The UK tax year ends on 5 April. Between now and that date, there are concrete steps you can take that will reduce your 2025/26 tax bill — some of them significantly. Most of these strategies involve timing decisions (bringing forward expenses, deferring income, using allowances before they reset) and are fully endorsed by HMRC as legitimate tax planning. Here are eight of the most impactful.
1. Maximise Your Pension Contributions
Pension contributions are among the most powerful tools available for reducing your tax bill. You receive full Income Tax relief on contributions up to your annual allowance — which in 2025/26 is £60,000 (or 100% of your UK earnings, whichever is lower). Money you put into a pension is effectively exempt from Income Tax, making it the most tax-efficient savings vehicle available to most people.
The impact is most powerful for higher and additional rate taxpayers:
- A basic rate (20%) taxpayer contributing £800 net receives £1,000 in their pension
- A higher rate (40%) taxpayer can claim further relief via Self Assessment, effectively paying only £600 net for a £1,000 pension contribution
- An additional rate (45%) taxpayer pays only £550 net
You can also use carry forward — unused annual allowances from the previous three tax years can be carried forward and added to this year's allowance, provided you were a member of a registered pension scheme in those years. This can dramatically increase the amount you can contribute in a single year.
Company directors should also consider employer pension contributions from the limited company — these are a deductible business expense, reducing Corporation Tax, and don't trigger employer or employee NI. The pension annual allowance still applies, but employer contributions don't count towards the employee's income for Income Tax purposes.
2. Time Your Income and Dividends
If you're a limited company director and you have flexibility over when to draw dividends, timing matters. Dividends paid before 5 April are taxed in 2025/26; dividends paid on or after 6 April fall into 2026/27.
Consider whether your income this year pushes you into a higher tax band. If your 2025/26 income is already near the £50,270 basic/higher rate boundary, consider deferring any additional dividends until after 5 April to avoid paying 33.75% higher-rate dividend tax when you could pay 8.75% in a year when your total income is lower.
Conversely, if you expect your income to be significantly higher next year (perhaps a large contract, a property sale, or an employment termination payment), drawing additional income now may be tax-advantageous.
3. Use Your Dividend Allowance Before It Resets
Every individual has a £500 dividend allowance — dividends up to this amount each year are tax-free. If you haven't used yours this year, taking a dividend before 5 April ensures it's not wasted. The same applies to a spouse or civil partner who is a shareholder in your company — their £500 allowance is entirely separate from yours.
On its own, £500 saves basic-rate taxpayers £43.75 (8.75% of £500) and higher-rate taxpayers £168.75. Modest, but genuinely free — there's no reason not to use it.
4. Transfer Income-Producing Assets to a Lower-Earning Spouse
Transfers of assets between spouses and civil partners are generally free of Capital Gains Tax. This means that if you own investments, rental property, or shares that generate income, transferring them (or a portion) to a lower-earning spouse can shift that income into a lower tax band.
For savings and investments, the personal savings allowance is £1,000 for basic rate taxpayers and £500 for higher rate taxpayers (nil for additional rate). If your spouse is a non-taxpayer or basic rate payer, their savings interest is taxed at a lower rate or not at all.
For rental property, transferring a share to a spouse can shift rental profits and use their personal allowance and basic rate band. Note that mortgage lenders' consent may be needed for changes to beneficial ownership of mortgaged properties.
5. Use the Capital Gains Tax Annual Exempt Amount
Every individual has a £3,000 annual exempt amount for capital gains in 2025/26 — gains up to this amount are tax-free. If you're sitting on investment gains and are planning to sell, consider whether crystallising some gains before 5 April makes sense. If you have a spouse or civil partner, they also have £3,000 of exempt gains — assets can be transferred between you before sale to double the exemption.
Equally, if you have investments sitting at a loss, crystallising those losses before year-end allows you to offset them against gains you've already made this year — potentially reducing your CGT bill to zero.
6. Bring Forward Capital Expenditure (Annual Investment Allowance)
If your business needs new equipment — laptops, machinery, vehicles (not cars), office furniture — buying it before your accounting year end (for companies) or before 5 April (for sole traders) means you can claim the Annual Investment Allowance immediately. The AIA currently allows 100% of qualifying expenditure to be deducted from profits, up to £1,000,000.
This is particularly valuable if your company is approaching the £50,000 threshold between the 19% and 25% Corporation Tax rates. Bringing forward £30,000 of capital expenditure could keep profits below £50,000 and save up to £1,800 in Corporation Tax at the 25% rate.
Important caveat: don't buy equipment you don't need purely for a tax saving. The tax saving is typically 19–25% of the cost — meaning you still spend 75–81% of the cost. Only bring forward expenditure you genuinely planned to make.
7. Review Your Salary Structure and Use Trivial Benefits
The end of the tax year is a good time to review your overall remuneration structure. For limited company directors:
- Consider whether your current salary level is still optimal given changes in your income and personal circumstances
- Review any benefits in kind — ensure they are being processed through payroll and P11D correctly
- Make use of the trivial benefit exemption: directors can receive up to £300 per year in trivial benefits (gifts of £50 or less that aren't cash or a cash voucher, aren't contractual, and aren't in return for work). £300 worth of non-cash gifts — Amazon vouchers, restaurant cards — can be extracted from the company tax-free
8. Consider Losses and Anti-Avoidance
If your business made a loss this year — perhaps a new venture that hasn't yet become profitable — the timing of how you use those losses matters:
- Sole traders can offset trading losses against other income in the same year or the previous year, potentially generating a tax refund
- Limited companies can carry back losses against the previous year's Corporation Tax profits — generating a refund — or carry them forward against future profits
- For new businesses, there are special loss relief rules that may allow carry-back over three years in the early trading period
One important note: tax planning must be genuine and commercially motivated. HMRC's General Anti-Abuse Rule (GAAR) allows them to challenge arrangements that are artificial or abusive, even if they technically comply with the letter of the law. Everything discussed in this article is standard, legitimate planning — but always take advice before implementing more complex strategies.
Planning for Next Year Starts Now
The most effective tax planning isn't done in a panic in March — it's done throughout the year, with a review at the tax year end to catch anything that can still be actioned. Starting the new tax year with a clear plan for your salary, dividends, pension contributions, and capital expenditure means you're never scrambling to make decisions under pressure.
At SMD Accountancy, we conduct year-end tax reviews for all our clients in February and March. We identify opportunities, run the numbers, and make sure every available allowance and relief is used. If you'd like a year-end review of your tax position before 5 April, book a free 20-minute call now — time is short.