Step-by-step guide to claiming the most reliefs for small UK limited companies

I’m often asked by small limited company owners which tax reliefs they should be claiming and, more importantly, how to make sure they aren’t leaving money on the table. Over the years I’ve helped dozens of micro and small companies identify and apply for reliefs that are simple to claim yet routinely missed through lack of time or knowledge. Below I walk you through a practical, step-by-step process that I use with my clients — the same process you can apply to your business this month.

Start with clean records

Before you try to claim anything, make sure your bookkeeping is tidy. You can’t rely on memories or loose receipts when HMRC asks for evidence. I recommend maintaining digital records in one place — I often suggest clients use Xero, QuickBooks or FreeAgent because they integrate with bank feeds and make audit trails straightforward.

• Reconcile your bank accounts up to the end of the accounting period.
• Scan and attach receipts to transactions (you can use Shoeboxed, Dext or the native file upload in your accounting software).
• Ensure your payroll and pension records are up to date (RTI in payroll software and staging for pensions).

Once records are organised, you’ll be able to spot eligible costs and calculate accurate baselines for reliefs.

Run a reliefs checklist

I use a simple checklist with clients to make sure we consider the most common reliefs available to small limited companies. Use this as a quick diagnostic — if you answer “yes” to any of the items, there may be savings available.

• Do you employ staff or pay contractors?
• Have you invested in new plant, machinery or software?
• Do you hire or collaborate with SMEs, universities or R&D labs?
• Are you paying dividends from company profits?
• Do you work from home or have staff working from home?
• Have you made capital expenditures in the last two years?

Key reliefs to consider and how to approach each

Below I outline the reliefs that small limited companies most commonly benefit from, and practical steps on how to claim them.

1. Annual Investment Allowance (AIA)

AIA gives 100% relief on qualifying plant and machinery expenditure up to the AIA limit in the year of purchase. For small companies this is often the quickest capital allowance to claim.

• Identify qualifying purchases (equipment, machinery, some integral features of buildings). Software is usually excluded from AIA but may qualify for other reliefs.
• Record invoice date and payment date — the timing determines the accounting period in which you claim.
• Include the deduction in your company tax return (CT600) under capital allowances.

2. Super-deduction and special first-year allowances

For qualifying new plant and machinery purchases made during certain time windows (check current rules), companies could claim enhanced first-year reliefs. These were time-limited; always check the latest HMRC guidance or ask your accountant if the super-deduction or any successor relief applies.

3. Research & Development (R&D) tax relief

R&D relief is one of the most valuable and under-claimed incentives for small companies doing qualifying innovation. SMEs can claim either an enhanced deduction for profits or a payable credit if loss-making.

• Assess projects for qualifying criteria: did you try to advance science or technology and resolve uncertainty?
• Compile a project narrative: the problem, technical challenges, and how you tried to overcome them. Keep contemporaneous records (timesheets, design files, test results).
• Quantify eligible costs: staff salaries, subcontractors (with restrictions), consumables and certain software costs.
• Prepare the R&D report to submit with your CT600 — I’ve found HMRC responds better to clear, technical explanations than marketing-style language.

4. Research and Development Expenditure Credit (RDEC) for larger claimants

If your company is connected to a large group or has received grants, the SME scheme may not be available and RDEC (less generous but still useful) will apply. Check the grants and state aid rules first — they affect which scheme you can use.

5. Patent Box

If your company owns qualifying patents and profits from patented inventions, Patent Box can reduce Corporation Tax on those profits. It’s specialist territory — I usually recommend getting professional help due to the calculations and qualifying development activities test.

6. Employment-related reliefs and NIC savings

Small companies can save on National Insurance and salary costs by using a tax-efficient remuneration mix:

• Pay a small salary to directors up to the National Insurance threshold and top up with dividends (if the company is profitable).
• Use employer pension contributions — these are deductible for Corporation Tax and avoid NICs in many cases.
• Consider the Employment Allowance if eligible — it reduces employer NICs for qualifying employers (note: some employers are excluded, check HMRC rules).

7. Rollover relief, business asset disposal relief and capital gains

If you sell qualifying business assets or dispose of business property, reliefs such as Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) can reduce capital gains tax on disposals. Planning the timing of disposals and considering holdover/rollover relief on reinvestment can be tax-efficient.

8. VAT schemes and cashflow relief

Choosing the right VAT scheme can free up working capital:

• Cash accounting for VAT helps if your customers are slow payers.
• Flat Rate Scheme simplifies VAT for some small businesses and may reduce admin costs (but compare effective rates).
• Annual accounting scheme reduces filing frequency.

Practical checklist to claim reliefs (step-by-step)

Follow these steps in the order given — it’s the workflow I use with new clients to make sure nothing is missed.

• Step 1 — Close your books: reconcile and prepare year-end accounts in your accounting software (Xero, QuickBooks, FreeAgent).
• Step 2 — Run a capital expenditure review: list all purchases, classify them (AIA, special allowance, non-qualifying).
• Step 3 — Review payroll and benefits: confirm pension contributions, employment allowance eligibility and NIC optimisation.
• Step 4 — Screen for R&D: identify projects, gather technical records and cost allocations.
• Step 5 — Consider VAT scheme suitability and adjust as required for the next year.
• Step 6 — Prepare CT600 and attach relevant narratives (R&D report, Patent Box calculations if applicable).
• Step 7 — Keep documentation in case of HMRC queries and set a reminder for the next year’s review.

Quick reference table: common reliefs and who benefits

If you’d like, I can prepare a tailored checklist for your company based on a short questionnaire — it takes about 10 minutes and will highlight which reliefs are most likely to apply. I’ve found that a focused review usually uncovers at least one relief that saves money or improves cashflow.