Beat the tax clock! Make every allowance count

It’s nearing the end of the tax and financial years for both individuals and businesses which is a great time to be turning attention to careful planning. Both businesses and individuals can take note of several key allowances and reliefs to consider before the end of the tax year or accounting period – as well as a few things to plan for next year too!

Here are our key areas to consider:

1. Personal Allowances and Reliefs

For the 2025/26 tax year, most individuals can earn up to £12,570 tax-free. If your income approaches the higher thresholds, and you have the flexibility to plan your income levels (particularly relevant if you are a shareholder who takes most of their income via dividends), consider utilising your basic rate band and/or deferring income to make the most of your allowances.

If you are married and one spouse earns below the personal allowance threshold and the other is a basic rate taxpayer, transferring up to 10% of the personal allowance can save up to £1,260 in tax.

Make the most of your savings too – especially for your 2025/2026 cash ISA. You can contribute up to £20,000 in an Individual Savings Account (ISA), including cash, stocks and shares, or innovative finance ISAs. Any growth or income is tax-free – but don’t forget that rules will change in 2027 and the cash ISA threshold will reduce. Make the most of it while you can!

Don’t forget to make the most of pension contributions as these are one of the most effective ways to reduce taxable income. Contributions attract tax relief at your marginal rate, and annual allowance limits for 2025/26 are £60,000, although this tapers for very high earners.

2. Business Allowances

The Annual Investment Allowance (AIA) gives 100% tax relief on qualifying capital expenditure, up to £1,000,000 per year. This includes equipment, machinery and certain integral features of buildings such as electrical systems. Purchasing assets before the year-end can dramatically cut your tax bill.

For assets not covered by the AIA, main rate and special rate writing-down allowances may apply or you may even be entitled to 50% or 100% Full Expensing Relief, depending on the assets you purchase.

Corporation tax is charged at a rate of 25% where profits are in excess of £250,000, 19% where profits are below £50,000 and a marginal rate where profits fall between these thresholds. Maximising investment before the year-end can reduce taxable profits and potentially the rate of corporation tax chargeable.

As mentioned above, individuals can obtain tax relief on pension contributions but businesses can as well. A company can make employer pension contributions and receive corporation tax relief as a result. It is worth reviewing the position as if pension allowances have been under utilised in previous years, and your company has excess funds, it maybe beneficial to top up the pension pot.

If your business has made a loss this year, you may be able to carry it back or forward to offset against other profits, reducing your overall tax liability – consider your options to ensure you’re making the best use of any losses made.

3. Other considerations

If your company is engaged in qualifying R&D activities, you could potentially claim a cash credit from HMRC. If you have never made a claim in the past, there are certain notification deadlines you’ll need to adhere to once your accounting period has ended so if you’re not sure if you could qualify, seek guidance as soon as possible to make sure you don’t miss any deadlines.

And finally, don’t forget charitable giving as both individuals and companies can benefit. Gift Aid allows individuals to claim tax relief on donations at their highest marginal rate and companies can deduct qualifying charitable contributions from their profits, reducing corporation tax.

Effective year-end tax planning is all about timing, awareness and taking advantage of available reliefs and allowances.

If you would like any further help or advice relating to your own year end tax planning, contact Monahans to see how we can help.

Stephanie Hurst