As the tax year runs from 6th April to 5th April, it is crucial to prepare effectively to ensure compliance and maximise any potential tax benefits. Whether you are self-employed, a business owner, or an employee, taking proactive steps before the tax year ends can help you optimise your tax position and avoid unnecessary stress. Here’s a comprehensive guide to ensure you are fully prepared.
Review Your Income and Expenses
One of the first steps in preparing for the end of the tax year is reviewing your income and expenses. If you are self-employed or a small business owner, ensure that all invoices have been issued and payments accounted for. Likewise, review your business expenses to ensure you have claimed all allowable deductions, such as office supplies, travel, and professional subscriptions.
Maximise Your ISA Allowance
An Individual Savings Account (ISA) allows you to save or invest money tax-free. The annual ISA allowance for the 2025/26 tax year is £20,000. If you haven’t yet utilised your full allowance, consider making additional contributions before the tax year ends. This will help you shield your savings from tax and maximise returns.
Use Your Pension Allowance
Contributions to a pension scheme attract tax relief, making them a valuable way to reduce your taxable income. The annual allowance for pensions is currently £60,000 (or 100% of your earnings, whichever is lower). If you haven’t made full use of this allowance, consider making additional contributions to boost your retirement savings while benefiting from tax relief.
Claim Any Available Tax Reliefs
There are various tax reliefs available, depending on your circumstances. For instance:
- Marriage Allowance: If your income is below the personal allowance threshold you may be able to transfer £1,260 of your allowance to your spouse.
- Gift Aid: Donations to registered charities may be eligible for Gift Aid, allowing the charity to claim an extra 25% on your donation while also reducing your taxable income.
- Capital Gains Tax (CGT) Allowance: If you have assets to dispose of, consider using your annual CGT allowance before the tax year ends to minimise tax liabilities.
Check Your Self-Assessment Tax Return
If you are required to file a self-assessment tax return, ensure all information is up to date. Gathering necessary documents, such as P60s, P11Ds, and dividend statements, will make the filing process easier and more accurate. Additionally, if you have underpaid tax, making voluntary payments before the deadline can help you avoid interest and penalties. Remember – just because the deadline is 31st January that doesn’t mean you have to leave it until January to file!
Plan for the Next Tax Year
Once you have completed your preparations, it’s a good time to set financial goals for the new tax year. Consider setting up a budget, increasing your pension contributions, or exploring new investment opportunities to enhance your financial position.
By taking these proactive steps, you can ensure a smooth transition into the new tax year while maximising potential savings and tax efficiencies. If in doubt, contact one of our accountants for advice and support!
