LinkedIn
The goal is simple: make tax decisions while options are still open. Once the year end has passed, many of the best opportunities become harder or impossible to implement.
Tax planning for a limited company is not about finding loopholes. It is about making sure the company, the director and the wider shareholder group are structured in a way that is commercially sensible and tax efficient. The best results usually come from planning pre year end, when there is still time to influence salary, dividends, pension contributions, capital purchases and other decisions.
At The Advisory Group, we believe tax planning works best when it is proactive rather than reactive. That means reviewing results before the accounting period ends, so decisions can be made while there is still time to act, rather than after the numbers are fixed. A proper year-end review can identify whether profits should be extracted by dividend, pension contribution, bonus or retained in the company, and whether any capital expenditure should be accelerated or delayed.
A good pre-year-end process typically includes reviewing:
Alphabet shares can be a useful planning tool where a company has more than one shareholder and wants flexibility over dividends. Different share classes, such as A, B and C ordinary shares, can carry different dividend rights provided those rights are properly set out in the articles of association.
They are particularly useful where:
The key point is that share rights must be documented correctly. If the articles are not drafted properly, planning can become ineffective or legally problematic. Tax advice tailored to your circumstances is needed when implementing varying dividend share structures such as alphabet shares.
Claiming all legitimate business expenses is one of the simplest ways to reduce taxable profits. HMRC allows relief only for costs incurred wholly and exclusively for the business, so the documentation and business purpose matter.
Common areas include:
As always, the main test is whether the company incurred the cost for genuine business reasons and can support that treatment with records.
Company car planning remains one of the biggest opportunities for limited companies. Fully electric cars are usually much more tax efficient than petrol or diesel vehicles because Benefit-in-Kind (BiK) rates are materially lower, and the electricity reimbursement rules are favourable compared with fuel for combustion cars.
By contrast, petrol and diesel company cars typically attract much higher BiK charges. In practice, that means an employee or director could pay significantly more personal tax for a conventional car than for an EV with a similar list price. For example, a petrol company car might be taxed at a materially higher BiK percentage than a full EV, so even where the EV has a higher purchase price, the overall tax cost can still be lower.
There is also a VED angle. From 1 April 2026, most electric, zero or low-emission cars pay £10 in the first year if registered on or after 1 April 2025, then the standard rate of £200 after that, while hybrids no longer get the old £10 discount. That means the tax case for choosing an EV is still strong, but hybrids are less generous than many owners assume.
Reviewing the salary and dividend mix is a core part of limited company tax planning. Changes in tax rates and thresholds in recent years have closed the gap between salary vs salary/dividends.
In practice, the best salary level depends on a number of factors such as:
For many sole-director companies, the salary/dividend mix needs a separate review each year because the optimal answer changes with thresholds and company profit levels
Employment Allowance can reduce the company’s employer NIC bill by up to £10,500 in 2026/27. However, a company generally cannot claim it where the only person on payroll is a director, or where the certain other payroll structures are in place.
Employer pension contributions are one of the most effective tax planning tools for a limited company. They can usually be deductible for corporation tax if incurred wholly and exclusively for the purposes of the trade, and they can also help extract profits in a tax-efficient way.
The annual allowance is currently £60,000, subject to the usual rules and any carry-forward from the previous three tax years. A pension contribution can be especially useful when the company has a strong profit year, when the director is close to higher-rate tax, or when funds are better retained for retirement rather than extracted as salary or dividends.
Capital allowances can create major tax savings if asset purchases are timed correctly. The key planning point is often whether the company should buy an item before the year end, after the year end, or in a later period depending on profits and expected relief.
Typical examples include:
The timing of purchase matters because relief is normally linked to when expenditure is incurred and when the asset is brought into use. If the company expects a profit spike, accelerating qualifying purchases before year end may increase immediate relief; if profits are expected to fall, delaying may preserve cash and match the relief to a later period.
Pre-trading expenses may be deductible where they are incurred for the purposes of the eventual trade and meet the relevant conditions. This can be useful for companies that incur professional fees, setup costs, software, premises or recruitment costs before trading actually starts.
Losses also need active management. A company with trading losses may be able to carry them forward, set them against other profits, or use group relief where the structure allows it. In a group, losses should be reviewed across companies so they are used efficiently rather than left stranded in one entity.
A sensible group structure can help with risk management, sale planning and tax efficiency. It may allow different businesses or assets to be separated, losses to be moved where permitted, and future disposals to be managed more cleanly. In some cases, a properly structured sale of a subsidiary can be treated more tax efficiently than selling the trade directly (Substantial shareholding exemption (SSE) enables the sale of shares to be tax free), depending on the facts and ownership chain.
Group planning also matters where one company owns valuable IP, property or a particular trading line. The structure should be reviewed early, not just when a sale or investment is imminent, because tax-free reorganisations and future exit planning are much easier when documented in advance
Director’s loan accounts need careful control because they create tax and documentation issues if left unmanaged. An overdrawn loan can trigger Corporation Tax charges, benefit-in-kind reporting and potential interest charges, depending on the facts and timing of repayment.
The main planning points are:
A properly managed loan account is fine; a poorly documented one can become expensive quickly.
Share options can also be part of the planning mix. EMI and CSOP are two of the most widely used UK tax-advantaged share schemes, and they can be highly effective where the company wants to reward staff, align incentives and support growth without immediate cash cost. These schemes need to be set up properly, with attention to eligibility, documentation and future exit planning.
Although not strictly tax advantaged in the way EMI/CSOP are, Freezer & Growth shares are another way to provide shares to key employees or family members while protecting the value in the business already built by the current business owners.
At The Advisory Group, we have the most useful conversations well before the year end. That gives business owners time to decide whether to accelerate spending, revise salary levels, fund pensions, issue dividends, tidy up director’s loans, or restructure shareholdings before the accounting period closes.
The goal is simple: make tax decisions while options are still open. Once the year end has passed, many of the best opportunities become harder or impossible to implement.
At The Advisory Group, we work with business owners to understand performance, improve profitability and make better financial decisions. If you would like support in reviewing how your business can increase profit in 2026, please get in touch here.
This publication has been prepared by The Advisory Group UK Limited and is not intended to be a comprehensive statement of law or represent specific advice. No liability is accepted for the opinions it contains. All rights reserved.