The end of the tax year might feel a long way off, but February and March are actually the most important months for tax planning. Once 5 April passes, many opportunities to reduce your tax bill disappear.
If you want to pay less tax in 2025/26, now is the time to act. Early planning gives you options, flexibility and peace of mind, rather than a rushed scramble in January.
Why Early Tax Planning Matters
Leaving tax planning until the Self Assessment deadline often means missed allowances and higher tax bills. By planning ahead, you can:
• Make full use of available tax allowances
• Spread decisions over time rather than rushing them
• Improve cash flow and avoid surprises
• Reduce stress when January comes around
Simple steps taken before the tax year ends can make a meaningful difference to how much tax you pay.
Pension Contributions, One of the Most Effective Tools
For individuals
Personal pension contributions can reduce your taxable income and keep you out of higher tax bands. Higher and additional rate taxpayers can claim further tax relief through their tax return.
For company directors
Employer pension contributions made by your company are usually allowable business expenses. This means:
• The company saves corporation tax
• You avoid income tax and National Insurance
• Your pension grows tax efficiently
If you have available profits, contributing before 5 April can be a smart move.
Salary vs Dividends: Is Your Mix Still Right?
Many directors use a combination of salary and dividends to extract income from their company. However, what worked last year may no longer be the most efficient option.
Things to review include:
• Your salary level and use of the personal allowance
• Dividend tax rates and thresholds
• Upcoming changes to dividend tax
• The impact of frozen income tax bands
A small adjustment to your salary or dividend strategy before the tax year ends can reduce your overall tax bill in 2025/26.
Make the Most of Your Allowances
Each tax year comes with valuable allowances that cannot be carried forward if unused.
These may include:
• Personal allowance
• Dividend allowance
• Capital gains tax annual exemption
• Pension annual allowance
Using these allowances before 5 April can significantly improve your tax position. Once the deadline passes, unused allowances are lost.
Why February and March Are the Best Times to Act
Waiting until January to do your accounts limits your options. By February and March:
• You still have time to make pension contributions
• Dividends can be planned and declared correctly
• Income can be reviewed before thresholds are crossed
• Records can be checked while changes are still possible
Early action also means time to ask questions, run the numbers and make informed decisions rather than rushed ones.
A Calm, Proactive Approach Works Best
Good tax planning is not about aggressive schemes or last-minute fixes. It is about understanding your position, using the rules properly and planning ahead.
A short conversation now can often save far more than it costs and help you start the new tax year with clarity and confidence.
Let’s Plan Ahead
If you are a business owner, director or landlord, now is the ideal time to review your tax position before the 2025/26 tax year begins.
We support clients across Stevenage, Hertfordshire and beyond with practical, straightforward tax planning advice. If you would like to explore your options or sense check your plans, get in touch, and we will guide you step by step.
Planning early puts you in control. Let’s get started.
Want to know more?
You can contact Hammond-Barr accountants on 01438 281281 or via email at [email protected].
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