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What Do I Do If My Company Earns Too Much Profit?
If your limited company is making a strong profit, it's a nice problem to have.
The catch is this. More profit usually means more Corporation Tax, and if you then take more money out personally, you can quickly wander into higher tax bands.
So rather than rushing to spend money (or taking a big dividend without a plan), the smart move is to plan before your year end, while you still have options.
The step by step plan
- Make sure the profit number is real (and you’re not missing obvious costs).
- Check your salary and dividends are tax efficient (especially once income goes over £50k).
- Use tax free perks properly (trivial benefits).
- Enjoy staff events in a tax efficient way (summer parties and Christmas parties).
- Maximise the right pension contributions (often one of the biggest wins).
- Reinvest into the business (training, marketing, systems, team benefits).
- Plan early with a pre-year end tax planning meeting (before profits and tax are locked in).
- If there’s still surplus cash, consider investing (with the right advice).
1) First, are you sure the profit is right?
Before you do anything clever, make sure the accounts reflect reality.
Quick checks:
- Have you included all business costs for the year (software, insurance, phone, subscriptions, travel, mileage, small tools, bank fees)?
- Have you posted director expenses correctly?
- Are you timing purchases sensibly, for example buying kit you genuinely need before the year end?
- Are you claiming the right tax reliefs, for example capital allowances on equipment?
This is the boring bit, but it’s the bit that stops nasty surprises.
2) Is your salary and dividend mix tax efficient?
This is usually where the biggest gains are.
Why £50k matters
Once your total taxable income goes above £50,270, you enter the 40% income tax band.
Dividends are taxed differently to salary, but the principle is the same. Taking too much personally in one tax year can quietly increase your tax bill.
What we normally review
- Are you paying a sensible director salary through payroll?
- Are dividends being taken in a planned way, rather than ad hoc?
- Are you accidentally pushing income into higher tax bands?
- Are there opportunities to smooth income across tax years?
Dividends feel harmless because there’s no National Insurance, but higher rate tax still bites once thresholds are crossed.
3) Are you using trivial benefits properly?
Trivial benefits are small, tax free perks your company can provide.
To qualify, each benefit must:
- Cost £50 or less
- Not be cash or a cash voucher
- Not be a reward for work done
- Not be written into a contract
Common examples:
- Gift cards
- Flowers or wine
- Birthday or thank you gifts
- Biscuits and snacks for the office
Director limit (important)
If you’re a director of a close company, there’s also a £300 per tax year cap.
Used correctly, this is an easy win that many businesses forget about.
4) Pre-year end tax planning, where this all comes together
This is where proactive planning really makes a difference, and it’s often the step that saves the most tax overall.
We offer a pre-year end tax planning meeting, usually around three months before your company year end.
Starting from £60 plus VAT, we:
- Project your expected profits for the year
- Estimate your Corporation Tax liability
- Identify how much spare profit is likely to be left
- Talk through the best ways to deal with that profit, including salary, dividends, pensions, benefits, events, and reinvestment
The key benefit is timing. This happens before your profit and tax are locked in for the year.
That gives you time to:
- Adjust salary and dividends
- Plan pension contributions
- Decide on sensible company spending
- Avoid last minute decisions after the year end
It’s one of the main ways we work proactively, rather than reacting once the numbers are already fixed.
5) Are you making the most of staff parties?
Annual staff events can be paid for by the company without extra tax, as long as you stay within the rules.
The key limit is:
- £150 per head per tax year, including VAT and any linked travel or accommodation
You can have more than one event (for example a summer party and a Christmas party), but the total per head must stay within £150.
Go over the limit and it can turn into a taxable benefit, so planning matters.
6) Are you taking the right amount out for pension?
For many directors, pensions are one of the most effective ways to use profits.
Why company pension contributions work so well
- They’re usually an allowable business cost
- They reduce Corporation Tax
- You’re building and growing long term personal wealth
- There’s no income tax when the company pays in
Access age
Most people can currently access pensions from 55, rising to 57 from April 2028.
Pensions are powerful, but they come with limits and rules, so this is an area where advice really matters.
7) Reinvest profit into the business (and feel the benefit)
Reducing profit only makes sense if the spending actually improves the business.
A simple rule. Don’t spend £1 just to save 19p or 25p in tax.
Training and development
Investing in skills can pay off quickly. That might be formal courses, specialist training, or immersive team experiences that genuinely improve performance.
Marketing that accelerates growth
Profit is often the fuel for growth:
- Better websites
- Professional photos and video
- SEO and Google visibility
- Paid advertising you can track
- Systems that improve follow up and conversions
Systems, tools, and kit
- Equipment and tools
- Computers and software
- Job management and reporting systems
Team benefits
Some benefits are tax efficient, some are not. Always worth checking before rolling them out.
8) If there’s still surplus cash, investing can be the next step
Once everything else is optimised, some companies still have excess cash.
At that point, investing can make sense, usually with a financial adviser involved.
Investment routes that may be discussed
- Unit trusts
- OEICs
- Bonds
- Shares and funds
- Property investments
- Pension-led options such as SASS arrangements
Company structures
Some business owners also explore:
- Holding companies
- Separate investment limited companies
These can be effective, but they add complexity and need to be set up properly with the right advice.
The Bottom Line
High profit isn’t a problem, it’s an opportunity.
The goal is to:
- Plan early
- Take money out tax efficiently
- Invest in the business where it helps growth
- Use surplus profit wisely
If you want to know what your options look like before your year end arrives, a pre-year end tax planning meeting is the best place to start.
Want to Explore More About Tax Planning?
We think you’ll find the below blogs quite helpful
- How Limited Company Directors In Dartford Can Use Pensions to Save Tax and Grow Wealth | Blue Rocket
- Personal tax planning: 7 ways to save | Blue Rocket
- 10 Minutes that Could Save You Thousands - Let's Reduce Your Tax | Blue Rocket
