Bedford Accountants Reveal How to Cut Your Tax Bill Before the Year Ends

Introduction

With the UK tax year running from 6 April to 5 April, the period leading up to the year end is a crucial window for proactive tax planning. Whether you are a small business owner, a sole trader, a landlord or an employee earning additional income, the actions you take now can reduce your tax bill and keep more of your hard earned money in your pocket.

In this article I explain, in clear terms, the tax planning strategies that matter in the last few weeks of the year. I will discuss how allowances work who can benefit from different reliefs how to accelerate or defer income and expenses and, importantly, how to act within HMRC rules to avoid unexpected liabilities. You will leave with practical steps you can take now and an understanding of why timing matters so much in tax planning.

At Towerstone we help Bedford clients through our accountancy services in Bedford so they can make better decisions with less stress. We created Bedford Accountants Reveal How to Cut Your Tax Bill Before the Year Ends to help you get practical ideas to reduce your tax bill lawfully and learn what to plan before the year end rush.

Why Year End Planning Matters

I often see business owners and individuals delay tax planning until after the year end only to discover they missed opportunities that could have reduced their liability. The UK tax system is built around allowances reliefs and thresholds that reset each year. If you do not use them in the year they arise they are lost.

For example if you are self employed and you make a purchase that qualifies as a capital allowance before the year end you can reduce your taxable profit in that year. Delay it until next year and you may pay more tax now and defer relief into a year where your income might be lower and the relief worth less to you.

Year end tax planning is not about aggressive avoidance or bending rules. It is about understanding the mechanics of the system and using available reliefs and allowances in the most efficient way.

Understanding Your Allowances and Reliefs

Personal Allowance

Most individuals have a personal allowance. This is the amount of income you can receive tax free before you start paying income tax. For the 2025 26 tax year the personal allowance is £12,570 for most taxpayers.

If your income is below this you pay no income tax and there is no benefit in trying to defer income. But if your income is above this threshold every pound of income over the allowance is taxed into higher bands. Planning to ensure you fully utilise your personal allowance can save tax.

Dividend Allowance

If you receive dividends the dividend allowance lets you receive a set amount tax free. For 2025 26 this is £1,000. Dividends above this are taxed at rates depending on your tax band. If you have a spouse or civil partner who is a shareholder consider whether it makes sense to shift some dividends to them if they have unused allowances.

Capital Gains Tax Annual Exempt Amount

The annual exempt amount for capital gains tax is currently £6,000 for individuals. Gains above this are taxed at rates depending on the asset type and your income band. If you are considering selling an asset this year and the gain will exceed the exemption consider whether you can defer or accelerate disposals to make use of allowances.

Marriage Allowance

Some couples can transfer part of their personal allowance between spouses to reduce their tax. If one spouse earns less than their personal allowance and the other is in the basic rate band this can reduce tax by up to several hundred pounds a year. You can apply for this allowance online before the year end to benefit this tax year.

Business Owners and the Importance of Timing

As a business owner I know that cash flow and tax planning are often at odds. You want to keep money in your bank account but you also want to claim legitimate deductions to reduce taxable profits. Here are the key areas where timing matters most.

Claiming Business Expenses

For sole traders and partners in a partnership business expenses can be deducted from income provided they are wholly and exclusively for the purpose of the business.

If you know you will incur certain expenses that qualify for deduction consider making those purchases before the year end. This could include items such as office equipment software subscriptions professional fees and repairs.

There are cases where delaying expenditure into the next year could be better if you expect profits to be lower next year and the relief would be more valuable. This is a point I will return to later.

Capital Allowances

For many businesses capital allowances replace the old system of writing down allowances for plant and machinery. The Annual Investment Allowance (AIA) lets you deduct the full cost of many qualifying assets in the year you buy them. The AIA limit is currently £1 million and it resets each accounting period rather than each tax year.

If your profits for the year are strong and you have not used your AIA limit consider purchasing qualifying assets before the year end to reduce this year’s profit. Remember capital allowances are subject to specific rules and not all assets qualify.

Pension Contributions

Business owners can make pension contributions through the company or personally. These contributions can reduce taxable profits for the company and provide relief against personal income tax.

Contributions must be made by 5 April to count for the 2025 26 tax year. If your company has profits it may be tax efficient to pay employer contributions up to the level that reduces profits into lower rate bands.

Bear in mind there are annual limits on pension contributions that attract tax relief. The standard annual allowance is £60,000 but this can be tapered for high earners. Professional advice is often essential here to strike the right balance.

Making Use of Losses

If your business has made a loss this year or in prior years do not overlook the value of those losses. Losses can often be carried back to reduce tax in earlier years or carried forward to offset future profits.

For example if you have a loss in 2025 26 and you made profits in 2024 25 you might be able to carry the loss back and claim a repayment of tax paid in that earlier year. There are specific rules that govern this process and deadlines for claims so it is important to act before the year end.

Dividend Planning for Shareholders

Many small company owners draw income through dividends. Dividends are not deductible for corporation tax purposes so planning matters.

If you are close to crossing a threshold into a higher dividend tax rate consider the timing of dividend payments. For example a dividend paid just before the year end might push you into a higher rate band costing more tax than waiting until after 6 April.

