Tax-Saving Tips for Small Businesses

5 Smart Tax-Saving Strategies for UK Small Businesses in 2025

Running a small business comes with its share of challenges, but optimising your tax liabilities doesn’t have to be one of them. Here are five practical ways to legally reduce your tax bill and improve your cash flow.

1. Claim All Allowable Expenses Ensure you're claiming all eligible expenses, including:

• Office costs (utilities, rent, software subscriptions)
• Travel expenses (mileage, public transport, overnight stays)
• Professional services (accountants, legal fees)

2. Take Advantage of the Annual Investment Allowance (AIA)

• The AIA remains at £1 million, allowing businesses to deduct 100% of qualifying capital expenditures.

3. Make Pension Contributions

• Contributions up to £60,000 (previously £40,000) benefit from full tax relief.

4. Pay Yourself Tax-Efficiently

• Salary + Dividend Strategy: Take a £12,570 salary to maximise personal allowance and withdraw dividends up to £50,270 at a lower tax rate.

5. Use R&D Tax Credits

• SME tax relief remains at 86% deduction, with a payable credit rate of 10%.
  
  

These strategies can lead to significant tax savings. If you’d like tailored advice on how to implement them, UMC Accountants is here to help.