Corporation Tax bills don’t appear out of nowhere. They’re the result of decisions you made (or didn’t) months earlier.
Most businesses pay more Corporation Tax than they need to. Not because of clever loopholes or aggressive schemes, just because nobody planned ahead. By the time the year-end accounts are being prepared, most of the levers have stopped working.
This guide walks through the five legal Corporation Tax planning moves every limited company in the UK should be considering, and when each one needs to be done by.
First, the basics: what is Corporation Tax?
Corporation Tax is what UK limited companies pay on their taxable profits. As of the 2026/27 tax year, the rates are:
- 19% on profits up to £50,000 (the small profits rate).
- 25% on profits over £250,000 (the main rate).
- A sliding scale (marginal relief) between £50,000 and £250,000.
That sliding scale is important. It means there’s a band of profit where every extra pound is effectively taxed at a higher rate than the headline 25%, which is exactly the area where planning is most valuable.
Important: tax rates and thresholds change. Always check the current position on GOV.UK or with your accountant before acting.
The five levers that actually work
1. Timing of bonuses, dividends and salary
When you pay yourself matters as much as how much. A bonus or salary paid before year end reduces that year’s profit (and therefore the tax). The same payment after year end pushes it into the next year’s calculation.
For company directors, this is a frequent planning move. Sometimes you want to accelerate income into a lower-tax year. Sometimes you want to delay it. Either way, the decision needs to be made before the year-end cut-off, not after.
2. Capital allowances on equipment
If your business buys equipment, vehicles, or qualifying assets, you can often deduct the full cost from your taxable profit in the year of purchase, through the Annual Investment Allowance (AIA). The current AIA threshold is £1 million per year for most businesses, which covers all but the largest purchases.
The implication: if you’re planning a major piece of equipment anyway, the timing of the purchase can make a meaningful tax difference. Buying just before year end pulls the deduction into this year. Buying just after pushes it into next.
3. Pension contributions through the company
Company pension contributions are deductible from your Corporation Tax as a business expense. They also build your personal pension pot, completely outside the dividend / salary taxation framework.
For owner-directors with profitable companies, this is often the single most efficient way to extract value. The money leaves the company tax-free into your pension, where it can grow without further tax until you draw it.
There are limits (the annual allowance and tapering rules for high earners), so this needs sensible planning rather than maxing out blindly, but it’s a substantial lever for most owner-managed businesses.
4. Loss relief
Had a tough trading period anywhere in the last few years? Losses can often be carried forward to offset future profits, or in some cases carried back to reclaim tax already paid.
This is one of those areas where a lot of businesses leave money on the table because the loss reliefs weren’t claimed at the time. Worth a proper look at your trading history if there’s been a bad year somewhere.
5. R&D tax relief, if it applies
If your business does anything that could genuinely count as research and development — and the definition is broader than people think, often covering software development, process improvements, new product work — there are still R&D tax credits that can substantially reduce your Corporation Tax bill or, for loss-making companies, generate a cash credit from HMRC.
The rules have been tightened in recent years and HMRC scrutiny is up, so this needs to be done carefully and properly. But for genuine R&D activity, it remains one of the highest-impact reliefs available.
The principle: before year end is when planning works
Here’s the unifying point. All five of these levers work best before your year end. Once the year is closed and the books are being prepared for filing, most of the decisions are already locked in. The tax bill at that point is largely a calculation, not a choice.
This is the difference between an accountant who files your accounts and one who actually plans with you. The filing happens after the fact. The planning happens before.
If your Corporation Tax year-end is approaching and you haven’t had a proper planning conversation, that itself is worth flagging.
Want a Corporation Tax planning review before your year end? Drop us a message and we’ll walk through the levers for your specific situation. Most clients save more than the cost of the conversation in the first sit-down.
