Are You Wasting Money? Smart Tax Strategies for Business Owners

Don’t Let HMRC Take More Than They Should 

Running a business is hard enough without giving away more to HMRC than necessary. Yet every year, thousands of business owners unknowingly hand over more tax than they should – simply because they haven’t reviewed their tax strategy.

The good news? With the right advice and a few smart changes, you could significantly reduce your tax bill and keep more of your hard-earned profits.

Here’s how to make sure you’re not overpaying – and what to do about it:

1. Is Your Profit Extraction Strategy Still Working?

That old “salary plus dividends” combo used to be king. But recent tax changes – especially the increase in dividend tax rates and reduction in the tax-free dividend allowance (now just £500 in 2024/25) – mean this may no longer be the best approach.

What you can do:

• Consider a blend of salary, dividends, and pension contributions to maximise efficiency.
• Explore Director’s Loans (carefully!) if cashflow is tight.
• Review your profit extraction plan annually to reflect updated tax thresholds and legislation.

💡 Tip: Pension contributions can reduce your corporation tax bill and build personal wealth – a double win.

2. National Insurance Is Going Up – Be Proactive Now

From April 2025, Employer National Insurance is set to rise to 15%. That means it’ll cost you more to pay your staff – and yourself.

Smart ideas to reduce the impact:

• Introduce salary sacrifice schemes for pensions, electric vehicles, and cycle-to-work benefits.
• Review bonus structures to align with more tax-efficient planning.
• Consider employee benefits that increase retention without increasing gross pay.

💡 Tip: Salary sacrifice isn’t just for big companies – small businesses can use it to cut costs and improve staff satisfaction.

3. Think You Don’t Qualify for R&D Tax Relief? Think Again

You don’t have to wear a lab coat to claim R&D relief. If your business is solving technical problems, improving processes, or developing new products or software, you might be eligible – even if you’re in marketing, manufacturing, or food production.

According to HMRC data, over 80,000 businesses claimed R&D relief in 2022/23, receiving more than £7.6 billion in tax savings.

What counts as R&D?

• Developing new or improved products or services
• Creating bespoke software or automations
• Experimenting with new materials, technologies, or production methods

💡 Tip: If you’ve ever said, “This hasn’t been done before – we’ll have to figure it out ourselves,” that could be R&D.

4. Are You Claiming All Allowable Business Expenses?

Every missed expense is tax you didn’t need to pay. Many business owners lose out by not recording or claiming all allowable costs, especially if they work from home or travel often.

Commonly missed tax-deductible expenses:

• Business use of personal vehicles and mileage
• Home office costs (portion of rent, utilities, broadband)
• Subscriptions, training, and professional fees
• Marketing and advertising spend
• Business travel, meals, and client entertaining (some restrictions apply)

💡 Action Step: Use an expense tracking app like Dext, Xero Expenses, or even a simple spreadsheet to log expenses in real time.

✅ Key Takeaways:

🔹 Review your director remuneration plan annually
🔹 Plan ahead for the 2025 NI rise
🔹 Don’t assume R&D relief doesn’t apply to you
🔹 Get a handle on your expenses – and claim them properly

Want to Pay Less Tax Without Taking Risks?

At AEL Markhams, we specialise in helping businesses – especially those in creative industries, tech, marketing, and professional services – optimise their tax position without crossing the line.

Our team can help you:

• Build a bespoke profit extraction strategy
• Identify hidden R&D opportunities
• Maximise legitimate business expenses
• Prepare for upcoming tax changes