In the approach to the end of the tax year, there are a number of factors you may wish to consider if you are an individual, sole trader, part of a partnership, director of a close company, or own rental property.
Don’t miss out on potential opportunities before the deadline!
Making a pension contribution
When saving for retirement, the government offers a pension tax relief for each payment. The amount of tax relief depends upon on the rate of Income Tax an individual pays.
Basic-rate taxpayers and non-earners receive a 20% tax relief directly into their registered pension even if they have not paid tax.
Higher rate taxpayers can get up to 40% tax relief.
Additional rate taxpayers can get up to 45% tax relief. This means a £1,000 pension payment, could cost as little as £600 net pay.
Note: Additional or higher-rate taxpayers must pay sufficient tax to receive the relief. There are also limits on how much tax relief you can receive which is based on net earnings which does not include dividend income.
It is important to seek independent financial advice regarding pension contributions. It is also important to be mindful of not exceeding the Annual Allowance and incurring a tax charge. The standard Annual Allowance for tax-free contributions is £60,000 for 2025/26 but in certain circumstances, unused allowances from the previous 3 tax years can also be used.
Gift Aid donations
Donating through Gift Aid means charities and community amateur sports clubs can claim an extra 25p for every £1 given, costing no extra to the donor.
Higher and additional rate taxpayers can claim the difference between their rate and the 20% basic rate, when completing their Self-Assessment tax return.
For example, if an individual donates £100 to a charity with Gift Aid, this results in a gross donation of £125. The individual pays 40% tax so can personally claim back £25.00 (£125 x 20%), making the net cost £75.
To make these claims, it’s essential to keep thorough records of any Gift Aid donations.
Annual Investment Allowance
For sole traders or partnerships, use your Annual Investment Allowance (AIA) on qualifying asset purchases in March (laptop, van etc). This allows purchasers to deduct the full value of a qualifying asset from profits before tax.
AIA can only be claimed in the period in which the item is bought.
From April 2026, the main writing down allowance falls from 18% to 14%, slowing tax relief for asset purchases not covered by the AIA.
Dividend allowance
Directors and shareholders of close companies can look to decide what dividend to declare in the year. It’s always good to declare dividends throughout the year, but the approach to the tax year end is a good time to ensure you have taken dividends in the most tax efficient way.
A close company is a UK-resident company controlled by five or fewer participators (shareholders) or solely by its directors. Directors/shareholders of a close company can utilise an annual £500 dividend allowance, before tax is due on dividends.
Dividends of this kind must be reported separately on directors’ Self-Assessment tax returns.
From 6 April 2026, the dividend tax rate will go up from 8.75% to 10.75% for basic rate taxpayers, and from 33.75% to 35.75% for higher rate taxpayers. The additional rate will remain unchanged at 39.35%.
Need some assistance?
If you’re thinking about significant items of income, expenditure or asset purchasing near your year-end, please contact us for guidance, so you can make the best possible decision.
