UK business owners are turning their attention to how they can plan better, spend smarter, and save more. Effective corporate tax planning in 2025 means understanding what’s changed, what strategies still work, and how to stay compliant while reducing your tax bill. Whether you’re a sole trader, limited company director, or growing SME, the earlier you prepare, the more control you’ll have over your company’s finances.
Overview of Tax Changes in 2025
Staying up to date with HMRC updates is essential. Here’s what’s changing for 2025:
- Corporation tax remains tiered:
- 19% for profits up to £50,000
- 25% for profits above £250,000
- Marginal relief for companies in between
- Full expensing continues for capital investments (replacing the super-deduction)
- Research & Development (R&D) rules are being reviewed with an emphasis on compliance and digital submission requirements
Key Tax Planning Strategies for 2025
Tax efficiency comes from stacking multiple legal strategies together. Here’s what to focus on this year.
Optimise Allowable Expenses
Claiming all your allowable business expenses reduces your profit, and therefore your tax liability. Track expenses like:
- Staff salaries and pensions
- Rent, utility bills, and phone/internet
- Travel and subsistence (for business purposes)
- Marketing and software subscriptions
Tip: Use cloud accounting software and keep digital copies of receipts for easy auditing.
Use of Capital Allowances & AIA
Capital allowances let you deduct the cost of qualifying assets:
- Annual Investment Allowance (AIA): Claim up to £1 million in plant/machinery
- Full Expensing: 100% deduction on qualifying main rate assets
- Writing Down Allowances (WDA): For assets that don’t qualify for the above
Strategically timing your asset purchases before your year-end could make a big difference.
Salary vs. Dividends
As a director, how you extract income matters. A smart approach in 2025:
- Take a salary up to the personal allowance threshold
- Supplement with dividends (which are taxed more favourably)
This avoids unnecessary NICs and makes full use of both income and dividend tax bands.
Need help balancing this mix? Explore How to Reduce Corporation Tax: Legal Strategies for UK Businesses
Pension Contributions
Pension contributions made by your company:
- Are a tax-deductible expense
- Lower your corporation tax bill
- Help with long-term wealth building
Just make sure the contributions are considered “wholly and exclusively” for business purposes.
R&D Tax Credits
If your company develops new products, processes, or technology, you may be eligible for R&D relief.
- SMEs: Can receive up to 27p per £1 spent
- RDEC (large companies): Smaller percentage but still valuable
2025 update: HMRC is placing greater scrutiny on claims, so work with a qualified adviser to avoid delays or rejections.
Timing Purchases and Revenue Recognition
The date you invoice or purchase matters:
- Delay invoicing until your next accounting period to shift taxable profit
- Accelerate qualifying purchases to claim relief earlier
Caution: These must reflect genuine commercial activity. Artificial deferrals can raise red flags.
Using Group Structures or Loss Relief
Advanced but effective strategies:
- Group relief: Share losses across multiple companies within a group
- Loss relief: Carry forward or back losses to offset profits in other periods
Learn more about this in Corporate Tax Loopholes: What’s Legal & What’s Not?
Mistakes to Avoid in 2025
Tax planning mistakes can be costly. Common pitfalls include:
- Not tracking all allowable expenses
- Misunderstanding what qualifies for relief
- Relying on outdated strategies that no longer apply
- Confusing tax planning with tax avoidance
- Ignoring changes from HMRC
When to Seek Professional Advice
While many tax-saving ideas are simple, certain situations call for expert input:
- You’re making large capital purchases
- You’re restructuring or forming a group company
- You’re unsure if a strategy is compliant
- You’re planning to sell or buy a business asset
Conclusion & Next Steps
Tax planning in 2025 isn’t just about saving money—it’s about building a stronger, more sustainable business. From basic expense tracking to advanced group relief strategies, every step matters.
Takeaways:
- Know what’s changing in 2025
- Track expenses and time asset purchases
- Make full use of pension, R&D, and capital allowances
- Avoid outdated or aggressive strategies
Next steps:
- Review your company’s financials before your year-end
- Book a session with a qualified tax professional
