Year-End Tax Planning: 7 Ways to Reduce Your Corporation Tax Before Filing
Your accounting year-end is approaching. Here are 7 legitimate ways to reduce your Corporation Tax bill before you file.
1. Make Pension Contributions
Employer pension contributions are fully deductible and don't attract National Insurance. If your company has spare cash:
- Annual allowance: £60,000 per person (2025/26)
- Carry forward: Unused allowance from the previous 3 years
- Must be paid before your year-end to get the deduction
A £40,000 pension contribution saves £10,000 in Corporation Tax at 25%.
2. Claim Capital Allowances
Buy equipment, computers, or vehicles before year-end:
- Annual Investment Allowance: 100% deduction on first £1 million
- Full expensing: 100% on new plant and machinery (no limit)
- Zero-emission cars: 100% First Year Allowance
The asset must be purchased and available for use before your year-end — don't just order it.
3. Pay Bonuses
Director and staff bonuses are deductible when committed (not when paid). If your board minutes record a bonus decision before year-end, it's deductible in that year — provided the bonus is actually paid within 9 months of the period end (CTA 2009 s.1288). If payment is delayed beyond that window, the deduction shifts to the period in which it is paid.
But watch out: bonuses attract PAYE and NIC, which may offset the CT saving. Compare the net cost.
4. Write Off Bad Debts
Review your debtors. If any debts are genuinely irrecoverable, write them off before year-end. You can claim a deduction for:
- Specific bad debts genuinely estimated to be irrecoverable
- Debts from insolvent customers
The test is whether the debt is genuinely estimated as irrecoverable — not simply how long you have been chasing it. General provisions ("some of these might not pay") are NOT deductible.
5. Prepay Expenses
Some expenses can be prepaid:
- Annual software subscriptions (pay before year-end for next year)
- Insurance premiums
- Rent (if your lease allows)
The deduction timing depends on the accounting treatment — discuss with your accountant.
6. R&D Tax Relief
If your company does innovative work, you may qualify for R&D tax relief. For accounting periods beginning on or after 1 April 2024, a single merged RDEC scheme applies:
- Merged RDEC: 20% above-the-line credit on qualifying R&D expenditure for all companies
- Enhanced R&D Intensive Support (ERIS): a higher payable credit rate available to loss-making SMEs spending 30% or more of their total expenditure on qualifying R&D
- Claims can be made up to 2 years after the period end
Even software development can qualify if you're solving a genuine technical uncertainty. R&D claims require the CT600L supplementary page.
7. Choose Your Year-End Wisely
If you're approaching the £50,000 small profits threshold:
- Bring expenses forward into this period to stay below £50,000
- Defer income to the next period if possible
- The difference between 19% and the 26.5% effective marginal rate in the relief band is significant
What NOT to Do
❌ Don't buy things you don't need — saving 25% tax by spending £1 still costs you 75p ❌ Don't fabricate expenses — HMRC penalties for deliberate inaccuracies are 20-100% of tax lost ❌ Don't shift personal expenses to the company — P11D charges and potential BIK tax
File Your CT600
After your year-end planning, file your CT600 with Taxpipe. We calculate marginal relief, capital allowances deductions, and your exact tax liability. £59, no hidden fees.