Tax year-end planning: Practical points for small businesses and the self-employed

If you are self-employed or running a small, limited company, as the tax year-end approaches, you might be wondering if you have done everything you can to reduce your tax bill.

In the weeks prior, there can still be opportunities to make the most of available reliefs, allowances and planning strategies. A proactive approach now could mean paying less tax later, whilst also ensuring you go into the new tax year with your finances, record-keeping and tax strategy in good shape.

In this blog we cover just a handful of the practical planning points to consider ahead of 5 April.

Profit extraction – dividend vs. salary

The optimal remuneration strategy will depend on your personal circumstances, which is why professional advice is crucial, to ensure that you are extracting money from your business in the most tax efficient way.

As a company director, remuneration often involves striking the right balance between PAYE salary and dividends, taking into consideration your personal allowance and applicable tax rates.

Sole traders pay income tax and Class 4 National Insurance Contributions (NICs) on all profits. However, you can still minimise your tax liability by ensuring that all allowable business expenses have been claimed, and pensions contributions maximised.

Pensions – timing, tax reliefs (and new salary sacrifice rules)

As outlined above, sole traders can reduce taxable income by maximising personal contributions, whilst for limited companies the focus will likely be on reducing corporation tax by paying into employee pensions before year-end. Both groups should review contribution limits, timing, and tax reliefs to ensure they’re fully utilising available benefits.

New salary sacrifice rules will also impact employers from 6 April 2029, whereby contributions exceeding £2,000 will be subject to Class 1 National Insurance for both the employer and employee.

Maximise your allowances, or lose them!

Some unused allowances cannot be carried forward, so consider whether you have utilised the likes of your personal allowance, dividend allowance and ISAs, as well as annual IHT and CGT exemptions.

Changes to Business Property Relief (BPR) for Inheritance Tax (IHT) purposes means that succession planning needs to be a careful consideration for business owners. Historically, shares in trading businesses have been free of IHT under this relief, meaning that succession planning and ownership has been of less importance. As of 6 April 2026 this relief is restricted to £2.5m of value (£5m for a couple) meaning that trading businesses with significant value need to undertake careful planning and structuring to protect the family from paying tax on these shares. The use of Trusts and “growth share” schemes can help to limit the impact of these new rules.

MTD for Income Tax Self-Assessment (ITSA) and record-keeping practices

With the first MTD ITSA implementation date taking effect on 6 April 2026, it is important to understand whether the initiative impacts you as the income thresholds that determine inclusion fall in April 2027 and April 2028. Eventually, all landlords, freelancers and sole traders with qualifying income above £20,000 will be required to comply with digital record-keeping and quarterly submissions.

Beyond MTD, reviewing and strengthening record-keeping practices more generally stands you in good stead going forward. A clear understanding of your income and expenses can make planning and decision-making much easier.

Succession and exit planning

Exit planning, when it comes to the sale or closure of the business, is an important step to maximise tax reliefs available and ensure that the net amount received is maximised. Many factors of a deal can impact the amount of tax payable including:

1. Whether it is being structured as a share sale or an asset sale
2. Whether the business contains investment assets – this can restrict the availability of Business Asset Disposal Relief which is a very beneficial capital gains relief
3. Whether any restructuring takes place before the sale – for example, a corporate transaction to demerge any assets that the owner would like to retain after the sale
4. Whether a family Trust fund has been established

Taking advice as early as possible, when it becomes clear that the business will be sold, will ensure that proper steps are taken to maximise value to the owner upon disposal.

Trusted local accountants and tax advisers – Here to help

Year-end is the moment to take stock. Assess your business structure, review allowances and reliefs, and ensure your setup remains tax-efficient and fit for purpose, before the new tax year begins. For support and guidance, or to discuss your requirements, get in touch with us today.