Running a business is about more than just turning a profit - it's about keeping as much of that profit as possible. With smart planning, you can legally reduce your tax bill and make your money work harder for you.
Here are 25 practical, HMRC-compliant ways to save tax - ideal for limited company owners and directors.

1. Pay Yourself a Tax-Efficient Salary

Set your salary at the optimal level to utilise your personal allowance while keeping National Insurance contributions minimal. For most directors, this means around the NI threshold (£12,570), depending on other income.

2. Take Dividends

After paying yourself a salary, draw the rest of your income as dividends. Dividends are taxed at lower rates than salary and come with a £500 tax-free allowance.

3. Employ Your Spouse or Civil Partner

If your spouse helps with admin, marketing, or bookkeeping, pay them a fair salary for their role. This shifts income to their tax allowance and saves corporation tax for your company.

4. Gift Shares to Family Members

You can share company ownership with family members through Family Investment Companies (FICs) or by gifting shares, allowing income to be taxed at lower rates.

5. Make Pension Contributions

Employer pension contributions are a powerful way to save. They’re deductible from corporation tax and build your personal wealth in a tax-free wrapper.

6. Use Salary Sacrifice Schemes

Salary sacrifice can be used to exchange part of your salary for non-cash benefits such as pension contributions, electric cars, or cycle-to-work schemes. These reduce your taxable income and can also save National Insurance for both employer and employee.

7. Use Trivial Benefits (£50 Rule)

You can gift yourself and your employees items up to £50 in value, such as wine, flowers, or gift cards, without tax or NI — as long as it’s not cash or performance-linked.

8. Claim Tax-Free Mobile Phones

Each director or employee can have one mobile phone paid for by the company, with no taxable benefit. The phone contract must be in the company’s name.

9. Get Reward Points on Business Spending

Use business credit cards like Capital on Tap (1% cashback) or American Express to earn rewards on spending you’d make anyway — effectively reducing costs.

10. Consider an Electric Company Car

Electric cars have very low benefit-in-kind (BIK) rates, making them highly tax-efficient. The company can also claim 100% first-year capital allowance on qualifying vehicles.

11. Reclaim Business Mileage

Use HMRC-approved mileage rates (45p per mile for the first 10,000 miles, 25p thereafter) for business travel in personal cars. Keep good records to support claims.

12. Use the Cycle to Work Scheme?

Buy bikes and equipment through your company and save up to 32–47% through salary sacrifice, depending on your tax rate.

13. Take Advantage of Tax-Free Childcare

Eligible parents can save up to £2,000 per child per year through the government’s tax-free childcare scheme. It’s available even if you’re self-employed.

14. Claim for Subsistence and Travel

When you’re away on business, you can claim reasonable meal and accommodation costs. This applies when travelling for work, not your regular commute.

15. Use the £150 Staff Party Allowance

You can spend up to £150 per person per year on staff events (like Christmas parties) without tax implications — as long as it’s open to all staff.

16. Offer Onsite Facilities

Providing things like free parking, coffee, or gym access at your business premises can be tax-free perks for staff and directors.

17. Pay for Life Insurance via the Company

Relevant Life Insurance is tax-deductible for the company and paid from pre-tax profits. It’s not treated as a benefit in kind — a big saving versus personal policies.

18. Claim Subscriptions and Learning Costs

Subscriptions related to your work (like Audible, training, or professional memberships) can be claimed if they’re relevant to running your business.

19. Rent – Claiming for Working from Home

If you use part of your home exclusively for business, you can charge rent from yourself to your company. This rent is tax-deductible for the company and taxable to you personally, but you can offset household expenses against it. Always have a written rental agreement and seek advice to avoid capital gains implications later.

20. Keep Good Records for Entertaining

Client entertainment isn’t tax-deductible — but staff entertainment is. Keep receipts separated so you don’t lose legitimate claims.

21. Set Up a Family Investment Company

FICs allow you to hold investments in a company structure, paying corporation tax (25%) instead of personal income tax (up to 45%), and pass wealth to family tax-efficiently.

22. Invest in Your Workspace

If you work from home, claim a reasonable proportion of home expenses — electricity, broadband, rent, and more. You can also use HMRC’s flat rate (£6/week).

23. Reclaim VAT on Business Expenses

Even if you’re not VAT-registered yet, track VAT paid — registration later may allow you to reclaim up to 4 years of pre-registration VAT.

24. Claim Capital Allowances on Equipment

Claim tax relief on items like laptops, desks, and tools used for your business through the Annual Investment Allowance (AIA).

25. Use the Marriage Allowance

If your spouse earns below the personal allowance, they can transfer £1,260 of their allowance to you — worth up to £252 per year.

Final Thoughts

Tax efficiency isn’t about avoidance — it’s about planning ahead and making smart use of legitimate reliefs. These 25 ideas are a solid starting point for business owners looking to keep more of what they earn. Get in touch today if you want to find out more about any of the above in greater detail!