Corporation Tax Year-End Planning: 12 Tips

Corporation Tax Year-End Planning: 12 Tips to Cut Your Bill

Your company's year end is approaching. The decisions you make in the final weeks of your accounting period can save thousands in corporation tax — or cost you if you miss them.

This guide covers 12 practical year-end planning tips that UK limited companies can use to legally reduce their corporation tax bill before the deadline hits.

Why Year-End Tax Planning Matters

Corporation tax is calculated on your taxable profits for the accounting period. Once your year end passes, most opportunities to reduce that year's tax bill disappear.

The key principle is simple: bring forward allowable deductions and defer income where possible and legal.

With the main corporation tax rate at 25% (and the small profits rate at 19% for companies with profits under £50,000), every £1,000 of legitimate deductions saves you between £190 and £250.

Tip 1: Make Pension Contributions Before Year End

Employer pension contributions are one of the most tax-efficient ways to extract money from a limited company:

• Fully deductible against corporation tax
• No employer NIC on pension contributions (unlike salary)
• No employee NIC or income tax for the director at the point of contribution
• Annual allowance of £60,000 per person (2025/26)

What to do

If you have headroom in your annual allowance, make the contribution before your year end. The contribution must be paid (not just accrued) to qualify for relief in the current period.

Carry-forward trick

If you haven't used your full annual allowance in the previous 3 tax years, you can carry forward the unused amount. A director who hasn't contributed for 3 years could potentially contribute up to £180,000 in one go.

Warning: The contribution must pass the "wholly and exclusively" test. HMRC may challenge very large one-off contributions if the individual has minimal salary history with the company.

Tip 2: Accelerate Allowable Expenses

Review what your company plans to spend in the first few weeks of the next accounting period. Can any of these be brought forward?

Common expenses to accelerate:

• Professional subscriptions and memberships
• Training courses and CPD
• Software licences — pay annually rather than monthly
• Office supplies and equipment
• Marketing spend — commission work before year end
• Repairs and maintenance — get work done before the period closes

The expense must be incurred in the current period. For most items, "incurred" means you have an obligation to pay, even if the cash hasn't left your account yet.

Tip 3: Use Your Annual Investment Allowance (AIA)

The Annual Investment Allowance gives 100% first-year relief on qualifying plant and machinery, up to £1,000,000 per year.

What qualifies

• Computers, laptops, monitors
• Office furniture (desks, chairs)
• Tools and equipment
• Vans and commercial vehicles
• Fitted kitchens in rental properties (if through a company)

What doesn't qualify

• Cars (they have separate capital allowance rules)
• Land and buildings (structures and buildings allowance applies separately)
• Items given to you (no cost = no allowance)

Year-end action

If you're planning a major equipment purchase early next year, bring it forward to before your year end. The full cost is deductible immediately under AIA.

Tip 4: Write Off Bad Debts

Review your trade debtors list. Any debts that are genuinely irrecoverable can be written off as an allowable expense.

To claim the deduction:

1. The debt must be a trade debt (not a loan to a friend)
2. You must have included the income in your accounts
3. The debt must be genuinely bad — not just slow-paying
4. You need to write it off in your books before year end

A specific bad debt provision (for identified debts you don't expect to collect) is also deductible. General provisions (a percentage of all debtors) are not allowable for tax purposes.

Tip 5: Consider Timing of Income

If you can legitimately defer invoicing until after your year end, this pushes the income into the next accounting period.

This works best when:

• You're close to a marginal relief threshold (£50,000 or £250,000)
• You expect lower profits next year
• The work genuinely spans your year end

Important: Don't manipulate your accounts. If work was completed before year end, the income belongs in that period regardless of when you invoice. Revenue recognition rules apply.

Tip 6: Pay Director Bonuses Before Year End

A director's bonus is deductible for corporation tax if it's paid within 9 months of the year end. But paying it before year end is cleaner:

• The deduction is clearly in the current period
• No risk of missing the 9-month window
• Salary vs dividends planning is simpler

Optimal salary reminder

For 2025/26, the tax-optimal director's salary is typically around the NIC threshold. Anything above that, consider whether a pension contribution would be more efficient.

Tip 7: Review Your Company Structure

If you have associated companies, they share the small profits rate and marginal relief thresholds.

Year-end checks

• Could you consolidate companies to simplify and avoid threshold sharing?
• Are dormant companies unnecessarily counting as associated?
• Would group relief let you offset losses between companies?

