Year-end tax planning is essential for UK companies to optimise their tax liabilities and ensure financial efficiency. Here are some strategies to consider:
1. Review Your Company’s Tax Position: It’s important to understand where your profits fall. Profits under £50,000 are taxed at 19%, while profits over £250,000 are taxed at 25%. If your profits fall between these thresholds, you’ll pay a marginal rate.
2. Utilise Capital Allowances: Take advantage of the Annual Investment Allowance (AIA), which allows you to claim 100% tax relief on qualifying equipment purchases up to £1 million. Timing your purchases just before the year-end can accelerate your tax relief.
3. Maximise Pension Contributions: Employer pension contributions are tax efficient as they provide tax relief and are not subject to National Insurance contributions. Consider making larger contributions before the year-end if you have sufficient profits.
4. Plan Dividend Payments: You should review your accounts to see what level of dividends can be taken out, as dividend tax is increasing by 2% in April 2026. You should also assess whether taking out the full amount available is the correct strategy, as the personal dividend allowance is currently only £500.
5. Claim R&D Tax Relief: Research and Development (R&D) tax relief is available for a wide range of activities, not just for tech companies. Ensure you are claiming all eligible R&D expenses.
6. Review Director Loans: If directors have borrowed money from the company, ensure these loans are repaid within 9 months of the year-end to avoid a 33.75% corporation tax charge. This rate is also increasing to 35.75% from April 2026.
7. Optimise Capital Gains: Plan the timing of asset sales to manage capital gains tax efficiently. Consider any changes in capital gains tax rates and allowances.
Implementing these strategies can help your company navigate the complexities of tax planning and position it for future growth.