End of Year Tax Planning: What Small Businesses Need to Know
As the financial year draws to a close, end of year tax planning becomes important for small business owners across the UK. Taking proactive steps now can help you reduce your tax bill, maximise available reliefs, and avoid any last-minute compliance issues with HMRC.
Whether you’re a sole trader, a limited company director, or a partnership, this guide will walk you through key tax planning steps to take before the end of the financial year.
1. Ensure Your Financial Records Are Up to Date
Before making any tax-related decisions, ensure your financial records are accurate and complete. This includes:
- Profit and loss statements
- Balance sheets
- Invoices and receipts (for deductible expenses)
- Payroll records (including any PAYE or National Insurance payments)
If you’re still working with paper records, now is a great time to consider switching to digital accounting in preparation for Making Tax Digital (MTD).
2. Claim All Allowable Business Expenses
Maximising your deductions is one of the simplest ways to reduce your taxable income. You can claim tax relief on a wide range of business expenses, including:
✅ Office rent and utilities
✅ Business insurance premiums
✅ Equipment, IT, and software costs
✅ Marketing and advertising expenses
✅ Travel and mileage costs
✅ Professional fees (e.g., accountants and solicitors)
For a full list of allowable business expenses, visit GOV.UK’s official guide.
3. Make the Most of the Annual Investment Allowance (AIA)
If you need to invest in new equipment, machinery, or business assets, the Annual Investment Allowance (AIA) allows you to deduct 100% of qualifying purchases from your taxable profit.
The AIA limit is currently set at £1 million (source: GOV.UK). If you’ve been considering a large purchase, making it before the end of the financial year could be a smart move.
4. Consider Pension Contributions for Tax Efficiency
Making pension contributions may be a tax-efficient way to save for the future.
As a business owner, you can:
- Make personal pension contributions (which attract tax relief).
- Make employer pension contributions (which count as a deductible business expense).
For more information, visit The Pensions Regulator.
5. Review Your VAT Position
If your business is VAT-registered, ensure all VAT returns are up to date and that you’re on the most tax-efficient scheme.
You may be eligible for the Flat Rate Scheme, which simplifies VAT calculations, or the Cash Accounting Scheme, which allows you to pay VAT only when invoices are paid.
Check the latest VAT schemes on GOV.UK.
6. Plan for Corporation Tax Payments
If you run a limited company, planning for Corporation Tax is essential. The UK’s main rate of Corporation Tax is currently 25% (source: GOV.UK).
- Ensure you set aside enough funds to cover your tax bill.
- Consider deferring income or accelerating expenses to manage your tax liability.
If your profits are higher than expected, speak to your accountant about reinvestment strategies before the year ends.
7. Check if You Qualify for R&D Tax Relief
If your business has invested in innovation, new technology, or process improvements, you may be eligible for Research & Development (R&D) tax credits.
- Small businesses can claim tax relief (source: HMRC).
- Even if your project wasn’t successful, you may still qualify.
If you think your business might be eligible, speak to an R&D tax specialist before submitting your claim.
8. Prepare for the New Financial Year
While tax planning for this year is important, it’s also a great time to set yourself up for success in the next financial year.
✅ Automate tax and accounting tasks with software.
✅ Set up a tax savings account to cover future liabilities.
✅ Review your business structure – is it still the most tax-efficient?
✅ Create a financial forecast to plan for upcoming expenses.
9. End of Year Tax Planning: Get Professional Advice
Tax laws change frequently, and getting expert advice can help you save money and avoid compliance issues. Consider consulting a chartered accountant or tax advisor to ensure you’re making the most of available tax reliefs.
🔹 Find a registered accountant via ICAEW
🔹 Always keep up to date with any changes at HMRC – GOV.UK
Final Thoughts
End-of-year tax planning doesn’t have to be overwhelming. By taking action now, you can:
✅ Ensure your tax bill is correct
✅ Maximise available allowances
✅ Ensure compliance with HMRC
✅ Start the new financial year on a strong footing
Need funding for end-of-year expenses or business growth? We offer access to flexible loan solutions tailored to small businesses. Apply today and secure the funds you need before the financial year ends!
