Top 10 Year-End Tax Planning Tips for Small Business Owners (2025/26 Edition)
As the 2025/26 tax year draws to a close, now is the time for small business owners to take a close look at their finances and act before 5 April 2026 to ensure they are making the most of all available tax reliefs.
Whether you’re running a limited company, operating as a sole trader, or earning rental and investment income alongside your main business, there are a range of planning opportunities — and common pitfalls — that can affect your tax liability.
This guide highlights ten of the most important year-end tax planning areas to review before the tax year ends.
1. Maximise Use of Your £500 Dividend Allowance
For 2025/26, the dividend allowance has been cut to just £500, down from £1,000 the year before. That means:
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The first £500 of dividend income is tax-free
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Dividends above that are taxed at:
- 8.75% (basic rate)
- 33.75% (higher rate)
- 39.35% (additional rate)
If you are a company director/shareholder, it’s worth checking:
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Have you drawn at least £500 in dividends to use the allowance?
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Can you shift further dividends into a lower tax year (if income is expected to fall)?
Timing is everything — especially with the dividend allowance now so low.
2. Consider Bringing Forward or Deferring Dividends
Because dividends are taxed in the year they are declared, you have some flexibility over when they are paid.
If you’re close to a higher-rate threshold this year, deferring dividends until after 5 April 2026 could save tax.
Alternatively, if your income is unusually low in 2025/26, bringing forward dividends into this tax year could take advantage of unused basic rate band.
Speak to your accountant to model the best option based on your personal and business income.
3. Use Your £3,000 Capital Gains Exemption
The Capital Gains Tax (CGT) annual exempt amount for individuals is now just £3,000 (2025/26 rate). This is the amount of gain you can make each year before CGT applies.
If you have investments or properties that have increased in value:
- Consider triggering gains up to the £3,000 limit to use the exemption
- If you’re married or in a civil partnership, assets can be transferred between partners tax-free to double the allowance
- Loss-making assets can also be sold to offset gains (known as “bed and breakfasting” or loss harvesting)
Remember: any unused CGT exemption cannot be carried forward.
4. Review Director’s Loan Accounts
If you’ve taken money out of your company through a director’s loan account (DLA), ensure any overdrawn balance is repaid within 9 months of year-end to avoid a 32.5% corporation tax charge under section 455 rules.
Likewise, ensure that any loans made to the company from you personally are correctly documented, and consider the interest position — interest paid by the company may be deductible, and interest received by you may be taxable.
5. Make Use of Capital Allowances
Purchases of plant, machinery, office equipment, and other qualifying business assets may qualify for:
- Annual Investment Allowance (AIA): 100% relief on qualifying purchases up to £1 million per year
- Full Expensing (companies only): 100% deduction for new equipment
- 50% First-Year Allowance (FYA): For special-rate assets
To claim these in 2025/26, the asset must be purchased and brought into use by 5 April 2026 (or 31 March 2026 for companies).
If you’re planning to invest soon, bringing the expenditure forward could accelerate tax relief.
6. Review Pension Contributions
Pension contributions are one of the most efficient ways to reduce taxable income, especially for higher earners.
For 2025/26:
- The annual pension allowance is £60,000 for most individuals
- Contributions can be made by you or your company
- You may be able to carry forward unused allowances from the previous three years
Personal contributions can reduce your income for tax purposes, potentially restoring your Personal Allowance or reducing child benefit charge.
Company contributions are generally fully deductible from corporation tax, as long as they are wholly and exclusively for business purposes.
7. Consider Bonuses and Salary Timing
If your company is paying bonuses or additional salary, consider whether to process this before or after 5 April.
A bonus paid before year-end will:
- Count as income in 2025/26
- Trigger PAYE and NICs accordingly
- Reduce company profits for corporation tax
Delaying payment may defer the tax liability to 2026/27 — which can help manage personal tax thresholds.
However, for sole traders and partnerships (on the tax year basis from 2025/26), this won’t affect timing — all profits are taxed when earned, not when withdrawn.
8. Make Gift Aid Donations Before Year-End
Gift Aid donations to registered charities can extend your basic rate band, reducing your tax bill on higher-rate income.
To benefit in the 2025/26 tax year:
- Donations must be made on or before 5 April 2026
- You can also elect for Gift Aid donations made after 5 April to be treated as prior-year gifts (useful if your income falls)
Always retain receipts and confirm the charity is eligible.
9. Check Business Expenses and Timing
Ensure all allowable expenses are claimed, especially:
- Subscriptions
- Home office costs
- Mileage (where appropriate)
- Software or digital tools (especially for MTD readiness)
You may also wish to accelerate certain costs into 2025/26 to reduce this year’s profit — such as paying for annual services upfront.
Watch out for prepayments, though — some must be disallowed for tax.
10. Don’t Forget the Employment Allowance
If you run a payroll and your employer Class 1 National Insurance bill was under £100,000 in the previous year, you may qualify for the £10,500 Employment Allowance in 2025/26.
You must claim this via your payroll system. It’s worth reviewing:
- Are you claiming the allowance?
- Is your business or charity structure eligible?
- Have you taken steps to maximise use of the allowance by employing eligible staff?
Missing this could cost you up to five figures annually — even for smaller businesses.
Final Thoughts
Year-end tax planning isn’t just about saving money — it’s about avoiding surprises. By reviewing your accounts, income, and ownership structures before 5 April 2026, you can make strategic decisions that benefit your cash flow, retirement plans, and long-term goals.
Every business is different — so while the ideas above are widely applicable, it’s vital to take advice tailored to your situation.
