10 Clever Ways to Reduce Your Corporation Tax Before Year-End

As financial year-end’s approach, it’s the ideal time for business owners to review their Corporation Tax (CT) planning. Efficient tax management isn’t about dodging obligations it’s about understanding what reliefs, allowances, and strategies are available to you. Here are 10 effective ways to reduce your Corporation Tax liability and keep more of your hard-earned profits within the business.

1. Claim Mileage Expenses

If you or your employees use personal vehicles for business purposes, you can claim mileage at HMRC’s approved rates.

• Cars and Vans: 45p per mile for the first 10,000 miles, and 25p per mile after.

• Motorcycles: 24p per mile.

• Bicycles: 20p per mile

These reimbursements are tax-deductible, lowering your company’s taxable profit. It’s a simple yet often underused way to reduce your Corporation Tax.

2. Invest in Essential Equipment

Planning to buy new machinery, tools, IT equipment or electric vehicle? If you make these purchases before your year-end, you can claim up to 100% tax relief through the Annual Investment Allowance (AIA), helping to cut down your CT bill significantly.

3. Pension Contributions

Company-paid pension contributions to directors and staff are tax-deductible, provided they are "wholly and exclusively" for the business. Not only do you reduce Corporation Tax, but you also enhance your long-term financial security.

4. Optimise Salary vs Dividends

Drawing a combination of salary and dividends can be more tax-efficient than taking one or the other alone. Salaries are deductible for Corporation Tax purposes, whereas dividends are not but dividends are usually taxed at lower personal rates. Getting the right balance can optimise both business and personal tax positions.

5. Make Use of R&D Tax Credits

If your company is involved in innovation, software development, or improving products and processes, you may be eligible for Research and Development (R&D) Tax Credits. These can either reduce your Corporation Tax bill or even result in a cash refund. Many businesses don’t realise they qualify even small startups or non-tech firms can be eligible.

6. Pay Bonuses Before Year-End

Bonuses paid to employees and directors before the year-end are deductible for Corporation Tax purposes. Ensure they are processed through payroll and reported to HMRC correctly. This not only reduces your CT bill but can also boost team morale at the same time.

7. Defer Income Strategically

If your business is expecting a large payment towards the end of your financial year, consider whether it's possible (and practical) to defer invoicing until the next accounting period. This pushes the tax liability into the next year effectively smoothing cash flow and giving you time to plan ahead.

8. Claim Use of Home as Office

If you're a director working from home, your company can reimburse you for part of your home running costs (electricity, heating, internet, etc.) as a business expense. This must be reasonable and backed by evidence, but even modest claims reduce taxable profits and CT.

9. Work With a Proactive Accountant

A good accountant does more than file your accounts they advise on strategy, compliance, and opportunities. They’ll spot reliefs you might miss, ensure you're making the right decisions on timing and structure, and help you stay ahead of deadlines. Think of them as a long-term investment in your business’s financial health.

 10. Prioritise a Professional Bookkeeper Over DIY Tools

While platforms like Dext, Xero, or QuickBooks can assist with basic recordkeeping, relying solely on software often leads to missed deductions and errors. A qualified bookkeeper brings experience and attention to detail that automation alone can’t replicate. They ensure expenses are accurately recorded, categorized, and fully compliant with HMRC standards helping you claim all allowable costs and avoid overpaying Corporation Tax. Doing the bookkeeping yourself might seem cost-effective, but it often results in inefficiencies and overlooked savings.

Final Thoughts

Corporation Tax planning is something every business should take seriously especially as the year-end approaches. From legitimate expense claims and pension contributions to using R&D tax credits and automation tools, there are many effective ways to reduce your tax burden.

Planning early, keeping accurate records, and working with a knowledgeable accountant can make all the difference. Not only can you reduce your tax liability, but you’ll also have a clearer financial picture to make better business decisions for the year ahead.