Company Year-End Tax Planning Checklist
Every year, the same thing happens. In the first week of April, my phone rings. A director in Tunbridge Wells, Sevenoaks or Maidstone says, "We've just had our best year ever. What can we do about the tax?"
And every year, I have to give the same answer. Too late. The year ended last week.
Most of the useful options in company tax planning expire on the last day of the accounting period. A pension payment has to leave the bank before it. A piece of equipment has to be bought before it. A bonus has to be decided before it. Once the year-end passes, the figures are largely set, and all that remains is to report them.
This checklist is designed to stop that April phone call. It walks you through the five areas I review with every client in the final three to four months of their year: profits, expenses, capital expenditure, directors' remuneration and pension planning. Use it as it stands, tick off what applies, and bring the rest to a conversation with your accountant. All figures are for the 2026–27 tax year.
A limited company's tax is calculated on the profit of its accounting period. That period usually runs for twelve months and ends on a date you chose when the company was formed. Many companies end on 31 March or 5 April, but plenty end on 30 June, 30 September or 31 December. What matters is that the date is fixed, and anything that happens after it belongs to next year.
That fixed date is both a deadline and an opportunity. Before it, you can often change the figures by changing your decisions. After it, you can only report what happened.
Let me give you a simple picture. Think of the year-end as the closing time of a shop. Until the doors shut, you can still make a purchase. Afterwards, even if you are standing on the pavement with the money in your hand, it counts as tomorrow.
I suggest working to four checkpoints.
The rest of this guide follows that logic.
The first job is to find out where you stand. You can't plan around a number you haven't seen.
A forecast takes your profit and loss account to date and projects it to the year-end. It doesn't need to be perfect. It needs to be close enough to show which Corporation Tax band you are likely to be in.
Ask yourself these questions.
If your bookkeeping is a few months behind, this is the moment to catch it up. A forecast built on out-of-date books is worse than no forecast at all.
For 2026–27, the rates for a company with no associated companies and a twelve-month period are:
The practical point is this. If your forecast profit is £72,000, every extra pound of profit costs you 26.5p in tax, and every pound of cost or pension contribution you add saves you 26.5p. Move the profit down to £50,000 and the rate on the next pound drops to 19%. The band you are in changes what each decision is worth.
If you control more than one company, remember that the thresholds are divided among them. A group of two companies has £25,000 and £125,000 limits each, not £50,000 and £250,000. It's a detail that often gets overlooked.
Profit depends on what is recorded, so a quick audit of the books is worthwhile.
I once worked with a Tonbridge joinery business that discovered, just before its year-end, that a £14,000 invoice had been entered twice. The profit forecast dropped, the Corporation Tax estimate dropped with it, and the director's planned bonus plan changed completely. That sort of discovery is much better made in February than in July.
If your profit is close to a threshold, small timing differences matter. A job completed on 28 March goes into this year. A job completed on 3 April goes into next. In some businesses there is a genuine choice about when to invoice. I would never suggest distorting the business to save tax, but if the timing is neutral, it is worth knowing which side of the line you fall on.
Once you know where profit stands, look at the cost side. There are two questions here. Have you claimed everything you are entitled to? And have you claimed anything you shouldn't?
Directors often leave money on the table. These are the claims I check for every client.
Our guides to company expenses and director expenses go through these in more detail.
Equally important is to check what shouldn't be in the claim. Client entertainment is the classic. It isn't deductible, and neither is the VAT on it. Fines for parking and speeding aren't deductible. Personal costs paid through the company aren't deductible either. If you leave them in, HMRC may adjust the return later, and you could face interest and penalties.
For every expense, ask whether you could produce a receipt, an invoice or a clear note of the business purpose if someone asked. Records should be kept for six years. A digital photograph of a receipt is normally enough. If the evidence is missing, now is the time to find it, while the supplier can still send a copy.
Costs are deductible in the period they relate to. If you've received a bill for work done in the year but haven't paid it, it still belongs in the year. If you pay an annual subscription in advance, only the portion that relates to this year should be claimed in this year. Getting this wrong in either direction produces the wrong profit.
