holding exhibitions that are of scientific, historic, artistic or cultural interest.
4. Claim on your household bills
Do you have a home office? If so, you might be able to claim a proportion of your household bills as a business expense.
There are two options for doing this. You can either work out the precise amount it costs you to run your business at home, or you can opt for the flat rate set by HMRC.
Whatever you decide, it will reduce your corporation tax liability.
5. Work with an accountant
This might be a no-brainer, but working with an accountant is the easiest way to reduce your corporation tax bill.
There are endless ways to reduce your corporation tax bill, and the opportunities to do so vary depending on your business.