The new financial year is creeping up on us (6th April – don’t forget!), and now is the perfect time for sole traders and SMEs to get ahead with their financial planning. By being proactive, you can set your business up for success, promoting financial stability and maximising tax-saving opportunities. In this guide, we’ll help you explore key strategies to help you start the 2025/26 tax year on the right foot.
Reviewing the Previous Year
Before looking forward, it’s crucial to assess the financial year just gone. Conducting a thorough review will help you identify strengths, weaknesses, and areas for improvement. You should look to analyse:
- Profit and Loss Statements & Cash Flow – Understanding your revenue, expenses, and overall profitability will give you a clearer picture of financial health.
- Tax Liabilities – Reviewing your tax returns and payments ensures there are no surprises and helps in planning for future liabilities.
- Operational Efficiency – Assess whether any costs can be reduced or if your pricing strategy needs to be adjusted.
Budgeting and Forecasting for the New Year
A strong financial foundation starts with setting clear goals and preparing for potential challenges. Setting financial targets for revenue growth, cost savings, and profitability will give your business direction.
It’s also important to anticipate seasonal trends and cash flow fluctuations so you can ensure you have adequate working capital throughout the financial year. Unexpected expenses can catch us off guard, so having a contingency plan by setting aside emergency funds will help your business stay resilient.
Tax Planning Tips for 2025/26
Tax rules and allowances change each year, so it’s important to stay informed and make the most of available relief. Effective tax planning not only helps businesses remain compliant but also maximises potential savings, keeping more money in your business.
- Review and adjust for tax reliefs and threshold changes – The government regularly updates tax bands, personal allowances, and corporation tax rates. Check whether any adjustments will impact your tax obligations and plan accordingly.
- Maximise business expenses and allowable deductions – Many business costs are tax-deductible, reducing taxable profits. This includes office expenses, travel, professional fees, and even some home office costs for sole traders. Keeping detailed records ensures you claim everything you’re entitled to.
- Consider VAT schemes – If your business is VAT-registered, review whether your current VAT scheme is still the best fit. The Flat Rate Scheme, for example, can simplify VAT returns and potentially reduce liabilities for some businesses. If your turnover is close to the VAT threshold, consider whether voluntary registration or deregistration is the best option.
- Plan for self-assessment tax payments – Sole traders and directors taking dividends should ensure they have set aside enough funds to cover their tax bill, particularly for payments on account. If cash flow is tight, explore options such as adjusting your tax code or negotiating a Time to Pay arrangement with HMRC.
- Take advantage of capital allowances – If your business plans to invest in new equipment, vehicles, or machinery, the Annual Investment Allowance (AIA) allows you to deduct the full cost from taxable profits, significantly reducing tax liability. Check whether your planned purchases qualify.
- Optimise pension contribution – Contributions to a pension scheme are tax-efficient and reduce taxable income. Limited company owners can make employer contributions to their pensions, which may also be deductible against corporation tax.
- Make sure you’re claiming tax relief on any charitable donations you’ve made – keep a record of any Gift Aid payments you’ve made as these reduce your tax bill.
- Consider switching shares and / or bank savings to tax free Individual Savings Accounts (ISAs) – you can invest £20K per tax year in ISAs so you could invest £20K on 5 April and £20K on 6 April.
Automating Financial Processes
Managing finances can be time-consuming, but automation can streamline tasks and reduce errors. Using accounting software like Xero simplifies invoicing, expense tracking, and tax calculations.
If bookkeeping takes up too much of your time, outsourcing it to a trusted professional accountant can free up valuable hours while ensuring compliance with tax regulations.
Did you know we fit that bill? Contact 360 Accountants today and make the move to simplified accounting.
Top Tax-Saving Opportunities for 2025/26
Taking advantage of government schemes and incentives can lead to significant savings:
- Research available government grants and funding opportunities to see if your business qualifies for financial support.
- Maximising pension contributions can be a tax-efficient way for business owners to save for the future.
- Utilise the Annual Investment Allowance (AIA) if you’re planning to invest in new equipment, allowing you to deduct the full cost from your taxable profits.
Taking the time to plan at the start of the financial year can make a huge difference to your business’s success. Start by reviewing your previous tax year, then make the most of those tax-saving opportunities discussed above. This approach will put you and your business in a strong position for the 2025/26 tax year.
If you need expert support with your tax planning, 360 Accountants are here to help. Get in touch today to ensure your business is fully prepared for the start of the new financial year.
