Nobody goes into business dreaming about tax. Yet every pound you hand over needlessly is a pound that could be growing your business or simply staying in your pocket. The good news is that a little planning goes a long way.
You do not need to be a tax expert to keep more of what you earn. You just need to know where the opportunities are. Here are some practical and completely legitimate small business tax saving strategies for the 2026/27 tax year.
Use your allowances before you lose them
Lots of tax allowances work on a use it or lose it basis. They reset every 6 April and most cannot be carried into the next year. A few worth knowing:
Your personal allowance lets you earn £12,570 before any income tax
The dividend allowance covers your first £500 of dividends
You can pay up to £60,000 into a pension each year with tax relief
You can shelter up to £20,000 in an ISA
If you have not used these by the end of the tax year they are usually gone for good. A quick review before 5 April makes sure nothing slips away.
Review how you pay yourself
If you run a limited company the way you pay yourself really matters. Most company directors take a mix of a small salary and dividends because it usually works out more tax efficient than salary alone.
This year that balance deserves a fresh look. Dividend tax rates rose on 6 April 2026 so dividends now cost a little more. The basic rate went up to 10.75% and the higher rate to 35.75%. A common approach is a salary of £12,570 topped up with dividends but the right mix depends on your profits and your wider income. Getting this right can save hundreds of pounds a year so it is well worth a proper look.
Put money into a pension
A pension is one of the most tax efficient ways to take money out of your company. Employer pension contributions are usually an allowable business expense so they can reduce your corporation tax bill. At the same time you are building your own future.
You can pay in up to £60,000 across your pensions each year and still get tax relief. If you have not used your full allowance over the last three years you may be able to carry some of it forward. It is a rare win for both you and your business.
Claim every allowable expense
Money you spend running your business is often tax deductible so make sure nothing slips through the net. Common expenses include:
A share of your home office costs if you work from home
Business mileage and travel
Professional subscriptions and training
Software, equipment and office supplies
For larger purchases like machinery, tools or computers you can often claim capital allowances. The Annual Investment Allowance lets you deduct the full cost of most qualifying equipment up to £1 million in the year you buy it. Keep every receipt because small amounts soon add up.
Use tax free benefits and perks
Some perks are completely tax free when the rules are followed. They are a lovely way to reward yourself and your team without a tax bill. For example:
Trivial benefits of up to £50 each such as a gift or a meal. Directors of small companies can enjoy up to £300 of these a year
An annual staff event such as a Christmas party up to £150 per head
Electric company cars which still carry very low benefit in kind tax
These are small things on their own but used well across a year they add up to a real saving.
A few more ways to stay ahead
Beyond the headline savings a few good habits keep your tax bill healthy all year:
Choose the right VAT scheme. Options like the Flat Rate or cash accounting scheme can help your cash flow
Look into R&D tax relief if you develop new products or processes as it can be surprisingly generous
Plan around your year end. Timing a big purchase or an invoice sensibly can shift a cost or some income into a more helpful year
Get ready for Making Tax Digital for Income Tax. If you are a sole trader or landlord earning above £50,000 you are already in scope and those above £30,000 join from April 2027
None of these needs to be complicated. A little planning is all it takes.
Let Profectus help you keep more of what you earn
This is general information rather than personalised advice and every business is a little different. The best savings come from a plan built around yours.
That is exactly what Renu does. Through the Finance Fixer service Profectus helps small businesses get their numbers straight, spot the savings and stay ready for whatever comes next. A little planning now can mean real money saved later.
Ready to get your finances back on track before the autumn rush? Book a discovery call with Renu and see how Profectus can help.
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