Your 2025/26 Pre-Year End Tax Planning Checklist

A practical guide for small business owners

For many business owners, that date comes around quickly. And every year, we see people miss out on valuable tax allowances simply because they did not review their position early enough.

If you run a limited company, operate as a sole trader, receive dividends, rental income, or have investments and pensions, this checklist is for you.

Tax planning is not about avoiding tax. It is about using the rules properly and making sure you are not paying more than you legally need to.

The key message is simple: act before 5 April. After that, many opportunities are lost.

1. Pensions – One of the Most Powerful Tax Tools

Pension contributions remain one of the most tax-efficient ways to reduce your taxable income.

For 2025/26, the standard annual allowance is £60,000.

You can contribute up to £60,000 into pensions in the tax year, but tax relief on personal contributions is limited to the higher of:

• 100% of your earnings in that tax year, or

• £3,600

Carry forward rules

If you did not use your full £60,000 allowance in the previous three tax years, you may be able to carry forward unused allowances.

In some cases, this can allow a very large one-off contribution. This can be extremely powerful for:

• Directors extracting profits

• Business owners with a strong trading year

• Individuals trying to reduce exposure to higher rate tax or the High Income Child Benefit Charge

Employer contributions

If you run a limited company, employer pension contributions are usually:

• Deductible for corporation tax

• Not subject to income tax or National Insurance

This is often far more efficient than taking additional salary.

Pensions for children

You can contribute up to £2,880 per year for a child, and the government tops this up to £3,600. Over decades, that can grow significantly.

Even though the Lifetime Allowance has been abolished, it is still important to review total pension value and future tax implications carefully.

2. ISAs – Use It or Lose It

Every adult has a £20,000 ISA allowance each tax year.

If you do not use it by 5 April, you lose it forever.

ISAs allow:

• Tax-free growth

• Tax-free withdrawals

• No impact on dividend or capital gains allowances

Your spouse also has their own £20,000 allowance.

Junior ISAs

You can invest up to £9,000 per child per tax year into a Junior ISA. This grows tax-free until they turn 18.

Lifetime ISA

If you are under 50 (and opened it before age 40), you can contribute up to £4,000 per year and receive a 25% government bonus.

3. Dividends and Company Profit Planning

For limited company directors, pre-year end planning is critical.

Dividend allowance

The dividend allowance is now just £500 per year. Make sure you use it if appropriate.

Defer income

If your income is close to:

• £50,270 (higher rate threshold)

• £100,000 (personal allowance taper)

• £60,000 (Child Benefit charge zone)

You may benefit from delaying dividends or bonuses until the next tax year.

Timing matters.

4. Rental Income Review

If you receive rental income:

• Make sure all legitimate expenses are claimed

• Review mortgage interest treatment under Section 24 rules

• Consider whether income is split efficiently between spouses

Transferring a property interest to a lower-earning spouse can reduce overall tax, but this must be structured correctly.

5. Gifting and Inheritance Tax Planning

The tax year end is a good time to review gifting.

Annual exemption

You can give away £3,000 per year free of inheritance tax.If you did not use last year’s allowance, you may be able to carry it forward once.

Small gifts

You can give up to £250 per person to unlimited individuals each year.

Wedding gifts

You can gift:

• £5,000 to a child

• £2,500 to a grandchild

• £1,000 to anyone else

Gifts from surplus income

Regular gifts made from excess income can fall outside your estate for inheritance tax, provided:

• They are affordable

• They are regular

• They are properly documented

6. Gift Aid and Charitable Giving

If you donate to charity under Gift Aid:

• You can extend your basic rate band

• Higher rate taxpayers can claim additional relief

• Donations can reduce inheritance tax exposure

Donating shares to charity can also eliminate capital gains tax on those shares.

7. Marriage Allowance and Spousal Planning

If one spouse earns below the personal allowance threshold, up to 10% of the personal allowance can be transferred to the higher-earning spouse.

This is often overlooked.

Spousal planning generally remains one of the simplest and most effective tax strategies.

8. Savings and Interest

Check your Personal Savings Allowance:

• £1,000 for basic rate taxpayers

• £500 for higher rate taxpayers

• £0 for additional rate taxpayers

9. Childcare and Education Planning

If you use Tax-Free Childcare:

• The government adds 20% to contributions

• Up to £2,000 per child per year

Also review income thresholds carefully. Crossing £100,000 can mean losing certain childcare support.

If you are building funds for school or university fees, consider tax-efficient structures early.

10. National Insurance and State Pension

Check your National Insurance record.

If you have gaps due to:

• Career breaks

• Maternity leave

• Illness

• Time abroad

You may be able to make voluntary contributions to increase your future State Pension entitlement.

11. Company Benefits and Salary Sacrifice

Salary sacrifice arrangements can reduce tax and National Insurance on:

• Pension contributions

• Electric vehicles

• Cycle-to-work schemes

For company directors, structuring benefits properly can significantly reduce overall tax.

12. Review Your Tax Code

Incorrect tax codes are common.

If your circumstances have changed, your PAYE code may be wrong, which can lead to:

• Overpaying tax

• Unexpected underpayments

Review this before year end.

13. Offshore and Investment Review

If you hold offshore investments, ensure:

• They are correctly reported

• You understand the UK tax treatment

Different investments are taxed in different ways. Efficiency depends on your overall income level.

A Final Word

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on your individual circumstances.

Pre-year end tax planning is not about rushing into decisions. It is about reviewing your position early, understanding your numbers, and making informed choices before 5 April.

As a small business owner, you work hard for your profits. The least you can do is ensure you are keeping as much of them as legally possible.