Year-End Tax Planning Checklist

Year-end tax planning means reviewing your financial position before the end of your accounting period and taking legitimate steps to minimise the tax you pay. It is not about aggressive avoidance schemes. It is about making sure you claim everything you are entitled to, time your income and expenditure sensibly and structure your affairs efficiently.

The key principle: once your year end passes, most opportunities are gone. Tax planning works when you act before the year end, not after.

When to start

Start your year-end tax planning at least two to three months before your accounting year end. This gives you time to review your position, take action and ensure transactions are completed and recorded before the cut-off date.

For companies with a 31 March year end (the most common in the UK), this means starting in January. For sole traders and partnerships with a 5 April year end, the same timing applies.

See our guide to year-end accounts for the full year-end process.

Corporation Tax planning

Timing of income and expenditure

If your company’s profits are close to a tax band threshold, timing can make a meaningful difference:

If your profits are just above £50,000, accelerating a planned expense into the current year (or deferring income to the next) could keep you in the 19% small profits band.

Note: the thresholds are divided by the number of associated companies plus one. If you control two companies, the small profits threshold is £25,000 each.

Capital allowances

Capital allowances let you deduct the cost of business assets from your taxable profits. The main allowances to review at year end include:

If you are planning to purchase equipment, vehicles or other qualifying assets, completing the purchase before your year end claims the allowance a full year earlier. For more detail, see our guide to capital allowances .

Research and Development (R&D) tax relief

If your company spends money on qualifying R&D activities, you may be able to claim:

• SME R&D relief – an additional 86% deduction on qualifying expenditure (or a 10% credit for loss-making companies under the merged scheme from April 2024)
• R&D Expenditure Credit (RDEC) – a 20% above-the-line credit for larger companies

Review your year’s activities for qualifying expenditure before the year end. R&D does not need to involve laboratories or scientists – it covers any project that seeks to resolve scientific or technological uncertainty.

Sole trader and partnership planning

Personal allowance and tax bands

If your income is close to a band boundary, consider whether deferring income or accelerating expenses could keep you in the lower band.

Pension contributions

Pension contributions reduce your taxable income and are one of the most powerful tax planning tools available:

• Annual allowance: £60,000 (or 100% of earnings, whichever is lower)
• Carry forward: unused allowance from the previous three years can be carried forward
• Employer contributions (for company directors): fully deductible for Corporation Tax and not subject to National Insurance

For a company director, making an employer pension contribution before the year end reduces the company’s Corporation Tax bill and avoids the NIC cost that would apply to salary or dividends.

Salary and dividends (directors of limited companies)

The optimal salary and dividend split for directors changes each year as tax rates and NIC thresholds adjust. For 2024/25:

Taking a low salary and the rest as dividends is tax-efficient because dividends are not subject to National Insurance. Review the optimal split with your accountant before the year end.

Checklist: actions before year end

Expenditure and deductions

• Review planned purchases – bring forward any equipment, vehicle or technology purchases to claim capital allowances this year
• Prepay allowable expenses – annual software subscriptions, insurance premiums, professional memberships
• Write off bad debts – review aged debtors and formally write off invoices that are genuinely uncollectable
• Pay outstanding supplier invoices – if using cash basis accounting, the deduction is only available when you pay
• Make pension contributions – maximise employer and personal contributions within the annual allowance

Income and timing

• Review invoicing timing – if profits are near a tax band threshold, consider whether delaying an invoice by a few days shifts income into the next period
• Declare dividends – if appropriate, declare interim dividends before the year end to manage the personal tax position
• Review Corporation Tax instalments – if your profits have changed significantly, adjust your quarterly instalment payments

Assets and inventory

• Stocktake – count and value your stock; write down any obsolete, damaged or slow-moving items
• Review fixed assets – identify any assets that have been scrapped, sold or are no longer in use and claim the balancing allowance
• Check hire purchase agreements – capital allowances are available from the date the asset is brought into use, not when the final payment is made

Administrative

• Reconcile all bank accounts – ensure bank reconciliations are complete and up to date
• Reconcile VAT – check that your VAT returns agree with your accounting records
• Review accruals and prepayments – ensure expenses are allocated to the correct period
• Check intercompany balances – if you operate more than one company, reconcile intercompany accounts
• Review loan agreements – ensure interest deductions are correctly accrued

Employment and NIC

• Pay staff bonuses before the year end if you want to deduct them in this period
• Review benefits in kind – check whether any employee benefits need to be reported or adjusted
• Check NIC employment allowance – eligible employers can claim up to £5,000 reduction in employer NIC
• Consider salary sacrifice arrangements – pension salary sacrifice saves both employer and employee NIC

What not to do

• Do not create artificial transactions solely to reduce tax – this crosses the line from planning to avoidance
• Do not delay invoicing beyond what is commercially reasonable – HMRC can challenge contrived timing
• Do not make pension contributions that exceed the annual allowance – the tax charge eliminates the benefit
• Do not ignore the personal allowance taper – income above £100,000 gradually removes your personal allowance at a rate of £1 for every £2, creating an effective 60% marginal rate between £100,000 and £125,140