Buying equipment, vehicles and machinery is where timing matters most. The year in which you buy can decide how much relief you get and when.
Companies claim capital allowances rather than deducting the cost of equipment as an ordinary expense. The main ones for 2026–27 are as follows.
The rule is simple. The allowance usually goes to the period in which the expenditure is incurred. So if you were going to buy something in April, buying it in March may bring the relief forward by a year.
That's useful. But take care.
First, only buy what the business needs. A pound spent to save 26.5p in tax still costs you 73.5p. Second, make sure the asset is genuinely for the business. Third, think about delivery and installation. The safest approach is to have the equipment delivered and in use before the year-end, with the invoice dated within the period. Ask us about your particular purchase if the timing is tight.
I recall a Sevenoaks design studio that needed new computers, and the director had planned to order them in the new year. Brought forward by three weeks, the £6,000 purchase reduced that year's profit and the Corporation Tax along with it. The computers were the same, the price was the same, and the relief arrived a year earlier.
Cars sit outside the Annual Investment Allowance, and their allowances depend on their emissions. The company car also creates a benefit-in-kind charge for the director. For a zero-emission car, the benefit-in-kind rate is 4% of the list price in 2026–27, rising to 5%, 7% and 9% by 2029–30. The rules for electric car allowances have changed more than once, so check the current position before ordering.
Record every item with its date, cost, supplier and purpose. At the year-end, it gives your accountant what they need to claim the right allowances. It also helps when you later sell or replace the asset, because a sale can create a balancing charge.
How you pay yourself, and when, has a direct effect on the company's tax and on your own.
Salary is a cost to the company, so it reduces taxable profit. For most single-director companies, a salary around the personal allowance of £12,570 remains sensible. At that level, the employer's National Insurance bill is about £1,136, because it is charged at 15% above the £5,000 secondary threshold. A salary at that level still counts for state pension purposes, as it exceeds the lower earnings limit of £6,708.
Note that the Employment Allowance of £10,500 isn't available to a company where the director is the only person on the payroll.
If the company wants to pay a bonus, there is a useful rule. A bonus that is accrued in the accounts by the year-end, and paid within nine months afterwards, is deductible in the year it was earned. So the decision has to be made before the year-end. The payment can follow later.
For example, a £5,000 bonus costs the company £5,750 with employer's National Insurance. It reduces the Corporation Tax bill, but the employee pays income tax and National Insurance on it. Compare that with a dividend, which doesn't reduce the company's tax but is often taxed more lightly on the individual. There isn't a single right answer. It depends on the numbers.
Dividends aren't a cost of the company, so they don't affect Corporation Tax. But the timing is still important for two reasons. First, they can only be paid from distributable profits, so check the reserves. Second, they are taxed in your personal tax year, which ends on 5 April. That is a different date from the company's year-end unless you happen to share the same one.
For 2026–27, dividend tax is 10.75% in the basic rate band, 35.75% in the higher rate band and 39.35% in the additional rate band, with a £500 allowance. If you are close to the higher rate threshold, the date of a dividend can decide which year it falls in. Plan the amount and the timing together.
This is the item I most want you to check. If you owe the company money at the year-end, the company may owe tax on it. A loan to a director that remains outstanding nine months and one day after the year-end triggers a section 455 charge of 35.75% for loans made on or after 6 April 2026. On a £12,400 overdrawn balance, that is £4,433.
The tax can be reclaimed when the loan is repaid, but it ties up cash first. The best course is to clear the balance before the year-end, usually by a dividend, a bonus or a repayment from your own funds. Beware of the "bed and breakfasting" rule. If you repay the loan and then take out a new one within 30 days, HMRC may treat the repayment as not having happened.
Pensions are the most powerful year-end tool available to most directors, and they are the least used.
An employer pension contribution paid by the company is normally deductible for Corporation Tax if it is wholly and exclusively for the purposes of the trade. It doesn't attract employer's National Insurance. And it doesn't create any income tax for you at the time. Money goes from the company into your pension, tax-efficiently.
Compare that with taking the same money as a dividend. The dividend would be taxed on you, possibly at a high rate. The pension contribution isn't taxed until you draw it, and when you do, 25% can normally be taken tax-free, subject to the usual limits.
