There’s Still Time for Some Year-End Tax Planning (Yes, Really)

With the tax year end approaching, now is a good moment to pause, take stock, and make sure you’re not leaving perfectly legal tax reliefs on the table. No dramatic overhauls required, just a sensible check-in while there’s still time to act.

If any of the points below ring a bell, it’s worth a conversation.

Savings: Making Idle Cash Work a Bit Harder

If you’re sitting on spare cash, one of the simplest planning steps is to make full use of your ISA allowance for the 2025/26 tax year. The current limit is £20,000 per person, and once the tax year closes, any unused allowance disappears quietly into the void.

If you’re aged 18–39, a Lifetime ISA may also be worth a look. You can save up to £4,000 a year (until age 50), and the government adds a 25% bonus, up to £1,000 annually. The catch (there’s always a catch): you must open the account — and make your first contribution — before you turn 40.

That £4,000 counts towards your overall £20,000 ISA limit, but the bonus usually makes the maths fairly compelling.

Pension Planning: Still One of the Heavyweights

Pensions remain one of the most tax-efficient planning tools available, especially as we approach 5 April 2026.

Under current rules, the government effectively adds 20% tax relief to personal pension contributions. So a £4,000 contribution is topped up to £5,000. Higher-rate taxpayers can usually reclaim a further £1,000 through their tax return, bringing the net cost down to £3,000.

If your income sits between £100,000 and £125,140, pensions become even more powerful. Contributions reduce your adjusted net income, helping preserve your personal allowance — which otherwise disappears at a painful rate. In this band, pension contributions can deliver an effective 60% tax saving, which is about as close to a tax “sweet spot” as you’ll find.

Timing matters here, and so do annual contribution limits. This is very much an area where personalised advice pays for itself.

Dividends and Company Loans: A Clock Is Ticking

From 6 April 2026, dividend tax rates increase by two percentage points:

• Basic rate: 8.75% → 10.75%

• Higher rate: 33.75% → 35.75%

• Additional rate: unchanged at 39.35%

The higher rate increase will also feed into the penalty tax on certain company loans to shareholders made on or after that date.

As we approach the end of the tax year, it may be worth reviewing the timing of dividend payments and company loans, particularly where flexibility exists. Taking action before April 2026 could mean locking in lower rates — but only if it fits your wider financial picture.

This is one to discuss before doing anything irreversible.

Capital Allowances: Timing Is Everything

If your business has a 31 March or 5 April year end, the tax year end matters a lot for capital allowances.

To qualify, expenditure must be incurred and brought into use by the end of the accounting period — ordering equipment is not enough on its own.

Key points to note:

• The Annual Investment Allowance (AIA) gives a 100% write-off on up to £1 million of new and used equipment per year

• Cars are excluded, except for new zero-emissions vehicles, which qualify for 100% relief

• Limited companies can also claim full expensing on most new (not second-hand) equipment, with no upper limit

• From 1 January 2026, a new 40% first-year allowance becomes available for qualifying assets — particularly helpful where the AIA has already been used

Hire purchase assets can also qualify based on the full cost, provided they’re in use by year end — even if payments continue later.

Capital Gains Tax: Use It or Lose It

You may want to consider bringing forward capital gains before 6 April 2026, especially if you haven’t used your £3,000 CGT annual exemption for 2025/26.

There’s also a future rate increase worth noting. CGT rates for gains qualifying for Business Asset Disposal Relief and Investors’ Relief rose to 14% in April 2025 and are set to increase again to 18% from April 2026.

Where disposals are already on the horizon, timing could make a meaningful difference.

Voluntary National Insurance: Filling the Gaps

To receive the full State Pension, you generally need 35 qualifying years of National Insurance contributions.

If your record has gaps — often due to career breaks or self-employment — it’s usually possible to fill them by paying Class 3 voluntary NICs, currently £17.75 per week (£18.40 from 2026/27).

Normally, you can only go back six years, which means 2019/20 gaps must be addressed by 5 April 2026. After that, the door closes.

Inheritance Tax Reliefs: A Welcome Change of Direction

The government has revised its proposed reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR).

From 6 April 2026, the cap on 100% relief will be £2.5 million, rather than the £1 million originally announced. Better still, unused allowances will now be transferable between spouses or civil partners.

Taken together, this means qualifying couples may be able to pass on up to £5 million of business and agricultural assets free of IHT — a significant shift from the original proposals.

MTD for Income Tax: Nearly Here

Making Tax Digital for Income Tax becomes mandatory from 6 April 2026 for sole traders and landlords with combined turnover over £50,000 in the 2024/25 tax year.

More taxpayers will follow in 2027 and 2028.

We’ve already helped many clients prepare, and while it’s a change, it doesn’t have to be a painful one — provided planning starts early rather than at the last minute.

Employment Expenses: Working From Home Gets Tighter

From 6 April 2026, employees will no longer be able to claim tax relief for home-working costs unless reimbursed by their employer.

The £6-per-week relief (or higher actual costs) remains available for 2025/26, but only where home working is contractually required.

From 2026/27, employer reimbursements will be tax-free — provided the contractual requirement is in place.

VAT and the Supreme Court: Hotel La Tour Loses

In a recent decision, the Supreme Court ruled against Hotel La Tour Ltd, confirming that input VAT on professional fees linked to an exempt share sale cannot be reclaimed — even where the sale funds future taxable activity.

The judgment reinforces HMRC’s long-standing view on “direct and immediate links” and closes the door on a planning argument that had previously found some support in the lower tribunals.

The Takeaway

There’s no need for panic — but there is plenty of scope for sensible planning before the tax year ends. A few well-timed decisions now can prevent rushed (and often less efficient) choices later.

If you’d like to talk through what any of this means for you or your business, just get in touch. We’re here — spreadsheets, deadlines, and all.

Categories: Positive Accountant