The clock may show plenty of months left until 5 April 2026, but the most effective year-end planning is rarely a last-minute dash. Whether you’re a director-shareholder deciding how to draw income, a sole trader keeping receipts in shoeboxes or a higher-rate taxpayer wondering if the frozen personal allowance will bite, smart preparation now can trim next spring’s tax payment and free up cashflow for growth.

Why act early? First, several allowances are shrinking. The dividend allowance is down to only £500 in 2025/26, half the level of 2024/25 (HMRC, 2025). Second, continuing fiscal drag means more people fall into higher tax bands each year. The Office for Budget Responsibility forecasts that tax will reach 37.7% of gross domestic product (GDP) by 2027/28 – its highest level since the 1940s (OBR, 2025). Finally, the self-employed population is on the rise again, now at 4.338m roles (ONS, 2025), so competition for reliefs such as the £1m annual investment allowance (AIA) will intensify.

In this blog, we outline practical, HMRC-approved steps you can still take before the year end. Each tactic is grounded in current 2025/26 legislation and is designed to work whether you run your business through a company or trade personally. For tailored advice, do speak to us – our tax team at Thompson Wright is already preparing client checklists.

Maximise pension contributions before 5 April

Pension payments remain one of the most generous reliefs on offer. You can normally contribute up to £60,000 or 100% of UK earnings (whichever is lower) and receive tax relief at your marginal rate. Company owners can also make employer contributions, claiming corporation tax relief and avoiding national insurance.

• Carry-forward: Unused annual allowance from the previous three years can still be brought forward if your earlier pension inputs were below the limit.
• Taper check: If adjusted income exceeds £260,000, the allowance tapers down to a minimum of £10,000.
• Timing point: Employer contributions only attract relief when paid, so get funds across before 5 April.

Time dividend payments wisely

Frozen income tax thresholds mean more dividends now fall into higher bands. With only £500 tax free, precise timing is essential.

• Cashflow forecast: Estimate company profits and distributable reserves for the full accounting period, not just the tax year.
• Band planning: Where possible, declare dividends so that they land in years when you or your spouse have headroom in the basic rate band (8.75%).
• Children’s shares: Transferring shares to adult children can allow them to use their personal and dividend allowances, but watch the settlement rules.

Use the £3,000 capital gains allowance

The capital gains tax (CGT) annual exempt amount has fallen to £3,000 for individuals in 2025/26 – a sharp cut from £12,300 just three years ago.

• Bed and ISA: Sell and immediately repurchase investments inside an ISA to shelter future growth.
• Spousal transfers: Gifts between spouses are CGT-neutral, allowing you to access another £3,000 allowance.
• Crystallise losses: Realising losses before the year end can offset current or future gains.

Claim every allowable business expense

For sole traders and partnerships, profit is taxed on what’s left after legitimate costs. For companies, corporation tax relief is equally valuable. Typical year-end actions include the following.

• Pre-year-end spending: Office equipment, software subscriptions and marketing paid before 5 April accelerate relief.
• AIA planning: Purchases of qualifying plant and machinery up to £1m benefit from 100% deduction in the year of purchase.
• Staff bonuses: Contractually due bonuses are deductible when accrued, even if paid after the year end, provided they are paid within nine months of the accounting period end.

Year-end planning checklist for small companies

• Pension contributions: Make employer payments to directors before 5 April.
• Salaries vs dividends: Consider setting a director’s salary at or just above the £6,500 lower-earnings limit to secure state-pension credit; remember that employer national insurance contributions (NICs) start once earnings exceed the £5,000 secondary threshold.
• Capital investment: Use AIA or consider full expensing for main-rate assets.
• Research-and-development claims: Ensure records meet the new digital submission standards introduced in April 2025.
• Loss carry-back: If current-year losses are expected, accelerate income into the current year to maximise relief against earlier profits.

Make the most of ISA and savings allowances

The £20,000 ISA allowance remains untouched for 2025/26. Moving cash or shares into an ISA shelters both income and gains.

• Couples: Together you can shelter £40,000 each year.
• Flexible ISAs: Withdrawals can be replaced in the same year without affecting the allowance.
• Lifetime ISA: Up to £4,000 per person attracts a 25% government bonus, useful for first-time buyers under 40.

Review gifts and inheritance tax reliefs

With the nil-rate band frozen at £325,000 until at least April 2028, early gifting can still reduce the estate.

• Annual gifts: Use the £3,000 annual exemption and carry forward last year’s if unused.
• Small gifts: Up to £250 per person per tax year are inheritance tax(IHT)free.
• Regular gifts out of income: Documented, habitual gifts can be immediately exempt.

Work with our team early

Tax planning is rarely one size fits all. For example, a director facing the high-income child benefit charge may prefer salary deferral over dividends, while a sole trader approaching the VAT threshold needs different tactics. Engaging with our team early unlocks options that disappear once 5 April passes. Our year-end tax planning service provides the following.

• Tailored forecasting.
• Digital record-keeping support ensures compliance with Making Tax Digital (MTD) extensions.

Ready to reduce your tax bill?

Effective year-end planning is not about chasing loopholes – it is about using the allowances and reliefs that Parliament has already set aside for you. By acting before 5 April you turn what can feel like an abstract set of rules into real savings that stay in your pocket and bolster your working capital. A well-timed pension contribution can reclaim higher-rate tax, while careful dividend scheduling may save thousands in the current freeze on thresholds. Even small steps – crystallising a modest capital loss, moving shares into an ISA or bringing forward the purchase of vital equipment – add up when they are linked to a clear tax forecast.

The common thread is timing. Leave it until after the tax year closes and many opportunities disappear overnight. That is why we encourage clients to meet us well before the deadline. We review profits, personal income and upcoming investments, then craft a bespoke plan that balances tax efficiency with commercial goals and family needs.

If you would like tailored, plain-English guidance, contact us today – we will ensure your year-end planning works as hard as you do and your next tax bill is as light as possible.