As the tax year comes to an end, now is the time you should be planning your financial and business strategies for 2025/26.
Strategic planning before year-end not only ensures you remain compliant but can also mitigate your tax liabilities, potentially leading to significant savings over the next 12 months.
By addressing your tax considerations ahead of time, you can better manage your cash flow, invest in growth opportunities, and enhance the overall financial health of your business.
Our year-end tax planning checklist for SMEs
We often work with clients to help them prepare for the year-end and their next steps.
Here’s a short checklist of what we suggest:
- Review your financial statements: Ensure all financial records are accurate and up to date. This provides a clear picture of your financial position and aids in identifying potential tax-saving opportunities.
- Assess your capital expenditures: Consider investing in necessary equipment or technology before year-end to take advantage of available capital allowances. The Government's 'full expensing' policy allows businesses to deduct the entire cost of qualifying assets from their profits.
- Optimise employee benefits: Evaluate employee benefit schemes, such as salary sacrifice arrangements, which can reduce both employer and employee National Insurance Contributions (NICs). With the upcoming increase in employer NICs, this strategy can yield substantial savings.
- Utilise available reliefs: Ensure you're claiming all eligible reliefs, such as Research and Development (R&D) tax credits, which can significantly reduce your tax bill if your business engages in qualifying activities.
- Plan for dividends and bonuses: Determine the most tax-efficient way to reward shareholders and employees. Dividends may be more tax-efficient than bonuses, but it's essential to consider the impact on both corporate and personal tax liabilities.
If you’d like to see our complete tax planning checklist for 2025/26, please get in touch with our team – we have a detailed PDF that we can send you.
The anticipated tax changes for 2025/26
The Government's recent budget has introduced several changes that will impact SMEs in the upcoming tax year:
- Increase in employer National Insurance Contributions: From April 2025, employer NICs will rise from 13.8 per cent to 15 per cent, and the threshold at which employers start paying NICs will decrease from £9,100 to £5,000.
- Capital Gains Tax (CGT) adjustments: The main rates of CGT have increased from 10 per cent and 20 per cent to 18 per cent and 24 per cent, respectively. Additionally, the rate for Business Asset Disposal Relief will increase to 14 per cent for disposals made on or after 6 April 2025.
- Changes to Inheritance Tax (IHT) reliefs: From April 2026, Agricultural Property Relief and Business Property Relief will be restricted, with a cap of £1 million on assets qualifying for 100 per cent relief. Assets exceeding this cap will be eligible for 50 per cent relief.
- National Living Wage increase: The National Living Wage will increase by 6.7 per cent to £12.21 per hour from April 2025.This will impact payroll expenses for SMEs employing low-wage workers.
With the changes coming in, tax planning and staying abreast of legislative changes could be challenging – especially if you’re managing payroll as well.
Our tax advisory team specialises in providing tailored tax planning services for SMEs. We can:
- Conduct a comprehensive financial review: Identify areas for tax efficiency and ensure compliance with current regulations.
- Advise on tax-efficient investment strategies: Help you make informed decisions on capital expenditures and other investments.
- Help you implement effective employee benefit schemes: Design and manage benefit programmes that optimise tax savings for both your business and your employees.
- Keep you informed of legislative changes: We provide timely updates and guidance on new tax laws affecting your business.
I advise you don't wait until the last minute to address your tax planning needs.
Our experts are ready to help you and will work hard to position your SME for continued success.
