With Christmas just a few days away, most business owners are understandably focused on wrapping up the year, enjoying time with family, and perhaps switching off for a well-earned break. Tax planning is rarely top of the festive to-do list. However, while December may be about celebrations, January is when attention inevitably turns back to the business, and for companies with a March year-end, the clock starts ticking quickly.
The good news is that January is not too late to take action. In fact, it is one of the most effective times to review your financial position and consider sensible steps that could help reduce your corporation tax bill before the year-end arrives. Once the festivities are over, a proactive review can make a real difference and avoid rushed decisions as March approaches.
Below are several practical actions UK businesses can consider in January to help manage their corporation tax position ahead of a March year-end.
1. Review Profit Forecasts Early
One of the most effective actions you can take in January is to prepare or update a realistic profit forecast for the year ending in March. This allows you to estimate your expected corporation tax liability and identify whether planning opportunities exist.
If profits are higher than anticipated, it may be appropriate to bring forward allowable expenditure, review remuneration strategies, or invest in the business before the year closes. Conversely, if profits are lower than expected, this may affect decisions around bonus payments, dividends, or capital investment.
Early visibility gives you options – waiting until after the year-end often removes flexibility.
2. Accelerate Allowable Business Expenditure
Where commercially appropriate, bringing forward business expenditure into the current financial year can reduce taxable profits.
Examples include:
- Purchasing office equipment or IT hardware
- Renewing software licences
- Paying professional fees
- Carrying out repairs and maintenance (as opposed to capital improvements)
Timing is key. For expenditure to be deductible, it must be incurred wholly and exclusively for the purposes of the trade and fall within the correct accounting period. January provides a sensible window to plan and execute this rather than rushing decisions in March.
3. Make the Most of Capital Allowances
Capital allowances are a valuable relief and are often under-claimed.
The Annual Investment Allowance (AIA) currently allows businesses to deduct the full cost of qualifying plant and machinery expenditure (up to the annual limit) from taxable profits in the year of purchase. This can include items such as:
- Machinery and equipment
- Vans and commercial vehicles
- Computer equipment
- Furniture and fixtures
Review planned capital purchases early in the year to ensure they are completed before the March year-end where beneficial. January is also a good time to review prior year claims to ensure nothing has been missed.
4. Consider Bonus and Remuneration Planning
Director and staff bonuses can be deductible for corporation tax purposes, provided certain conditions are met.
If bonuses are accrued in the accounts and paid within the required timeframe (generally within nine months of the year-end), they may be deductible in the current accounting period. January is the ideal time to:
- Assess affordability
- Ensure bonuses are properly documented
- Confirm that PAYE and NIC obligations will be met
Similarly, reviewing the balance between salary and dividends for owner-managed businesses can ensure tax efficiency while remaining compliant.
5. Review Bad Debts and Provisions
As the year-end approaches, it is sensible to review your trade debtors and identify any amounts that may be irrecoverable.
Bad debts that are genuinely unrecoverable can be written off and deducted from taxable profits. January provides sufficient time to:
- Review aged debtor reports
- Chase outstanding balances
- Identify debts that may need to be written off
It is important to distinguish between specific bad debts and general provisions, as only specific write-offs are allowable for tax purposes.
6. Pension Contributions
Employer pension contributions are generally deductible for corporation tax purposes, provided they are paid before the year-end (or within the relevant deadlines).
January is a good time to review:
- Existing pension arrangements
- Whether additional contributions are affordable
- The timing of payments to ensure relief is obtained in the desired accounting period
For owner-managed companies, employer pension contributions can be an effective way to extract profits tax-efficiently while supporting long-term financial planning.
7. Use Losses and Group Relief Effectively
If your company has brought-forward losses or is part of a group, January is a sensible time to review how losses are being utilised.
Losses can often be:
- Carried forward to offset future profits
- Carried back (subject to rules)
- Group relieved where applicable
Understanding how losses interact with current year profits can significantly affect the corporation tax bill and cash flow.
8. Check R&D Tax Relief Eligibility
Many companies overlook Research & Development (R&D) tax relief, assuming it does not apply to them. In reality, a wide range of activities, including software development, process improvement, and product innovation, may qualify.
January is an ideal time to:
- Review projects undertaken during the year
- Identify qualifying costs such as staff time and consumables
- Ensure records are in place before the year-end
Early assessment avoids last-minute claims and improves accuracy.
9. Review Prepayments and Accruals
Accurate cut-off at year-end is essential for both compliance and tax efficiency. Reviewing prepayments and accruals in January ensures that expenses are recognised in the correct period.
Common areas include:
- Rent and utilities
- Professional fees
- Insurance
- Subscriptions
Ensuring expenses are correctly accrued can prevent understated costs and unnecessarily high taxable profits.
10. Speak to Your Accountant Early
Perhaps the most important step is to engage with your accountant before the year-end, not after it.
January is the optimal time to:
- Discuss forecasts and tax exposure
- Identify planning opportunities
- Ensure compliance with current tax legislation
- Avoid rushed or reactive decisions in March
Early conversations often lead to better outcomes and fewer surprises.
Final Thoughts
Corporation tax planning does not require complex schemes or aggressive strategies. Thoughtful, timely actions taken in January can make a meaningful difference to your March year-end tax position while supporting the wider goals of your business.
By reviewing forecasts, making use of allowances and reliefs, and ensuring expenses and remuneration are structured appropriately, businesses can approach the year-end with confidence and clarity.
If you would like tailored advice on reducing your corporation tax bill or preparing for your March year-end, speaking to your accountant early is always the best place to start.