No one likes to pay taxes, but as a business owner, you have an obligation to do everything you can to reduce your corporation tax.
Corporation tax can be a significant expense for businesses, especially in industries where profit margins are tight. Reducing your corporation tax bill can be a complex and time-consuming process. However, taking some simple steps to reduce your taxable income can help lower your overall tax liability. There are a number of ways to reduce the amount of corporation tax you pay.
How to reduce corporation tax
In this blog post, we’ll outline how to reduce corporation tax in seven steps. Keep in mind that laws and regulations change all the time, so be sure to check with an accountant or tax specialist before making any major changes. With that said, let’s get started!
1. Claim R&D tax relief for your company
In the UK, there are a number of ways in businesses can reduce their corporation tax bill. One of these is through claiming Research and Development (R&D) tax relief. This allows businesses to claim back a percentage of the costs associated with R&D projects.
The R&D tax relief scheme is a government initiative that was set up to help businesses with the cost of carrying out qualifying research and development activities.
Find out more about Research and Development allowances here.
2. Benefit from the Annual Investment Allowance
The creative industries are vital to the economy – and they can also help your company save tax. The first thing to understand is that the Government offers two types of relief for businesses in the creative industries: Research and Development (R&D) Tax Credits and Creative Industries Relief.
It can help your company save tax in a variety of ways. For example, the relief can be used to offset losses incurred from selling or licensing intellectual property rights. The relief can also be used to reduce corporation tax on profits from certain qualifying activities. If your company is engaged in any of these activities, the creative industries relief could save you significant amounts of money in taxes.
4. Staff parties can be tax free!
In most countries, staff Christmas parties are considered to be a form of entertainment, and as such, the costs associated with them are tax-free. This applies to both the organisation that is hosting the party and the employees who attend, covering up to £150 per head for an annual party.
5. See if you can claim Patent Box tax relief
The Patent Box tax relief is a scheme that was created to help companies that own patents. The scheme allows qualifying companies to pay a reduced rate of corporation tax on income generated from their patented inventions.
If your company is in the technology, cryptocurrency, auto industry, IT, or eCommerce space, you may be able to take advantage of the patent box tax relief. This type of relief can help reduce your taxable income by Putting a percentage of qualifying profits into a special tax-free “patent box”.
6. Remember to claim all of your business expenses
One way to reduce corporation tax is by claiming all of your eligible business expenses. By doing so, you can reduce your taxable income and pay less in taxes.
Make sure that the expenses are actually for your business and not for personal use. Second, keep good records of your expenses so that you can support them if needed.
7. Keep on top of deadlines
When the tax deadline is approaching, it’s important to make sure you’re on top of it.
Here are four reasons why you should keep on top of deadlines for taxes:
1. You don’t want to owe money to the government.
2. You don’t want to be penalised for late filing or payment.
3. You want to get your refund as soon as possible.
4. Filing and paying taxes can be complicated, so it’s important to give yourself enough time to do it right.