Resources

March 2026

7 tax savings most UK small businesses miss every year

Most business owners only think about tax at year-end. By then, it's too late to do anything about it. The best time to reduce your tax bill is throughout the year — while you still have time to act. Here are seven reliefs and strategies I see overlooked most often.

1. Annual Investment Allowance (AIA)

You can deduct the full cost of qualifying equipment, machinery, and tools from your profits — up to £1 million per year. Most small businesses don't come close to the limit, but many still miss it because they don't claim at all, or they claim the wrong items. If you've bought a laptop, van, office furniture, or specialist equipment this year, it probably qualifies.

2. R&D tax relief

This isn't just for labs and tech companies. If your business has solved a technical problem that wasn't straightforward — developing software, engineering a new process, or creating a product through trial and error — you may qualify. For SMEs, the relief can reduce your corporation tax bill by up to 21.5% of qualifying expenditure. Many businesses are eligible and don't realise it.

3. Salary vs. dividends

If you're a director of a limited company, the split between salary and dividends directly affects how much tax you pay. The optimal split changes every April when thresholds move. For 2025/26, many directors benefit from a salary around the NI secondary threshold (£9,100) with the rest taken as dividends. Getting this wrong by even a small margin can cost you hundreds of pounds a year.

4. Pension contributions through the company

Employer pension contributions are deductible as a business expense and don't attract National Insurance. For a director paying themselves near the higher rate threshold, putting £20,000 into a pension through the company instead of taking it as salary saves roughly £6,500 in combined tax and NI. This is one of the most efficient ways to extract value from a profitable company.

5. Claiming use-of-home

If you work from home regularly, your company can pay you a tax-free allowance (currently £6/week without receipts, or more with evidence of actual costs). It's small, but over a year it adds up — and most people don't claim it at all. If you have a dedicated workspace, you may be able to claim a proportion of mortgage interest, council tax, heating, and broadband.

6. Capital allowances on property

If your business owns or leases commercial property, there are likely capital allowances embedded in the fixtures — heating systems, electrical installations, kitchens, security systems. These allowances can be claimed even if you bought the property years ago, as long as a proper election has been made. I've seen businesses recover tens of thousands this way.

7. Timing your expenses

Corporation tax is calculated on your accounting period. If you know you need to buy equipment or pay a large invoice, timing it to fall before your year-end can reduce this year's tax bill rather than next year's. This sounds simple, but it requires knowing your numbers month by month — which is exactly what proactive accountancy gives you.