How to reduce your Ltd company tax in the UK ?

Companies in the UK come in different types, and each type has its own pros and cons. However, company tax in the UK represents one of the most significant headaches for most business owners and managers.

How to reduce your Ltd company tax in the UK ?

Most business owners do not know how to reduce tax and spend a lot of time on ineffective actions. For limited liability companies -known as Ltd companies- there are several strategies that can help minimize this stress, especially if you are just starting your business. Below are a few strategies that could help you reduce your Ltd company tax in the UK.

Let us start with the first strategy: Claim all allowable business expenses.

Make sure you claim all allowable business expenses to reduce your tax liability. For example, if you use part of your home as an office, you can claim a proportion of relevant bills and utilities allocated to the business, such as telephone, internet, energy bills, and other home office costs. If you use your personal car for business purposes, you can also claim mileage as an expense.

Secondly, pay yourself a mix of salary and dividends.

In limited companies, if your income exceeds £50,000 in a tax year, you may be able to save on National Insurance by paying yourself through a combination of salary and dividends. You can structure up to £50,000 of company income as a mix of salary and dividends.

You must ensure that this combination results in the lowest possible tax liability.

The third strategy is to consider charitable donations.

You can reduce your limited company tax by donating to registered charities or eligible educational organisations.

Fourth, hire a family member or consider making them a partner.

However, this advice does not mean compromising on work quality. You can hire a family member, but you must ensure that the work is carried out to a high standard. Always put your company’s reputation first. Growth is important, especially in the highly competitive environment we are witnessing today.

Fifth, claim losses from previous years.

You can reduce the amount of tax owed by claiming allowable losses from previous years when filing your company tax return.

These strategies are essential for minimizing tax for a limited company in the UK. And if you are running a limited company, do not forget to check your responsibilities from HERE.

Thank you and good luck.