April 5th – it’s an important date for business owners. It’s the end of the tax year. There are all kinds of housekeeping tasks to complete before the deadline, and it’s also a great opportunity to review the past year and make some changes.

With only a few months to go, here are some key steps business owners might need to take.

1 Review how you draw an income from the business

Once your business is profitable, you’ll need to consider how you draw an income from the company, and there are several options. If you run a limited company, you could:

• Pay yourself a salary
• Take dividends
• Benefit from employer pension contributions.

Most business owners opt for a combination of all three of these options, and when deciding on the balance, you need to consider the tax you might pay.

For instance, if you take a salary, you’ll pay Income Tax on your earnings. Meanwhile, you’ll pay Dividend Tax on any dividends. In both cases, the rate of tax you pay depends on your Income Tax bracket.

Then you have pension contributions. You benefit from tax relief on these contributions and won’t pay tax on any growth you generate from money in your pension. This means pension contributions could be more tax-efficient than a salary or dividends, but you can’t normally access funds in your pension until you’re 55 (rising to 57 from April 2028).

It’s also important to note that salary and pension contributions are allowable business expenses, which could reduce your Corporation Tax bill. Dividends, on the other hand, are paid from the company’s profits after Corporation Tax.

As you can see, there is a lot to consider, and it’s a complicated equation to get right. That’s why you may want to review how you’re drawing an income before the tax year ends. We can support you with this to ensure you’re being as tax-efficient as possible.

2 Check if you’ve recorded all allowable business expenses

Your salary and pension contributions aren’t the only allowable business expenses that could reduce your Corporation Tax bill.

Any spending that is “wholly and exclusively for business purposes” normally counts. This includes all the expected costs such as staffing expenses, office rent, and utilities.

However, you might forget expenses such as:

• Business travel costs
• Working from home costs
• Subscriptions to professional bodies.

These small costs add up, so make sure you record everything to input on your next tax return and bring down your Corporation Tax bill.

3 Consider bringing forward planned business investment

The end of the tax year is a good opportunity to check how much cash you have in the business, and whether you’re holding too much. In some cases, spending a bit of additional cash could be a useful way to reduce your taxable profits.

If you’re planning to invest in new equipment or upgrade your office in the future, you could bring that spending forward to the current tax year. That way, you can use surplus cash and potentially reduce your Corporation Tax bill by spending money you were going to spend later anyway.

4 Chase invoices and tidy up paperwork

You’ll want to start the new tax year organised, so now is a good time to chase up any unpaid invoices. More importantly, you may need to get your paperwork in order, so you have all the relevant details ready to file your tax return.

If you spend some time gathering receipts and relevant paperwork outlining all your spending and revenue in the current tax year, you’ll make life a lot easier for yourself later.

5 Use important personal allowances and exemptions before you lose them

There are a lot of business-related tasks as the tax year comes to a close, but you might want to focus on your personal finances, too. It’s important to save and invest for the future, and there are several tax allowances and exemptions that help you reduce the tax you pay when building wealth.

Many of these reset at the start of a new tax year, so you may need to take advantage of opportunities for tax efficiency while you still can. For example, you might want to use your:

• Pension Annual Allowance (£60,000) – The total amount you can contribute to your pension tax-efficiently each year
• ISA allowance (£20,000) – The annual amount an individual can contribute to ISAs, which allow you to grow your money without Income Tax, Dividend Tax, or Capital Gains Tax (CGT)
• CGT annual exempt amount (£3,000) – The amount of capital gains you can make each year without paying CGT
• Annual gifting allowance (£3,000) – The value of gifts that are automatically free from Inheritance Tax (IHT) each year.

If you are unsure about any of these allowances and exemptions, we can help you understand them and make the most of all available opportunities to mitigate tax before the end of the tax year.