24/25 Year-End Tax Planning: A Guide For Business Owners

Business owners with a clear tax strategy are better suited for long-term success by using years-end tax planning to their advantage. Proper forward planning can minimise liabilities, access reliefs available and ensure compliance with HMRC.

Here’s a guide to what you need to know and how best to prepare ahead of the 2024/25 tax year end.

What is Year-End Tax Planning?

Tax planning consists of checking your financial position to look for ways to reduce tax liabilities and improve cash flow before the tax year ends. It covers techniques like using allowances, reforming income and costs, and pension contributions. Good tax planning assists businesses to steer clear of last-minute issues and guarantees that they maximise all reliefs/deductions obtainable.

Effective tax planning helps businesses to function efficiently while remaining compliant with tax laws. Mistakes can lead to potentially wasted tax reliefs, meaning you could end up spending more than you need to. Bad financial news can cripple your business as we go into the next financial year so take time to establish your financial fitness and take steps before the end of the remaining year to ensure your business remains financially viable.

When Should you Start Thinking About Year-End Tax Planning?

Realistically, year-end tax planning should be continuous across each financial year. The final quarter (January to March for the UK tax year) is, however, a key time for making strategic choices to optimise funds before the 5 April cut-off date. With early planning, you can take steps to make your business advantageous and to avoid a mad scramble to meet deadlines.

Tax planning early on enables business owners to spread tax liabilities over numerous financial years, instead of running around at the last minute to alter income and expenses. It also makes sure you take advantage of any tax reliefs and allowances before they run out. If left until later, tax planning can lead to opportunities lost, and cash flow concerns, and therefore it is important to allow time in advance.

10 Tips for Year-End Business Tax Planning

Maximise allowances and reliefs

All businesses should be availing themselves of all tax-free allowances available from the Joint Investment Allowance (AIA) for capital spending, to Research & Development (R&D) tax credits. They lower profits subject to tax, and so reduce tax bills.

Effective use of tax reliefs can have a significant impact on your successful financial planning. Businesses that buy energy-saving equipment can be entitled to enhanced capital allowances. Claiming R&D tax credits can be huge for innovative businesses that are developing new products.

Consider deferring income

If you expect a bumper year in profits for this tax year, you may want to push back some of your income until after 5 April 2025. This strategy allows your tax liability to be spread out the years and will keep you within the lower tax brackets.

Businesses that operate on a cash basis may be able to decrease their taxable income in the current financial period by delaying invoices or pushing projects into the next financial year. However, do this very carefully to ensure that this is in-line with your cash flow strategy.

Accelerate expenses

Accelerating deductible expenses, like purchases of office equipment, staff bonuses or fees to professionals, can help reduce your taxable income for the current year, lowering your overall tax bill.

If your business intends to invest in technology, machinery, or training programs, having them purchased before the end of the tax year allows for immediate deductions. This can also be a smart means of reinvesting for growth in your business while lowering tax liabilities.

Make the most of pension contributions

Employer pension contributions are tax deductible and a cost-effective method of mitigating the tax liability of a business whilst also providing a long-term investment which will secure your financial future and that of your employees. With the end of the year fast approaching, make contributions by the end-of-the-year deadline for tax relief.

Not only does contributing to a pension scheme ensure your future, it also opens up tax efficiencies. So, just this one tax shelter can provide significant tax relief for higher-rate tax payers, and make this a great long-term investment strategy.

Review director salaries and dividends

Owner-managed businesses need to ensure dividends and salaries are balanced for an optimum tax position. Salaries are deductible for corporation tax, but dividends are subject to lower rates of personal tax. Year-end review of this structure can help optimise your tax position.

You should also take NICs and changes in dividend tax rates into account. A correctly structured payment plan ensures compliance with the law while maximising take home pay for directors and shareholders.

Claim available capital allowances

Qualifying plant, machinery and vehicle investments can qualify for capital allowances on your taxable profits. Make sure you are claiming the appropriate rates, e.g. full expensing for new purchases and 50% first year allowances for special rate assets.

This is particularly pertinent to businesses with upcoming significant infrastructure upgrades. Maintaining records of capital allowances keeps you in line to claim the tax reliefs that are in place to promote investment in businesses.

Utilise loss relief strategies

If your business has sustained losses, consider the carry back or carry forward of those losses to offset profits and reduce tax liabilities. The new measures allow some companies to offset trading losses against profits from up to three previous years, which can in turn provide valuable tax refunds.

For businesses recovering from slumps in the economy, using loss relief can be an immediate cash injection. If your business anticipates returning to profitability in the near future, learning how to utilise losses to good effect can help offset future tax bills.

Review business structure

The way you operate (sole trader/partnership or limited company) is another big determinant of tax efficiency. This will give you an opportunity to see whether incorporation or restructuring may lead to tax benefits before year-end.

Sole traders earning over certain thresholds, for example, may find that a limited company provides better tax treatment and liability protection. They can also help you determine if restructuring a company makes financial sense.

Make charitable donations

While supporting good causes, donating to registered charities also provides tax relief. For businesses, charitable contributions made before the end of the tax year can be deducted, and lower the corporation tax liability.

If you want to improve your corporate social responsibility credentials while getting potential tax benefits, charitable donations are a great option. Make sure to maintain proper records for contributions to be fully deductible.

Prepare for corporation tax rate changes

Corporation tax rates and allowances may change in the upcoming financial year. Staying informed about legislative updates allows you to adjust your tax strategy accordingly, ensuring compliance and maximising savings.

With tax rules frequently evolving, businesses must stay ahead by planning for potential increases or reductions in tax rates. Consulting with an accountant ensures that you remain compliant while benefiting from upcoming policy changes.

Summary 

Year-end tax planning is essential for business owners who want to minimise tax liabilities and improve financial efficiency. By taking proactive steps, you can maximise available reliefs, optimise cash flow, and avoid last-minute tax burdens.

At Braant, we specialise in helping businesses navigate the complexities of tax planning. Our expert team provides tailored advice to ensure you stay compliant while optimising your tax position. Get in touch with us today to discuss how we can help you prepare for the 2024/25 tax year-end with confidence.