Restructuring takes time, so start early — but year end is the right time to review.

Tip 8: Claim R&D Tax Relief

If your company does any qualifying research and development, don't miss the enhanced deduction.

Under the merged R&D scheme (from April 2024):

• 20% above-the-line credit on qualifying R&D expenditure
• SMEs can also access the enhanced R&D intensive scheme if R&D spend exceeds 30% of total expenditure

Qualifying activities include:

• Developing new products or processes
• Improving existing technology
• Overcoming scientific or technological uncertainty

Even software development can qualify if you're solving genuinely uncertain technical problems. Read our R&D tax relief guide for more detail.

Year-end action

Ensure you're tracking R&D costs separately — staff costs, subcontractor costs, consumables, and software directly used in R&D.

Tip 9: Consider Charitable Donations

Qualifying charitable donations are deductible against corporation tax profits. This includes:

• Cash donations to registered UK charities
• Gifts of equipment or trading stock (at market value)
• Sponsorship payments (if there's a business benefit)

The donation must be made before your year end to get relief in the current period.

Gift Aid

Companies don't use Gift Aid in the same way individuals do. Instead, the donation is simply an allowable deduction in computing taxable profits.

Tip 10: Review Your Loss Position

If your company is making a loss this year, or has losses carried forward, year end is the time to plan how to use them.

Options include:

• Carry back trading losses to the previous 12-month period for an immediate refund
• Carry forward against future profits of the same trade
• Group relief — surrender losses to profitable group companies
• Terminal loss relief — if the company is ceasing to trade

Year-end action

Calculate your estimated loss and decide the optimal claim before filing your CT600.

Tip 11: Check Your Payment Dates

This isn't about reducing tax — it's about cash flow:

• Corporation tax is normally due 9 months and 1 day after your year end
• If your profits exceed £1.5 million (divided by associated companies), you need to make quarterly instalment payments
• If you're approaching the QIP threshold, consider whether deferring income or accelerating expenses could keep you below it

Also check: are you owed a repayment from HMRC? If you've overpaid tax on account or made excessive payments on account, claim the refund.

Tip 12: Don't Forget the Basics

Before your year end, run through this checklist:

• Reconcile your bank accounts — every transaction categorised
• Chase outstanding invoices — collect cash before year end if possible
• Review prepayments and accruals — are they correct?
• Check stock valuations — lower of cost and net realisable value
• Document director decisions — board minutes for bonuses, dividends, etc.
• Back up your records — HMRC requires you to keep records for 6 years

Year-End Planning Timeline

How Much Can You Save?

Here's a realistic example:

These are all legitimate, legal deductions. No aggressive schemes, no grey areas — just timing and awareness.

Frequently Asked Questions

Can I backdate expenses to my year end?

No. Expenses must be genuinely incurred before your year end. Backdating is fraud. However, you can bring forward planned spending that would have happened shortly after year end.

Does year-end planning work for small companies on the 19% rate?

Yes. Every tip here applies regardless of your tax rate. At 19%, you save £190 per £1,000 of deductions. At 25%, you save £250.

What if my year end has already passed?

Some opportunities still exist — particularly the 9-month window for paying director bonuses. But most planning needs to happen before year end.

Should I change my accounting year end for tax planning?

Possibly. If your company has seasonal income, aligning your year end with a low-income period can help with cash flow. However, changing your accounting period has specific rules and should be done carefully.

Is year-end tax planning legal?

Absolutely. HMRC expects businesses to arrange their affairs tax-efficiently. The line is between avoidance (legal planning) and evasion (illegal non-compliance). Everything in this guide is standard, accepted practice.

File Your CT600 with Taxpipe

Once your year end has passed and you've implemented your planning, you need to file your CT600. Taxpipe makes it simple — answer questions about your company, and we handle the CT600, iXBRL accounts, and HMRC submission.

No accounting jargon. No spreadsheets. Just straightforward filing from £99.

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Related Articles

• How to Reduce Corporation Tax Legally: 12 Strategies
• Corporation Tax Allowable Expenses — Complete List
• Pension Contributions & Corporation Tax Relief
• Capital Allowances and Corporation Tax: How to Claim
• Corporation Tax Deadlines 2026: When You Need to File and Pay
• Corporation Tax for Small Businesses: 2026 Guide