Ways a limited company can reduce their tax bill

Limited company saving their taxes
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    As a hard-working business owner, you’ll be the first to know that running a limited company comes with its fair share of responsibilities, and paying taxes is a big one. The great news is that there are several things you can do to reduce your tax bill and save money.

    Some of our top suggestions for reducing your company tax bill include:

    • Scouting out all allowable expenses and tax reliefs available
    • Maximise your capital allowances
    • Make pension contributions
    • Reshuffle your business in a more tax-efficient way
    • Find a good accountant, ahem – like Archimedia!

    At Archimedia, we are here to help you save more money. With many years of experience in tax planning and business advisory, we have the tools and know-how to make your business work for you. By looking at your entire financial situation, we’ll find the right solution that keeps you and your family financially secure now and for many years to come. So, if you’re someone who finds tax somewhat… taxing, then get in touch today.

    In this blog, we get straight to the point and show you some practical ways to reduce your tax bill, from making the most of any Corporation Tax relief that may be available to reorganising your business. Keep on reading for some of our most common tax-saving strategies.

    Can I pay less tax as a limited company?

    Oh, absolutely! This is something we like to shout about here at Archimedia.

    There are plenty of ways that you can reduce your tax bill and keep HMRC happy at the same time. The key to doing it right is understanding the various allowable expenses, reliefs, and tax deductions available to your business.

    Then, there’s working with experienced accountants like our close-knit team at Archimedia. We have many services to help companies get their tax affairs in order, from Corporation Tax services to business tax support.

    How can you reduce your Corporation Tax bill?

    Reducing your Corporation Tax liabilities is a smart move. With more cash on hand, you can invest in other areas of your business, such as hiring new employees or expanding your operations.

    Here are five simple ways you can reduce your corporation tax bill:

    1) Claim business expenses

    Every penny counts, and by ensuring you claim every allowable business expense you’re entitled to, you can really reduce the amount of tax you’ll owe. That means everything, from the cheap pack of Biro pens for the office to the expensive travel costs when heading out on a business trip.

    Staff salaries and even your office rent and utilities can be deducted from your taxable company profits.

    Business expenses are basically any costs that are “wholly and exclusively” for the purpose of running your business.

    Here’s a quick list of items you should seriously consider claiming:

    • Running the office (rent, utilities, maintenance, etc.)
    • Office supplies (pens, paper, laptops, etc.)
    • Staff costs (salaries, National Insurance contributions, pension contributions and staff entertainment)
    • Travel expenses (fuel, parking, train tickets and certain meals)
    • Training and development courses
    • Business software
    • Marketing equipment
    • Professional fees (lawyers and even your accountants!)

    2) Capital allowances

    Capital allowances let you claim tax relief on certain types of business assets, including ‘plant and machinery,’ which is essentially the larger, long-life equipment, tools and vehicles you may need to operate your business.

    Let’s say you run a particularly hectic construction firm and want to speed up your operations. We understand that purchasing new equipment is expensive and not always easy for growing businesses. But did you know that thanks to the Annual Investment Allowance (AIA), you can deduct the full amount of assets from your profits before tax – up to a certain amount, of course?

    So, if you purchase a brand new digger for your firm for £50,000, you can deduct the entire cost from your company profits and significantly reduce your Corporation Tax liability.

    3) Pension contributions

    Many business owners pay into a pension plan for themselves and their employees. Not only is this essential for keeping employees happy and preparing for your own future, but these contributions also count as an allowable business expense. This essentially means that any money you put towards employees’ pensions doesn’t count as part of your taxable profits.

    Not only is a company pension scheme an attractive benefit for employees, helping you keep hold of your most valuable staff members, but it also reduces your tax bill. It’s a no-brainer, really.

    4) Pay yourself a salary

    If you’re a director of a limited company, there are a few ways you can go about paying yourself, and some are more tax-beneficial than others.

    The most tax-efficient way to pay yourself as a company director is usually to take a combination of salary and dividends. For instance, if you take a salary up to the personal allowance threshold and the rest of your income as dividends, you can significantly reduce the amount of Income Tax and NIC you have to pay.

    Finding the right balance will depend on your specific financial goals and your company’s profits. It might not be best for you to take a low salary if you want to access certain benefits and pensions. Likewise, you’ll need to ensure your company has enough profits after the Corporation Tax bill is paid to make sure you can afford to pay dividends.

    5) Research and development tax relief

    Getting involved in innovative projects is a great way to get ahead of the competition and solve some of your industry’s biggest challenges. Did you know it also means you can save money on your Corporation Tax bill?

    The government wants more companies to come up with new ideas and inventions, which will help smaller companies access the resources they need for research and development, create more jobs, and ultimately benefit the economy. This is where R&D tax relief comes in.

    Research and development (R&D) tax relief makes things a bit more manageable for companies looking to take an inventive risk. It allows you to claim back a portion of your R&D expenditure, which can significantly reduce your tax liability.

    6) Reorganise your business

    Sometimes, even making a few tweaks to the way your business runs can help you make greater tax savings. Whether you’re looking to reduce costs, increase your profits, or overcome challenges, reviewing your business model and finding new strategies is essential from time to time.

    There are many ways to do this, including:

    • Setting up a group structure
    • Creating separate companies for different areas of your business
    • Merging with another company

    Work with Archimedia Accounts to optimise your company taxes

    At Archimedia, we’re passionate about helping our clients run their businesses more efficiently and profitably, ensuring success now and in the future. Our commitment to your success means we’re here to support not just your business but your personal life, too.

    We’re a family-run business, and we’ll put your family at the heart of everything we do. Our founders, Barbara and Chris, have found their own way to financial security as successful entrepreneurs and portfolio landlords. We aim to help our clients achieve the same level of financial freedom.

    It’s not every day you get to have a one-on-one meeting with the Head of Tax and Founder of a business. But here, at Archimedia, we offer regular tax planning sessions with the Mother Hen herself. You’ll have the chance to sit down with Barbara and discuss your current financial situation as well as your business and personal goals.

    Leave the hard financial stuff to us and focus on what you do best – running your business!

    When you join Archimedia, you’ll become an extension of our happy family. We’ll ensure you get the attention and support you deserve. Get in touch with us today.

    Our customers love how much we care. Take a look at what they have to say about us:

    “Barbara and Chris (and others from the team) always give me brilliant support, answer all my questions promptly and have saved me many thousands of pounds by re-filing my previous tax return. They are keen to see my small business grow and be tax-efficient. I appreciate their guidance and high level of expertise and I would gladly recommend them to others.”

    – Lissie A.

    Picture of Chris Demetriou

    Chris Demetriou

    Chris is Head of Business Advisory​ at Archimedia Accounts and is a specialist in tax. For more advice book a FREE consultation:

    Contact Chris

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