With the end of the tax year approaching, now’s a great time to take a look at your company’s financial position and see where you might be able to make some tax-efficient moves.
We’ve put together this straightforward guide to help you understand your options and make the most of available reliefs and allowances before the tax year ends.
Take a look at the tips our expert business accountants have put together to get ahead for 2025.
1. Review your company’s tax position
Since changes in April 2023, corporation tax has become a little more complex to navigate. Here’s the basic split:
- Profits under £50,000 are taxed at 19%
- Profits over £250,000 at 25%
However, it’s more complicated if your profits fall in the middle of those two figures.
In this case, you’ll pay what’s known as ‘marginal rate’, which increases gradually from 19% to 25%.
However, that’s not all. You also need to know that if you own more than one company, you’ll need to divide these thresholds by the number of companies you own.
How does this work in practice?
If you own two companies, each company’s threshold would be £25,000 for the lower rate (instead of £50,000) and £125,000 for the higher rate (instead of £250,000).
Tax-Saving Tip: If your profits are near any of these thresholds, you might want to think about timing your income and expenses carefully. For example, if you’re slightly over £50,000 in profit, bringing forward some expenses could help you stay within the lower rate band.
2. Make the most of capital allowances
Here’s a valuable opportunity for you to consider that you might not know about. You can claim 100% tax relief on qualifying equipment purchases up to £1 million through the Annual Investment Allowance (AIA). This is a great way to reduce your tax bill by investing in your business.
Remember: If you’re planning to buy new equipment, the timing matters. Purchasing just before your year-end rather than just after could mean getting tax relief a whole year earlier.
3. Consider your pension contributions
Many business owners don’t realise that employer pension contributions can be a really tax-efficient way to extract money from your company. The company gets tax relief on the contributions and they’re not subject to National Insurance contributions.
Tax-Saving Tip: You might want to think about making a larger one-off company contribution before your year-end if you have sufficient profits.
4. Plan your dividend payments carefully
The dividend allowance is dropping from £1,000 to £500 in April 2024 so you might want to consider moving forward any planned dividend payments to make use of the current, higher allowance.
Tax-Saving Tip: If you have family members who are shareholders, remember they each get their own dividend allowance – this could help you structure your payments more efficiently.
5. Check your research and development potential
Did you know that R&D tax relief isn’t just available for tech companies or scientists. If your business is solving technical problems in an innovative way, you might qualify. The tax relief can be quite generous – offering up to 33% of any qualifying innovation costs.
Note: Learn more about what qualifies as well as the key restrictions of R&D tax credits to see if you could access the scheme for your business.
6. Look at your company vehicles
The tax rules around company vehicles have changed significantly to encourage greener choices. In fact, electric and ultra-low emission vehicles can qualify for 100% first-year allowances, meaning you can deduct the full cost from your profits before tax.
Tax-Saving Tip: If you’re thinking about updating your company vehicles, consider electric or hybrid options because of the tax savings.
7. Review your staff rewards
Are you making the most of tax-efficient ways to reward your staff? You can provide certain benefits of up to £50 per employee without triggering tax charges (known as ‘trivial benefits’). This might include things like Christmas presents or event tickets.
Remember: You can’t give cash or cash vouchers as trivial benefits and they can’t be a reward for work or performance.
8. Clear up directors’ loan accounts
If directors have borrowed money from the company, a 32.5% corporation tax charge could apply if the loan isn’t repaid within 9 months of your year-end.
Tax-Saving Tip: Review any outstanding director loans well before your year-end to avoid this tax charge.
9. Check your capital gains position
If your company owns investments or is planning to sell assets, timing can make a big difference. The current corporation tax rates mean you might want to think carefully about when you realise any gains.
Key Point: If you’re planning any significant asset sales, it’s worth talking to us about the timing to ensure it’s as tax-efficient as possible.
10. Consider your succession planning
If you’re thinking about eventually passing on or selling your business, there are several reliefs that could help reduce your tax bill. But succession planning often needs planning well in advance to reap tax benefits.
Tax-Saving Tip: Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) could mean you pay just 10% tax on qualifying disposals, but you need to meet the conditions for at least 2 years before sale.
Get on top of your tax for 2025
Tax planning for companies can feel overwhelming – there are lots of moving parts to consider and it’s not always clear what’s the best move for your specific situation.
That’s exactly why our team at Williamson & Croft is here to help. We’ll work with you to create a tax strategy that makes sense for your business and helps ensure you’re not paying more tax than you need to.
Want to talk through your options? Get in touch with us before the tax year ends so we can schedule a detailed review of your business finances.