As we approach the end of the 2024/25 tax year, many business owners are taking time to check their financial position. This process includes looking at allowances, thresholds and reliefs that could help reduce tax bills and support cashflow. Below, we offer a clear and straightforward checklist to help you address these points effectively.
According to the Department for Business, Energy & Industrial Strategy, small and medium-sized enterprises (SMEs) make up around 99.9% of the UK’s business population. This figure highlights how important it is for businesses of all sizes to be informed about tax planning measures. By following the steps below, you can make sure your business ends the year in a better position.
Review your business structure
It’s wise to take a fresh look at how your business is set up. Many companies start as sole traders or partnerships but later move to a limited company model for added legal protection and tax benefits. If you already operate as a limited company, check whether you still benefit from this format. For example, the way you draw income and manage liabilities can have a big effect on your tax bill.
If you’d like more details on setting up or restructuring a limited company, you can refer to Companies House guidance for current regulations and requirements.
Check personal allowances and income tax thresholds
Income tax allowances and bands in the UK are frozen until 2028, which means the basic personal allowance stays at £12,570 for most individuals. The higher rate threshold remains at £50,270. If you have employees, confirm that their tax codes are accurate to avoid under- or over-paying their income tax.
You may also want to look at whether any staff have changed their working status, for instance from part-time to full-time. Accurate tax codes ensure that you process PAYE (Pay As You Earn) deductions correctly and minimise the risk of year-end corrections.
More information about current income tax rates and thresholds can be found on the HMRC website.
Consider dividend and salary mix
If you run a limited company, think about how you split your income between salary and dividends. For 2024/25, the dividend allowance is £500.
Anything above that limit may attract dividend tax at the appropriate rate. A balanced approach – where you pay yourself a tax-efficient salary and top it up with dividends – can help you make the most of your available allowances.
It’s important to maintain accurate documentation, including board-meeting minutes authorising dividend payments. This paperwork supports compliance with company law and could prove helpful if HMRC decides to review your records.
Make the most of capital allowances
Capital allowances let you deduct part of the cost of certain assets from your profits before you pay tax. For instance, you can claim the annual investment allowance (AIA) on many types of equipment and machinery. By claiming eligible allowances, you could reduce your corporation tax bill.
You also need to track when assets are purchased. Timing these purchases before the end of your accounting period can help you claim allowances sooner. Keep a record of all invoices and documentation to support your claims. If your investment plans are substantial, it might be worth discussing your options with a tax adviser who can outline which assets qualify.
Assess corporation tax rates
The corporation tax main rate can be as high as 25% for companies with profits above £250,000. A lower rate of 19% applies for those with profits at or below £50,000, with a tapered rate between these two thresholds.
Confirm your company’s profit estimates and see whether you fall above or below the small profits threshold. If you’re close to one of these limits, there may be scope to manage your tax bill through the timing of expenses or investments.
We have helped many clients with strategies tailored to their profit levels. Visit our corporate services page to see how we can support you.
Top up pension contributions
Pension contributions offer a practical way to reduce taxable income while building retirement savings. Employers can pay pension contributions directly on behalf of staff, which can count as a tax-deductible business expense. Directors of limited companies often use this method to manage their own pension pots too.
Don’t forget that there are annual allowances that limit how much you can contribute tax-efficiently each year. If you exceed these, you might face a charge. However, you may be able to carry forward unused allowances from previous years, so it’s worth checking your contribution history.
Confirm employment-related benefits
If you offer employee benefits like company cars, private medical insurance or other perks, you must account for these through the payroll or submit annual P11D forms. Paying these benefits in kind can affect your employees’ tax codes as well as your national insurance costs.
Make sure you review your staff benefits and note any changes or additional perks provided during the year. Accurate reporting helps you avoid penalties and keeps your workforce informed about their tax obligations.
Keep track of VAT deadlines
If your business is VAT-registered, confirm that you’ve filed all returns and paid any VAT due on time. Late filing or payment could trigger penalties. You might also want to check if you’re using the best VAT scheme for your turnover and industry. Some businesses may benefit from the flat-rate scheme, while others prefer standard VAT accounting. Check your eligibility each year to ensure you keep administrative work manageable and cashflow steady.
Plan for cashflow and forecast
A good end-of-year review extends beyond tax bills. Aim to build a forecast of your income, outgoings and tax deadlines for the year ahead. A clear view of future obligations helps you set aside funds in good time. It’s also worth reviewing your payment history to see if you can improve your approach to debt collection or supplier negotiations. Good cashflow management can reduce the risk of missing deadlines, which in turn avoids late payment fees and interest.
Stay informed about changes
Tax rules can change with little notice, and staying informed helps you make better decisions. We keep a close watch on updates to allowances, thresholds and administrative requirements. If you need help reviewing your specific tax position, get in touch to discuss your circumstances. Our priority is to find ways to help you stay compliant while making the most of current tax breaks.
Learn more about our tax services on our tax support page and let us know how we can assist.
Conclusion
A well-planned approach to tax matters can reduce stress and protect your business’s financial health. Steps such as reviewing your business structure, making the most of allowances and planning for any changes to your corporation tax or dividend strategy can offer real benefits. Remember to confirm your payroll details, pension contributions and VAT schemes too.
When you address tax considerations early, you help your business maintain stable cashflow and keep up with compliance. You also free up more time and resources to focus on growth. If you’d like more personalised guidance, our team at Thompson Wright is ready to assist.
Speak to our advisers about your end-of-year tax considerations. We can walk you through each step and help you find the best approach for your business. Contact us today.