Updated: November 2025
Year-End Tax Planning Tips for Sole Traders and Small Businesses
As the end of the tax year approaches, many sole traders and small business owners start to feel the pressure.
Deadlines loom. Numbers feel uncertain. And there’s often a nagging worry that you might be paying more tax than you need to.
The good news is that with some simple, well-timed planning, you can reduce your tax bill, avoid last-minute stress, and start the new tax year in a far stronger position.
This guide walks through practical, UK-specific year-end tax planning tips for sole traders and small businesses. Nothing complicated. Nothing risky. Just sensible steps that HMRC expects you to take.
If you’re unsure about any of this, or you want a second pair of eyes before the year ends, this is exactly where a good accountant earns their keep.
1. Know your key tax year deadlines
Before looking at planning opportunities, it’s important to be clear on the timelines.
For most UK sole traders and partnerships:
- The tax year ends on 5 April
- Your Self Assessment return is due by 31 January
- Any tax owed is also due by 31 January
- Payments on account may apply if your tax bill is over £1,000
Limited companies work to their own accounting year-end, but director tax planning still often links back to the personal tax year ending 5 April.
If you don’t know your accounting year-end or upcoming deadlines, that’s your first red flag to address.
Not sure whether you use the cash basis or traditional accounting?
This affects when income and expenses are taxed. Many people assume incorrectly, which can lead to surprises at year-end.
2. Bring forward allowable business expenses
One of the simplest ways to reduce your tax bill is to claim all allowable expenses and, where appropriate, bring them forward before the year-end.
Common allowable expenses include:
- Office costs and software subscriptions
- Mobile phone and broadband (business proportion)
- Professional fees, including accountancy
- Marketing and website costs
- Business travel and mileage
- Training related to your existing trade
If you know you’ll need something shortly after the year-end, it may make sense to incur the cost before 5 April so the relief is applied sooner.
This is not about spending money unnecessarily. It’s about timing genuine business costs sensibly.
Individually, costs like software subscriptions, mobile phones, or cloud tools feel minor. Over a year, they can meaningfully reduce your taxable profit if claimed correctly.
3. Review capital allowances and equipment purchases
If you’ve bought equipment for your business, or are considering doing so, capital allowances may apply.
Examples include:
- Laptops and computers
- Tools and machinery
- Office equipment
- Vehicles (subject to rules)
The Annual Investment Allowance (AIA) can allow you to deduct the full cost of qualifying assets in the year of purchase, rather than spreading relief over several years.
The rules can be nuanced, especially for vehicles and mixed-use assets, so it’s worth checking what qualifies before assuming.
If you’re planning to replace equipment or upgrade tools soon, buying before the year end may allow you to claim the relief earlier rather than waiting another year.
4. Check your income timing carefully
In some cases, timing income can legitimately affect how much tax you pay and when.
For sole traders using the cash basis, income is generally taxed when it’s received.
That means:
- Issuing an invoice just before the year-end does not automatically mean it’s taxable that year
- Receiving payment before or after 5 April can change which tax year it falls into
This must be handled carefully and ethically.
You should never delay income artificially or misrepresent transactions.
But understanding how your accounting method works can help avoid surprises.
If you use the cash basis, tax is usually due when money is received, not when you invoice. Understanding this can help avoid unexpected tax bills.
5. Use pension contributions wisely
Pension contributions are one of the most effective and underused tax planning tools.
For individuals:
- Pension contributions can reduce your taxable income
- Higher-rate relief may be available via your tax return
- Contributions must be made before the tax year-end to count
For company directors:
- Employer pension contributions are usually deductible for corporation tax
- They can be more tax-efficient than an additional salary
Pensions are not just about retirement. They are a legitimate way to move money from your business into a protected, tax-efficient structure.
Pensions are not just about retirement. For many business owners and directors, they are one of the most tax-efficient ways to plan ahead.
6. Make use of personal allowances and tax bands
Every year, valuable allowances go unused simply because no one checks.
Key examples include:
- Personal allowance
- Basic rate tax band
- Dividend allowance
- Savings allowance
For couples or family-run businesses, planning income across individuals can sometimes reduce the overall household tax bill.
This must be done properly and within the rules. But even small adjustments can make a meaningful difference.
Where appropriate, reviewing how income is shared between partners or family members can sometimes reduce the overall household tax bill.
7. Review payments on account early
Many sole traders are caught out by payments on account.
These are advance payments towards your next tax bill, usually due:
- 31 January
- 31 July
If your income has fallen, or your circumstances have changed, you may be able to reduce payments on account.
However, doing this incorrectly can result in interest and penalties, so it’s important to base any reduction on realistic figures.
Ignoring payments on account does not make them go away. Planning for them does.
Payments on account often cause stress because they are discovered too late. Reviewing them early gives you time to plan rather than react.
8. Check your records and bookkeeping now, not later
Year-end planning is almost impossible if your records are incomplete or messy.
Before the year ends, ask yourself:
- Are all transactions recorded?
- Are business and personal expenses clearly separated?
- Are bank feeds reconciled?
- Are receipts stored properly?
This becomes even more important with Making Tax Digital changes on the horizon.
Good records do not just help your accountant. They help you make better decisions.
Messy records lead to rushed work, missed claims, and higher fees. Keeping things tidy throughout the year usually saves both time and money.
9. Limited companies: review director pay and dividends
If you run a limited company, year-end planning often focuses on:
- Salary levels
- Dividend declarations
- Timing of bonuses
- Pension contributions
The balance between salary and dividends can have a significant impact on both personal and company tax.
Dividend planning must also consider:
- Available profits
- Dividend paperwork
- Timing relative to the tax year
Getting this wrong can cause compliance issues. Getting it right can save thousands.
Dividends must be supported by available profits and proper records. They are not just informal withdrawals.
10. Watch out for scams and fake HMRC messages
Year-end is peak season for tax-related scams.
Common examples include:
- Fake HMRC emails claiming you’re owed a refund
- Text messages threatening penalties
- Requests for personal or banking details
HMRC will never ask for sensitive information by text or email.
If something feels urgent or threatening, stop and check before responding.
A genuine accountant will always help you verify whether something is real.
HMRC does not ask for bank details or threaten penalties by text or email. If a message feels urgent or alarming, pause and check before acting.
11. Don’t leave planning until January
January is already busy, expensive, and stressful.
The best tax planning happens before the year-end, not after it.
By reviewing things early, you:
- Avoid rushed decisions
- Keep cash flow under control
- Reduce the risk of mistakes
- Give yourself options
Even a short planning conversation before April can be more valuable than hours of panic in January.
Once the tax year has ended, most planning options disappear. The best time to review your position is before 5 April, not after.
How Glow Accounts Can Help
At Glow Accounts, we help sole traders and small businesses:
- Understand what they owe and why
- Plan ahead rather than react
- Stay compliant with HMRC
- Avoid unnecessary tax and stress
If you’re unsure whether you’re doing things properly, or you simply want peace of mind before the year ends, now is the right time to talk.
A quick review today can save a lot of pain later.
Final Thoughts
Tax planning does not need to be aggressive or complicated. It just needs to be intentional.
If you know where you stand before the year ends, you stay in control. If you don’t, the tax bill controls you.
If you’d like help reviewing your position before the year-end, contact Glow Accounts and we’ll guide you through the steps you need to take to get things clear.
