8 Ways Limited Company Owners Can Save Money on Tax
Too many business owners are overpaying tax simply because they don’t know what they’re entitled to.
If you run a limited company, there are several legitimate reliefs and allowances that can help you reduce your corporation tax bill, invest back into your business, and even support your personal finances in a tax-efficient way.
Here are eight key tax-saving opportunities every limited company owner should know about.
1. Director’s Salary and Dividends
Getting your pay structure right can make a huge difference to how much tax you pay.
Most directors pay themselves a combination of salary and dividends. The salary ensures you qualify for National Insurance and state benefits, while dividends (taken from company profits) are taxed at a lower rate than income.
Balancing these correctly can minimise your overall tax bill and keep more money in your pocket.
2. Claiming Business Expenses
If you spend money for the purpose of running your business, it’s usually deductible.
Common business expenses include:
Office supplies and software subscriptions
Travel and accommodation for business trips
Marketing and advertising
Professional fees such as accounting or legal support
Always keep accurate records and receipts. Claiming legitimate expenses lowers your taxable profits and reduces your corporation tax bill.
3. Using Your Home for Business
If you work from home, you can claim a portion of your household costs.
This could include:
Heating, electricity, and water
Internet and phone bills
Rent or mortgage interest (depending on how your home is used for business)
You can either use HMRC’s flat rate allowance or calculate an actual percentage based on your home office use. It’s a simple but often overlooked way to reduce your tax burden.
4. Mileage Relief
If you use your personal vehicle for business journeys, you can claim mileage relief from your company.
The current HMRC rates are:
45p per mile for the first 10,000 business miles
25p per mile thereafter
You’ll need to keep a log of your business journeys, including dates, destinations, and mileage. This helps ensure your claims are accurate and compliant.
5. The Annual Investment Allowance (AIA)
The Annual Investment Allowance allows your company to claim 100 percent tax relief on qualifying business equipment purchases, such as machinery, computers, or office furniture, up to the annual limit.
This means you can deduct the full cost from your taxable profits in the same year, reducing your corporation tax and improving cash flow.
6. Full Expensing
Full Expensing is a new measure that allows limited companies to claim 100 percent relief on certain new equipment purchases with no annual limit.
It applies to assets such as:
Computers and IT equipment
Office machinery
Plant and manufacturing tools
This incentive encourages investment by allowing you to claim back the cost immediately rather than spreading it over several years.
7. Trivial Benefits
A trivial benefit is a small perk you can provide to yourself or your employees that doesn’t count as taxable income.
To qualify, the benefit must:
Cost £50 or less
Not be cash or a cash voucher
Not be a reward for work or performance
Examples include birthday gifts, flowers, or small vouchers. For directors of limited companies, the annual limit is £300 in total. It’s a simple, tax-free way to enjoy a small bonus.
8. Staff Training and Development
Investing in staff training is good for both your team and your tax bill.
Courses, professional memberships, and workshops that enhance skills directly related to your business are fully deductible. Training expenses improve efficiency, motivate employees, and reduce taxable profits at the same time.
The Bottom Line
Whether you’re just starting your limited company or have been trading for years, it’s worth reviewing your tax strategy each year. You might be missing out on valuable allowances that could help you save money and reinvest in your business.
At Rhombus Accounting, we help business owners identify every relief available, ensure compliance with HMRC, and keep their finances running efficiently.
If you want to make sure you’re not leaving money on the table, get in touch with our team today.
Meet Lewis
Lewis is a professional accountant and founder of Rhombus Accounting. He regularly shares his knowledge and best advice here on his blog and on other channels such as LinkedIn.
Book a call today to learn more about what Lewis and Rhombus Accounting can do for you.
