10 legal ways to pay less tax as a UK small business

Claim every allowable expense

The single biggest reason small businesses overpay is unclaimed expenses. Home-office costs, mileage, software, professional subscriptions, training that maintains your skills and pre-trading costs are all commonly missed. Keep tidy records all year, not just in January.

Use the right business structure

Above roughly £30,000–£50,000 of profit, a limited company often beats sole trader status once you factor in the salary/dividend split. Below that, a sole trade is usually simpler and just as efficient. Model both before you decide.

Take a tax-efficient salary and dividends

If you run a limited company, a small salary near the National Insurance threshold plus dividends is almost always more efficient than a large salary. Get the split right for the current tax year.

Make pension contributions

Company pension contributions reduce corporation tax and don’t count as personal income — often more efficient than taking cash and contributing personally.

Time your purchases and use capital allowances

Buying equipment before your year-end can bring the tax relief forward a whole year. The Annual Investment Allowance gives 100% relief on most plant and machinery up to the cap.