Year-End Tax Planning for Business Owners: What to Do Before 5 April 2025
Introduction: Why Now Is the Time to Act
The 2024/25 tax year ends on 5 April 2025, and this year, business owners face a complex mix of frozen thresholds, reduced allowances, and upcoming tax changes that require early action—not last-minute panic.
If you’re a limited company director, sole trader, or small business owner, this guide will walk you through the most effective tax-saving strategies to consider before the year closes.
This isn’t just about compliance—it’s about maximising profits, minimising liabilities, and setting up for a more tax-efficient future.
Key Changes for 2024/25 You Need to Know
Before we dive into the planning strategies, here are a few changes already in effect that shape this year’s tax environment:
Lower Allowances:
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Dividend allowance: Cut to £500 from April 2024 (was £1,000)
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Capital gains tax (CGT) annual exemption: Reduced to £3,000 (was £6,000)
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Frozen personal allowance: Still £12,570, but more people pay tax due to inflation
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Corporation tax: Still 25% for profits over £250,000
These changes mean it’s easier than ever to slip into higher tax bands, even if your income hasn’t increased much.
1. Review Director’s Salary and Dividends
Optimal Salary
The most tax-efficient salary depends on whether your company is eligible for the Employment Allowance (EA).
| EA Available? | Suggested Director’s Salary (2024/25) |
|---|---|
| Yes | £12,570 (to use full personal allowance) |
| No | £9,100 (to avoid employer’s NICs) |
Above these levels, consider topping up income with dividends, which are taxed at:
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8.75% (basic rate)
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33.75% (higher rate)
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39.35% (additional rate)
With the dividend allowance now only £500, tax liabilities can stack up quickly. Consider declaring a final dividend before 5 April if you want it taxed in this year.
2. Use Capital Allowances While You Can
Full Expensing (for Companies)
From April 2023, companies investing in qualifying plant and machinery can deduct 100% of the cost in the year of purchase. This has been extended to 31 March 2026.
Example: Your limited company buys new IT equipment for £20,000. Claiming full expensing reduces your corporation tax bill by £5,000 (25%).
This is an excellent time to:
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Replace ageing assets
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Invest in electric vehicles and charging infrastructure (also eligible for 100% relief)
Sole traders can still use the Annual Investment Allowance (AIA), up to £1 million.
3. Bring Forward Expenses
If you’re on the accrual basis, you can deduct expenses when they are incurred—even if you haven’t paid them yet.
Strategy: Bring forward planned costs (e.g. software, training, equipment, marketing) into 2024/25 to reduce profits this year and save tax now.
This works for:
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Office rent and utility bills
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Subscriptions and software
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Prepaid services
4. Involve the Family (Legally and Efficiently)
Employing Family Members
If a family member genuinely works in your business, you can:
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Pay them a reasonable salary
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Reduce your taxable profit
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Help them build up National Insurance credits
Gifting Shares
You could also gift shares to a spouse or adult child in a lower tax bracket to save tax on dividends.
Tip: Make sure any transfer is genuine, documented, and does not fall foul of HMRC’s settlement rules.
More guidance here:
HMRC – Income Tax on Dividends
5. Rethink Your Property Investments
From April 2025, Furnished Holiday Let (FHL) tax benefits are ending. If you own a holiday let:
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Consider selling before 5 April 2025 to benefit from Business Asset Disposal Relief (10% CGT rate)
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After that, CGT could be 18% or 24%
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You’ll also lose out on pensionable income, full mortgage interest deductions, and capital allowances
Planning before April 2025 is critical for holiday let owners.
Learn more here:
HMRC – SDLT and Buy-to-Let
6. Maximise Pension Contributions
Pension contributions remain one of the most powerful and tax-efficient ways to extract money from your business.
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Contributions made before 5 April 2025 reduce your income and lower your tax bill
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Company contributions can be a deductible business expense
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Annual allowance: Up to £60,000 (or more if unused allowances from previous years)
Example: A company contributing £20,000 to a director’s pension saves £5,000 in corporation tax (at 25%)
Consider boosting your pension if:
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Your income is nearing £100,000 (to preserve your personal allowance)
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You’re facing child benefit clawback (income > £60,000)
7. Use the £1,000 Trading and Property Income Allowances
If you or a family member has:
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Side income from selling online
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Freelance work
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Rental income under £1,000
You might not need to register for self-assessment or pay tax if you fall below the £1,000 allowance thresholds.
Great for spouses or adult children helping in a limited capacity or testing a business idea.
8. File Early and Avoid Penalties
Early tax return filing:
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Reduces stress and admin burden
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Gives more time to plan cash flow
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Ensures you claim all allowances
Penalties for late returns stack up fast:
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£100 immediately after 31 January
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£10/day after 3 months
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5% of unpaid tax at 6 months
Key dates:
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31 January 2025: Filing deadline
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5 April 2025: End of tax year
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31 July 2025: Second payment on account due
Final Thought: Don’t Leave Tax Planning to the Last Minute
Year-end tax planning isn’t just a box-ticking exercise—it’s an opportunity to legally reduce your tax, improve your business cash flow, and make smarter financial decisions for the long term.
Get Help from Merranti Accounting Today
At Merranti Accounting, we specialise in helping business owners like you:
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Pay less tax
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Maximise profit extraction
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Plan pension, dividend, and property strategies
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Navigate changing tax rules with confidence
Whether you’re a sole trader, contractor, or SME director—we’ve got the expertise you need to make the most of 2024/25.
Book your review before 5 April 2025.
