Tax Saving for Limited Company Owners Derby

Here are some straightforward tips for either saving your company Corporation Tax, or extracting money from the company tax efficiently. Why pay more tax than you need to?

Dividends

The tax-free Dividend Allowance has fallen steadily and is now just £500 for 2026/27. Amounts above this are currently taxed at 10.75% (basic rate) and 35.75% (higher rate), following increases that took effect in April 2026. Given how much rates have risen and the allowance has shrunk, the "operate via a limited company below £150,000 profit" rule of thumb is worth recalculating for your specific numbers rather than relying on a fixed threshold — see our director's salary and dividends guide for the current comparison.

Dividends don't attract NICs. Your company must have sufficient retained profits to pay a dividend. Make sure that those receiving dividends receive a salary high enough to maintain their NIC record.

Shareholdings

You may consider splitting your shareholding with your spouse, to benefit from using your other half's tax allowance (especially if they have no other source of income).

Make sure you only declare dividends when there are sufficient accumulated profits in the company to do so.

Penalties will apply to any dividends which have not been declared properly.

Company Cars

Have you considered whether the cars used in your business would be better owned personally?

If you use a company car personally you will be taxed on the benefit-in-kind and the company will pay Class 1A NI.

Owning the car personally will not attract the benefit in kind and mileage can be claimed at the approved rate of 55p/25p per mile.

The right choice however will depend on the circumstances and the vehicle involved and we can review your situation and advise whether it’s more tax efficient to own the vehicle yourself, or run it through your company.

Pension Contributions

Your company can make contribute towards your pension. The payments are deductible expenses for Corporation Tax purposes in the year they are made.

Using pension vehicles such as Small Self Administered Scheme or a Self-Invested Personal Pension can be beneficial when premises are being purchased. The rent received will not be taxed in the SSAS/SIPP & the company will receive a tax deduction for the rent.

This can also be advantageous when you sell your business. It’s a lot easier sometimes to sell the business and have it rent its premises from your pension fund than it is to sell both the business and the premises.

Family Members

Do your family members (spouse, children) help or work in the business? If so, then consider whether they should own shares in the company too.

That way you can take advantage of their basic rate allowance and pay dividends to them as well.

If you have children aged at least 13 and they help out in your business, then you can pay them a wage.

You can also pay your spouse or partner for work they do in the business.

We can advise you on the most tax efficient salary levels.

Expenses

Make the most out of the expenses you can put through your company.

As long as you only ever claim for things that have been genuinely incurred on business duties, there are savings to be made.

You may be able to claim for the costs of working from home, for example.

VAT

Consider joining the Flat Rate VAT Scheme.

Not only does this make your VAT accounting simpler, but you may pay less tax overall depending on the amount of VAT you charge, and reclaim.

During the first year, you receive an additional 1% discount on the flat rate you have to pay to HMRC.

The VAT cash accounting scheme offers more of a cashflow benefit than ‘tax saving’ per se – it allows you to only account for VAT once an invoice has been paid, rather than when it has been issued.

Annual Investment Allowance

The annual investment allowance, or AIA for short, is a capital allowance which provides full write off of qualifying capital expenditure in the year of purchase for plant and machinery. The AIA was made permanent at £1,000,000 from 1 April 2023, after several years of temporary extensions and thresholds.

Companies can also now claim Full Expensing — a 100% first-year allowance with no upper limit on qualifying new main rate plant and machinery, running alongside the AIA.

By reviewing and planning expenditure it is possible to reduce profits subject to Corporation Tax.

Business Asset Disposal Relief

Subject to eligibility (you must have held qualifying shares and been a director or employee for at least two years), you may qualify for Business Asset Disposal Relief on the sale of your limited company. The rate has risen sharply in recent years: 10% for disposals up to 5 April 2025, 14% from 6 April 2025, and 18% from 6 April 2026 — compared to standard Capital Gains Tax rates of 18% (basic rate) or 24% (higher rate) on other assets. The relief still offers a saving over the higher rate, but a much smaller one than in previous years. The lifetime limit is £1 million so the relief now shelters considerably less of a gain than it once did — worth factoring into any exit planning well in advance of a sale.

Statutory Deadlines

Whatever you do, make sure you meet your accounting and statutory deadlines, especially for submission of the confirmation statement and your company accounts.

The penalties for late submission can be great.