2025 rate Corporation Tax Rates and Planning

(and why “associated companies” matters). 

As we approach the final leg of the year, now is a good time to review your financial affairs and your tax liabilities. With a little careful planning and a strategic approach, it may be possible to minimise or mitigate the amount of tax you have to pay, and with this in mind, in the following series of articles, we will be reviewing tax planning measures for entrepreneurs and business owners.   

Corporation Tax

From 1 April 2025, the main Corporation Tax rate is 25% for profits over £250,000. A 19% small profits rate applies where profits are £50,000 or less. The slice in between gets marginal relief, so the effective rate steps up gradually. 

Associated companies rule

The £50k/£250k thresholds are divided equally between your associated companies (broadly, under common control / same group). Five associated companies? Your thresholds become £10k and £50k each. 

Tax planning tips  

• Map control & ownership now. If you have multiple companies or joint ventures, review whether association applies. Consider whether any entities can be merged, wound up or de-associated commercially to restore higher thresholds.
• Forecast profits. If you’ll straddle thresholds, time income/expenses (see below) to keep within the small-profits limit where sensible. 

Full Expensing vs AIA (and integral features)

Companies can claim Full Expensing (FYA): 100% first-year relief on most new and unused plant & machinery (not cars). Special rate (integral features/long life assets) get 50% FYA. The government may extend Full Expensing to leased assets “when fiscal conditions allow” (not yet in force). 
For all businesses, the Annual Investment Allowance (AIA) gives 100% relief on most plant and machinery (including many fixtures) up to £1m (made permanent). Expenditure over the limit falls into 18% or 6% pools. 

Tax planning tips

• New vs second-hand. Full Expensing requires new/unused. If buying used or installing special-rate items (e.g., electrical systems), AIA may be more generous (100% vs 50%) if you’ve headroom in the £1m cap.
• Disposals bite under Full Expensing. Selling an asset where Full Expensing was claimed triggers an immediate balancing charge (taxable). AIA-claimed assets don’t. If you rotate kit quickly, favour AIA where possible.
• Project staging. Align orders and deliveries to ensure spend in the right accounting period (e.g., before year-end to accelerate relief, or after if profits are lower this year).

Environmentally friendly kit & EVs

Qualifying energy-saving or water-efficient equipment can attract 100% immediate relief. Electric cars, zero-emission cars and EV charge points also qualify for enhanced relief. 

Tax planning tips  

• Specification letters. Ask suppliers to confirm qualifying status in writing (and keep datasheets). It’s audit gold if HMRC queries the claim.
• Bundle upgrades. If refurbishing a site, group qualifying energy/water-efficient systems in the same year to maximise immediate relief. 

Structures & Buildings Allowance (SBA)

For new non-residential buildings (and qualifying renovations/conversions), SBA gives 3% p.a. from April 2020 (straight-line, ~33 years).  This applies to qualifying expenditure incurred on or after 29 October 2018.  The relief is available from when the building is brought into use for the first time for a qualifying activity. 

Tax planning tips  

• Keep build logs. Preserve contracts, stage-certificates and cost breakdowns separating building from plant/fixtures, so you can claim SBA and capital allowances correctly.
• Consider timing. If your profits spike in 2025/26, pushing a practical completion milestone earlier may start SBA sooner. 

Fixtures in commercial property purchases

On buying a property with fixtures (lighting, HVAC, etc.), the vendor and purchaser should agree a s.198 election allocating value to fixtures. Miss it and you may lose allowances forever. 

Tax planning tips

• Make the election standard. Build a fixtures process into every commercial property acquisition checklist.
• Use specialists. A capital allowances survey can often find material extra relief.

R&D claims: opportunity with scrutiny 

R&D relief remains valuable, but HMRC scrutiny has intensified. Expect more evidence and potential enquiries. 

Tax planning tips  

• Eligibility first. Tie each project to a scientific/technological uncertainty, document hypotheses, baselines and outcomes.
• Contemporaneous logs. Engineer notes, sprint boards and version control are your best friend if HMRC asks.
• Additional Information Form (AIF) All claims submitted on or after 8 August 2023 require a validly completed AIF, not completing this correctly will lead to claims being rejected or a full compliance enquiry being opened. 

Cashflow levers: timing income & disposals

Timing of asset disposals (and large jobs’ completion) around year-end can move profit between periods, handy where thresholds or losses are in play. 

Tax planning tips 

• Revenue recognition. For long-term projects, ensure methods (e.g., percentage-of-completion) are consistent and understood.
• Dispose post year-end if a balancing charge would push you over a threshold. 

As always, these articles provide an overview of the various measures available and no action should be taken without seeking professional advice.  At Ritchie Phillips, we pride ourselves on providing clear, pragmatic advice to help businesses, individuals and families. If you’d like to discuss any of the above, please get in touch.