Tax planning is most effective when it's done before the year ends — not when your accountant is preparing your return six months later. If you're approaching your accounting year-end, here are ten actions that could legitimately reduce your corporation tax liability.
1. Accelerate deductible expenditure
If you have capital purchases planned — equipment, technology, vehicles — making them before your year-end means the deduction falls in this year's accounts rather than next. The Annual Investment Allowance currently allows 100% first-year deduction on qualifying plant and machinery up to £1 million.
2. Maximise pension contributions
Employer pension contributions are deductible for corporation tax purposes when paid. If your business is profitable, accelerating planned pension contributions before year-end can materially reduce your tax liability.
3. Review directors' remuneration
The optimal split between salary and dividends depends on your personal and corporate tax positions. Review this with your accountant before year-end — the structure you set now affects both your personal tax and the company's corporation tax bill.
4. Write off bad debts
Specific bad debt provisions are deductible when a debt is genuinely irrecoverable. If you have invoices that are unlikely to be paid, making a formal write-off before year-end crystallises the deduction in this year's accounts.
5. Review stock and WIP valuations
Stock and work-in-progress should be valued at the lower of cost and net realisable value. If you're carrying stock that's worth less than its book value, writing it down reduces your profit — and therefore your tax liability.
"Year-end tax planning isn't about avoiding tax. It's about not paying tax on money you didn't actually make — and taking the reliefs Parliament intended you to take."
6. Consider Research & Development claims
If your business has been doing anything that qualifies for R&D relief — and the definition is broader than most people realise — the time to identify and document those activities is before year-end, when the evidence is fresh.
7. Review capital allowances
Make sure all qualifying plant and machinery is on your capital allowances schedule. It's common for businesses to own assets they've never properly included in their allowances pool — particularly on acquisition from previous owners.
8. Consider timing of income recognition
For some businesses, there is flexibility in when income is recognised. This requires careful thought — both to ensure it's done correctly and to model the overall tax impact. Not all deferrals are beneficial; it depends on projected future profitability and rates.
9. Make charitable donations
Cash donations to UK charities qualify for corporation tax relief. If your company has a charitable giving programme, ensuring those donations are made before year-end maximises the relief in the current period.
10. Review loss relief
If your company has brought-forward losses from previous years, understand how they can be utilised in the current year. With corporation tax at 25% for profits over £250,000, efficient use of losses has never been more valuable.
None of these actions should be taken without proper advice specific to your circumstances. If you'd like to have a year-end planning conversation with a Runway founder, book a free call. We'd rather have this conversation in October than find ourselves discussing missed opportunities in April.
