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Accounts and Tax Filing Guide

  • 11 hours ago
  • 4 min read

If you run a micro company, meaning small turnover, a handful of employees or none, and often just you as the director, the rules around filing and tax can feel designed for bigger businesses. This guide answers the questions micro company directors actually search for, in plain English, with no jargon. HOW TO REDUCE CORPORATION TAX & WHAT YOU CAN CLAIM: A GUIDE FOR MICRO COMPANIES (2026) Here's a straightforward breakdown of the core sections covered:

  • When are company accounts due

  • How Is a Limited Company Taxed

HOW TO REDUCE CORPORATION TAX LEGALLY

How to reduce corporation tax legally?

The main legitimate routes are: claiming every allowable business expense, using capital allowances on equipment and assets, contributing to a pension through the company, timing income and large purchases around your year end, and structuring how you take money out as salary versus dividends.


None of this is aggressive tax avoidance, it's using reliefs that Parliament built into the system on purpose.


Ways to reduce corporation tax UK

  • Claim all allowable expenses, not just the obvious ones

  • Use capital allowances when buying equipment, this reduces taxable profit in the year of purchase

  • Make employer pension contributions through the company

  • Pay a modest director salary rather than none, since salary itself is a deductible business cost

  • Time significant purchases just before year end, if cash flow allows


Is pension contribution tax deductible for limited company?

Yes. Employer pension contributions made by the company on your behalf are generally a deductible business expense, reducing your Corporation Tax bill, and they're not treated as your personal income for tax purposes either. This is one of the most efficient ways to extract value from a profitable micro company without triggering personal Income Tax.


Salary vs dividends tax efficient: For a single-director micro company, the most tax-efficient setup usually looks like this:

  • Pay yourself a small salary – just enough to use up your personal allowance, while staying low enough to avoid high National Insurance costs.

  • Top up your income with dividends – dividends aren't subject to National Insurance, which is why this combination usually works out cheaper than taking everything as salary.

One thing to keep in mind: the ideal salary/dividend split can shift slightly each tax year as thresholds and rates change. So it's worth reviewing the numbers annually rather than assuming what worked last year still applies. WHAT EXPENSES CAN YOU CLAIM


What expenses can I claim as a limited company? Broadly, anything spent wholly and exclusively for business purposes. Common categories: office costs and equipment, business travel and subsistence, professional fees (including accountancy), software and subscriptions, marketing, insurance, and a proportion of home-working costs. Personal or mixed-use costs need care, since only the business proportion is claimable.

Can I claim travel expenses, being a limited company?

Yes, for travel that's genuinely for business, client visits, site work, business meetings, travel to a temporary workplace. Your regular commute to a permanent workplace generally doesn't count. Mileage can be claimed at HMRC's approved rates if you use your own car, which avoids needing to itemise every fuel receipt.


What expenses can I claim as self employed? The expense categories are broadly similar for both structures, expenses must be wholly and exclusively for business purposes to qualify.

The mechanics differ, though:

  • Sole trader – expenses are deducted directly from your own income.

  • Limited company – expenses are deducted through the company, separately from your personal income.

This is just one of several factors to weigh up when deciding between structures, alongside the tax rate differences. How much can I claim for working from home limited company? There are two common approaches. HMRC's simplified flat rate allows a fixed monthly amount based on hours worked from home, no receipts needed. Alternatively, you can claim a proportion of actual household costs (heating, electricity, internet) based on the percentage of your home used for business, which requires more record-keeping but can be higher. Which is better depends on your actual costs, so this is worth checking against your own numbers rather than assuming one is always best. Can I claim my phone bill as a business expense? Yes, but only the business-use proportion if it's a personal contract used for both. If the company takes out a phone contract solely in its own name for business use, the full cost is claimable. Mixed personal and business use on a personal contract means estimating and claiming only the business percentage.

What can I claim without a receipt?

Very little, as a rule. HMRC expects records for claims, though there are specific exceptions like the flat-rate mileage allowance and the simplified home-working flat rate, which don't require itemised receipts because they use a fixed HMRC rate instead. For most other expenses, keep the receipt, bank record, or invoice, since a claim without evidence is one of the more common triggers for HMRC to ask questions.


Director expenses - I can claim

As a director, the same wholly-and-exclusively rule applies to anything you claim back from the company, plus a few director-specific angles: business mileage, use of home as office, professional subscriptions relevant to your trade, and reasonable subsistence when travelling for business. Keep personal and business spending clearly separated, mixing them is one of the most common bookkeeping headaches for first-time directors.


How Can Taxation Made Easy Help?

We assist clients with identity verification as part of our wider company compliance services. If you're unsure whether you've verified, don't know your confirmation statement deadline, or simply want someone to walk you through the process, we can help.


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Rated Excellent, 4.8/5 rated as excellent accounting firm in 2026.

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