The standard annual allowance is £60,000, and you can carry forward unused allowance from the previous three tax years, provided you were a member of a pension scheme in those years. The allowance can be reduced for high earners. The contribution must also be reasonable in relation to the work you do for the company. Finally, the minimum age at which you can access your pension rises to 57 from 2028, so the money is not available for some time.
The contribution must actually be paid before the year-end to get relief in that year. An accrual isn't enough for a company pension contribution. Allow time, because some pension providers take a few days to receive and allocate the money.
Let's pull this together with a company I'll describe as typical for the Kent area. It has a 31 March 2027 year-end and a forecast taxable profit of £72,000. That puts it in the marginal relief band.
Without any planning, the Corporation Tax is 25% of £72,000, which is £18,000, minus 3/200 of £178,000, which is £2,670. The bill is £15,330.
Now the director takes action in the final quarter.
The total Corporation Tax is down from £15,330 to £11,090, a difference of £4,240.
Two comments on that. The pension money isn't lost. It is the director's, held in a pension. And the equipment saving is partly about timing, because without the purchase the company would have claimed the relief a year later. Nobody should spend £6,000 to save £1,590. But if the equipment was already needed, buying it before the year-end brings the relief forward.
Quick answer: The best time for company tax planning is three to four months before the year-end, not after it. The key steps are to forecast your profit, review expenses, time capital purchases, decide how you will be paid and consider an employer pension contribution. Most of these must be completed within the accounting period to count.
What this means for a company director: You control more of your tax bill than you might think, but only before the year-end. A forecast, a pension decision, a clear director's loan account and a sensible approach to equipment purchases can reduce the company's tax and improve your personal position. After the year-end, the numbers are mostly fixed.
Example: A company with a forecast profit of £72,000 would pay £15,330 in Corporation Tax. A £10,000 employer pension contribution brings that to £12,680. A needed £6,000 equipment purchase made before the year-end brings it to £11,090. The total saving is £4,240.
Common mistakes: Waiting until after the year-end. Buying things you don't need just to save tax. Paying a pension contribution too late. Leaving the director's loan account overdrawn. Claiming client entertainment. Forgetting that the thresholds are divided between associated companies.
When should you speak to an accountant? Ideally three to four months before the year-end, once you have a forecast. Also before buying a car or a major asset, before paying a large bonus or pension contribution, and if your profit is close to £50,000 or £250,000.
These are the errors that come up most often. They are all avoidable.
By far the most common. A year-end conversation held in the last week gives you few choices. One held three months earlier gives you many.
Tax relief reduces the cost of an expense. It doesn't remove it. If you wouldn't have bought the item otherwise, you are worse off.
A pension contribution that is promised but not paid by the year-end doesn't count. Neither does a purchase that is delivered after it. Check actual dates, not intentions.
The company's tax is only half the story. A bonus, a dividend or a salary also affects your own income tax. A plan that saves £2,000 in the company but costs you £3,000 personally isn't a good plan.
An overdrawn account at the year-end can lead to a 35.75% charge. It is simple to avoid and costly to forget.
Rates and allowances change. The writing-down allowance, dividend tax rates and the mileage rate are all different this year compared with last. Review the plan each year.
If you want a short version to print or pin up, here it is.
Three to four months before:
Two months before:
One month before:
The final week:
If your year-end is approaching, now is the time to talk. At Peter Hodgson & Co, we help company directors across Tunbridge Wells, Tonbridge, Sevenoaks and the wider Kent and South East area to review their position, forecast their tax and decide what to do while there is still time to do it.
To book a year-end planning conversation, you can complete the "Contact Us" form on our website, call us on 01892 515 733, or send us an email at info@peterhodgson.co.uk. Please don't wait for the April phone call. We'd much rather speak to you in January-February!
Disclaimer:
The content of this blog is for general informational purposes only and should not be considered professional tax advice. The information is correct at the time of publishing but may change following future UK budget announcements or updates to HMRC guidance. Individual circumstances vary, and tax obligations can differ based on your personal situation. We strongly recommend consulting with us or a qualified tax professional to receive advice tailored to your specific needs.
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