Often this requires looking at your personal income profile and forecasting what your total income will be across salary pension and dividends.

VAT Considerations

For VAT registered businesses year end is not always aligned with the VAT period but planning still matters.

If you are on the standard VAT scheme consider whether delaying or accelerating sales or purchases around the year end could affect your VAT liability. This requires careful cash flow forecasting as VAT is typically due within a month of the VAT quarter end.

If you are on the Flat Rate Scheme the effect of purchases on VAT payable is different. Flat Rate businesses pay a set percentage of turnover and typically cannot reclaim VAT on purchases so accelerating purchases does not reduce VAT payable in the same way. In these cases focus may be on aligning purchases that increase business efficiency rather than VAT savings.

Employer National Insurance Contributions (NIC)

If you employ staff and pay employer Class 1 NIC you should know that the employment allowance lets you reduce your liability up to a specific amount each year. Many small employers qualify for this allowance which is currently £5,000.

If you have not utilised the employment allowance fully consider whether you can bring forward payroll costs or bonus payments before the tax year end to make the most of the relief.

For example a December or March bonus paid before 5 April can use up the employment allowance if you have not already done so.

Planning for Landlords

If you are a landlord your tax planning needs a different focus. Rental income is taxable and you can deduct allowable costs such as repairs and letting agent fees. You cannot deduct mortgage interest in full but you receive a tax credit based on a basic rate of tax.

With the year end approaching consider whether you have incurred allowable expenses that you can settle before the year end. For example renewing a roof fixing a heating system or replacing floor coverings may be deductible.

Similarly if you are planning to sell a property and will realise a gain review how the timing of that sale interacts with your annual capital gains exemption.

Charitable Giving

If you make charitable donations through Gift Aid the donation is grossed up for tax purposes which means higher rate taxpayers can claim relief on the difference between the basic rate and their marginal rate.

To benefit in this tax year the donation must be made before 5 April. If you have been considering donating to charity this is an easy and effective way to reduce taxable income while supporting causes you care about.

ISAs and Tax Efficient Savings

Individual Savings Accounts (ISAs) remain one of the simplest tools for tax efficient saving. The annual ISA subscription limit is currently £20,000 for the 2025 26 tax year.

If you have not used your ISA allowance for the year consider making contributions before 5 April. Any income or gains within the ISA are tax free. This is often overlooked by people who assume ISAs are only for savings and not for serious investment planning.

I often encourage clients to think of their ISA allowance as an annual opportunity to shelter future growth from tax. Once the year end has passed the unused allowance cannot be carried forward.

Making it Practical: A Real World Example

Let me illustrate how these points can come together in practice. Consider Jane a freelance graphic designer in Bedford. Jane’s accounting year matches the tax year and she expects a profit of £70,000 in 2025 26.

She has not yet made pension contributions this year. She is close to the higher rate threshold and stands to pay a significant amount of tax on her income. With the year end approaching she and I reviewed her position.

We agreed she could make a personal pension contribution of £10,000 before 5 April. This reduced her taxable income and meant she moved more of her earnings into the basic rate band. She also purchased new design equipment qualifying for the Annual Investment Allowance.

By making these moves before the year end Jane reduced her taxable profits and benefited from immediate tax efficiency while also investing in her business future.

Common Mistakes to Avoid

Leaving It Too Late

Procrastination is the bane of tax planning. Once the year end has passed you cannot go back and claim allowances you missed. The rules around reliefs and allowances are fixed so acting early gives you options.

Ignoring Cash Flow

Tax planning is not simply about reducing a tax bill at all costs. You must balance tax efficiency with maintaining sufficient cash flow to operate your business and meet personal needs.

Misunderstanding Reliefs

Not all reliefs apply automatically. For example capital allowances have specific qualifying conditions and some schemes such as Entrepreneurs Relief (now Business Asset Disposal Relief) have strict criteria including minimum ownership periods.

DIY Without Professional Input

While many simple strategies are easy to apply there is risk in assuming reliefs apply when they do not. Professional advice can prevent costly errors and ensure that your planning is compliant with HMRC requirements.

What to Do Now

As we approach 5 April take these steps:

• Review your expected income and profits for the year.

• List tax allowances and reliefs you have not yet used.

• Consider timing of income and expenditure.

• Look at pension contributions especially if you are a business owner.

• Assess whether capital purchases before year end make sense.

• Speak with your accountant or tax adviser to validate the strategy.

Tax planning is not a once a year exercise. Annual review builds understanding and allows you to improve year on year.

Conclusion

Cutting your tax bill before the year end is entirely possible with thoughtful planning and timely action. The UK tax system offers numerous allowances and reliefs that can reduce liabilities but you must act within the relevant deadlines and rules.

Whether you are managing profits in a business looking to use your personal allowances or planning a capital gain the period before 5 April is your last chance each year to make the most of tax planning opportunities.

I encourage you to take a structured approach review your financial picture and act now rather than waiting until it is too late.

If you need tailored advice speak to a qualified accountant who can guide you through the options that are right for your circumstances.

To continue reading you may find Avoid These Costly VAT Errors: Bedford Accountants Expose Common Pitfalls and How to Choose the Right Accountant for Your Business in Bedford helpful. You can also browse all related guidance in our Bedford Accounting Hub.