1. Use your £20,000 ISA allowance
Each individual can invest up to £20,000 per year into an ISA. Any interest, dividends or capital gains generated within the ISA are completely tax free, making ISAs one of the most efficient long-term investment vehicles.
2. Make pension contributions and benefit from tax relief
Pension contributions attract tax relief at your marginal rate. For example, a higher rate taxpayer contributing £10,000 could receive £4,000 of tax relief, meaning the effective cost of the contribution is only £6,000.
3. Reduce income below £100,000 to restore your personal allowance
Once income exceeds £100,000, the personal allowance begins to reduce, creating an effective 60% tax rate. Pension contributions or Gift Aid donations can help reduce taxable income and restore some or all of the allowance.
4. Use the £3,000 Capital Gains Tax annual exemption
Each individual can realise £3,000 of capital gains per year without paying CGT. Married couples may be able to realise £6,000 of gains tax free if assets are transferred between spouses before disposal.
5. Transfer assets between spouses before disposal
Transfers between spouses are generally free of capital gains tax. This allows couples to utilise both CGT allowances and potentially lower tax rates when selling investments or property.
6. Review dividend payments before tax rate increases
Dividend tax rates have increased in recent years and further changes are possible. Company directors may wish to review the timing of dividend payments before the end of the tax year.
7. Clear overdrawn director loan accounts
If a director owes money to their company, the company may face a tax charge (currently 33.75%) if the loan remains outstanding nine months after the year end. Clearing the loan before this deadline can avoid this charge.
8. Use the £1m Annual Investment Allowance for business purchases
Businesses can claim tax relief on qualifying equipment purchases through the Annual Investment Allowance. This allows up to £1 million of expenditure to receive immediate tax relief.
9. Consider purchasing electric vehicles through your company
Electric vehicles continue to benefit from generous tax treatment including 100% capital allowances and low benefit-in-kind rates. For many directors, this can be a very tax-efficient way to run a company car.
10. Use the £3,000 annual inheritance tax gift exemption
Individuals can give away £3,000 each year without it forming part of their estate for inheritance tax purposes. If unused, the exemption from the previous tax year can also be carried forward.
11. Make regular gifts from surplus income
Regular gifts made from surplus income may be immediately exempt from inheritance tax if certain conditions are met. This can be an effective strategy for gradually reducing the value of an estate.
12. Review property ownership structures
Rental income is normally taxed according to ownership percentages. Adjusting ownership between spouses may reduce the overall tax bill if one spouse pays tax at a lower rate.
13. Prepare for Making Tax Digital from April 2026
Making Tax Digital for Income Tax will require many self-employed individuals and landlords to submit quarterly updates to HMRC. Ensuring your bookkeeping systems are digital and compliant is important.
14. Use the marriage allowance where eligible
If one spouse earns less than the personal allowance, they may transfer £1,260 of their allowance to their partner. This could reduce the couple’s tax bill by up to £252 per year.
15. Review eligibility for Business Asset Disposal Relief
When selling a business, qualifying individuals may benefit from Business Asset Disposal Relief, reducing the CGT rate on qualifying gains. Careful planning is required to ensure eligibility.
16. Employ family members in your business where appropriate
Paying a salary to a spouse or adult children for genuine work performed can utilise their personal allowances. This can reduce the overall tax paid by the family unit.
17. Consider employer pension contributions from your company
Employer pension contributions are usually deductible for corporation tax and do not attract income tax or National Insurance. For many company directors this is one of the most tax-efficient ways to extract profits.
18. Review salary versus dividend extraction strategies
Company directors often extract profits through a mixture of salary and dividends. Reviewing the balance between these can reduce income tax and National Insurance liabilities.
19. Use capital losses to offset capital gains
Capital losses realised on investments can be offset against gains to reduce CGT liabilities. Reviewing investment portfolios before the year end may allow losses to be crystallised where appropriate.
20. Review property portfolios for potential incorporation
Some landlords may benefit from holding property through a limited company, particularly where mortgage interest is significant. Professional advice should be sought before making structural changes.
21. Use Gift Aid donations to extend the basic rate tax band
Gift Aid donations increase the basic rate tax band, which may reduce higher rate tax liabilities. Higher rate taxpayers can also claim additional relief through their tax return.
22. Consider tax efficient investments such as EIS or SEIS
Investments in qualifying early-stage companies may provide income tax relief of up to 50% under the SEIS scheme. These investments can also offer capital gains tax benefits if the shares are held for at least three years.
23. Plan succession strategies for family businesses
Early planning for business succession can reduce potential tax liabilities when transferring ownership. Options may include share transfers, trusts or gradual ownership transitions.
24. Review share structures such as alphabet shares
Companies can issue different classes of shares to allow dividends to be paid flexibly between shareholders. This can be useful for tax planning within family-owned businesses.
25. Arrange a year-end tax planning review with your accountant
A proactive tax planning review before the end of the tax year can identify opportunities to reduce tax liabilities. Many planning strategies must be implemented before 5 April to be effective.