Tax Planning can be like visiting the dentist – you dread it, you think it will be painful, but ignoring it will cost you a lot more in the long run! Business owners face a multitude of challenges on their path to success – retaining employees, keeping costs under control, growing revenue, attracting customers, and fending off competitors just to name a few. However, one of the most consistently daunting tasks we hear of for many business owners is planning for end-of-year tax season.
Fortunately, we’re on hand to offer 5 top tax planning tips to help you maximise savings, avoid unexpected liabilities, and position your business for success in the 2025-26 tax year and beyond. Our most successful clients take these five steps to optimise their tax position before the financial year ends.
1. Get Organised Early
One of the best ways to ease the stress of tax season is to start organising your financial records well in advance of your year-end. Here are some key steps:
- Gather All Financial Documents: Ensure you have all the necessary documents, such as bank statements, invoices, receipts, and payroll records. Missing paperwork can slow down the process of preparing your year-end accounts and lead to inaccuracies
- Use Cloud-Accounting Software: If you’re not already using cloud-accounting software like Xero, Sage or QuickBooks, consider implementing one. These tools can help you track expenses, reconcile accounts, and generate reports that your accountant will need.
- Review Last Year’s Tax Return: Use your previous tax return as a reference to ensure you’re not missing any deductions or income sources. This can provide a helpful roadmap for managing your year-end accounts and ensuring nothing is overlooked.
Accelerate Purchases Before Year-End: If your business is planning to invest in equipment, software, or other assets, consider making those purchases before the end of March. This allows you to claim the tax benefit a year earlier, improving cash flow.
2. Prepare for Potential Tax Liabilities
Understanding your potential tax liability can help you avoid surprises and ensure you have the funds ready when tax season arrives in January.
- Estimate Your Tax Bill: Use accounting software or consult your accountant to estimate how much you might owe. This step will give you clarity on what to expect.
- Set Aside Funds: If you anticipate a significant tax liability, set aside the necessary funds to avoid cashflow issues.
- Make Lump Sum Pension Contributions Before Year-End: A common tax-efficient strategy is to make lump sum contributions to pensions before the tax year ends. This reduces your taxable income while boosting your retirement savings.
National Insurance Increase from April: With the upcoming National Insurance increase, business owners should explore ways to offset the cost, such as salary sacrifice schemes, bonuses paid before April, or other tax-efficient remuneration structures.
3. Communicate with Your Accountant
Your accountant is your greatest ally during tax season, so clear and proactive communication is essential.
- Provide Information Promptly: The earlier you provide all necessary documents, the more time your accountant will have to review and prepare your return, so it’s best to get your tax information across as soon after your year-end as you can. Missing details can cause delays or inaccuracies in your end-of-year tax preparation so be thorough when preparing your tax information.
- Ask Questions: Don’t hesitate to ask your accountant about anything you don’t understand. It’s better to clarify than to make assumptions that could lead to mistakes.
- Plan a Year-End Review: Schedule a meeting with your accountant to discuss your financial performance, tax strategies, and areas for improvement. This is also an excellent time to seek professional tax advice and planning tips for the upcoming year.
Double Cab Purchase Deadline: If you’re considering purchasing a double cab vehicle for business use, be aware that tax rules are changing after March. Buying before the deadline allows you to take advantage of the current tax relief options.
4. Plan for the Year Ahead
Tax season isn’t just about wrapping up the current year; it’s also an opportunity to set the stage for better financial management in the future.
- Create a Budget: Use insights from your financial reports to create a realistic budget for the next year. Accurate budgeting can help you manage expenses and identify potential savings. Alternatively, contact one of our friendly experts for help with budgeting.
- Outsource Processes: Outsource tasks such as bookkeeping and payroll to your accountant. This will reduce errors and save you time, freeing you and your team up to focus on core business tasks that drive growth.
- Track KPIs: Identify key performance indicators (KPIs) that reflect your business’ health and monitor them regularly. Tracking KPIs will help you stay on top of your finances year-round.
Thinking About a Business Exit? If you’re considering selling your business, now is the time to review Business Asset Disposal Relief (BADR). The relief, which reduces Capital Gains Tax on qualifying business sales, is expected to decline further. Maximising your eligibility before the changes take effect can result in significant tax savings. Speak to your accountant to ensure you take full advantage of BADR while it’s still available.
5. Stay Compliant
Ensuring your business complies with all tax regulations is crucial for avoiding penalties and maintaining a good standing with tax authorities.
- Meet Deadlines: Mark key tax deadlines on your calendar and set reminders to avoid late filing or payment penalties.
- Keep Records: HMRC requires you to retain records for at least six years. Store documents securely, either digitally or physically, to stay compliant.
- Stay Informed: Following the Autumn Budget in October 2024, tax rules are due to change significantly in April 2025. It is important to stay informed and plan for these changes. You can get clued up on the changes with our comprehensive guide to the Autumn Budget.
End-of-year tax preparation doesn’t have to be overwhelming. By getting organised early, preparing for potential liabilities, maintaining clear communication with your accountant, and planning for the year ahead, you can navigate tax season with confidence.
Remember, proactive tax planning not only helps you meet compliance requirements but also positions your business for long-term success. For more insights and professional tax advice, be sure to consult with a dedicated tax specialist.
