We talk about it every year, but yes, it’s coming! The new tax year!
The new 2025/2026 tax year starts on 6 April 2025, and we’re here to ensure you’re up to date and sorted ahead of the changes.
Tax compliance, strategic planning, and proactive financial management are all key to ensuring that your business remains compliant while maximising your financial potential.
Here are our essential tips to help small business owners navigate the new tax year effectively.
1. Understand Tax Changes and Updates
The first step in preparing for the new tax year is understanding any changes to tax regulations. The UK government often introduces adjustments to tax rates, thresholds, and allowances. For the 2025/26 tax year, small businesses should keep up to date about:
– Income Tax Thresholds: Don’t get caught up in any changes to personal allowances and higher-rate thresholds. These impact directors and sole traders. Make sure you’re in the know of any changes
– Corporation Tax Rates: Ensure you know if your business is affected by any new rates or banding changes
– Making Tax Digital: With the ongoing rollout of MTD, businesses may face new digital compliance requirements, particularly if thresholds have been adjusted. Keep an eye out for this
– Reliefs and Allowances: Watch for updates on schemes like the Annual Investment Allowance (AIA) or R&D tax credits, as these can significantly impact your financial planning
2. Update Your Financial Records
Making sure that all your records are accurate and up-to-date is crucial when kicking off a new tax year. Small businesses should review their bookkeeping practices to ensure all transactions are correctly recorded.
– Use Cloud Accounting Software: Leverage tools like Sage to streamline recordkeeping and maintain compliance with MTD requirements
– Reconcile Regularly: Regular reconciliation of bank accounts makes sure your financial records reflect the actual status of your business at that current time
– Separate Business and Personal Finances: Maintain separate accounts for personal and business transactions to avoid confusion and errors when it comes to filing everything
3. Review Your Business Structure
The start of a new tax year is a fresh slate and the ideal time to assess whether your current business structure is still the most tax-efficient option.
– Sole Trader vs Limited Company: If your business profits are growing, it might be time to transition from a sole trader to a limited company to benefit from lower corporation tax rates. Need help with this? Let us know.
– Partnerships: For any partnerships you have, make sure you review the agreements to ensure fairness and compliance and make sure it’s still the right fit for the new tax year
– VAT Registration: If your turnover is nearing the VAT threshold, consider registering voluntarily to avoid surprises in mid-year
4. Maximise Tax Reliefs and Allowances
Taking full advantage of available reliefs and allowances can significantly reduce your tax liability.
Key areas to focus on include:
– Annual Investment Allowance (AIA): If you plan to purchase business assets, make sure they fall within the AIA limits for complete tax relief
– R&D Tax Credits: If your business invests in innovation, research, or development, these credits can be a valuable source of funding
– Pension Contributions: Contributions to personal or workplace pensions can be tax-efficient while securing your financial future
– Employment Allowance: If you have any employees on your books, you may be eligible for relief on National Insurance contributions. Don’t miss out on this if you’re eligible!
5. Plan for Cash Flow Management
Effective cash flow management is essential for small businesses to navigate the tax year without financial strain.
– Set Aside Funds for Tax: Create a dedicated account for VAT, PAYE, or self-assessment payments to avoid scrambling for funds when due dates arrive. Being organised is a saviour when it comes to tax!
– Invoice Promptly: Send invoices immediately after providing goods or services and follow up on overdue payments. It’ll help keep everything on track and ensure nothing is missed
-*Forecast Regularly: Prepare cash flow forecasts to anticipate potential shortfalls and take pre-emptive action
6. Stay on Top of Key Deadlines
Missing tax deadlines can lead to penalties and interest charges, which are unnecessary expenses for small businesses.
Key dates to remember for the 2025/26 tax year include:
– 6 April 2025: Start of the new tax year
– 31 July 2025: Deadline for the second payment on account for 2024/25 (if applicable)
– 31 January 2026: Deadline for self-assessment tax returns and final balancing payments for 2024/25
7. Prepare for Making Tax Digital (MTD) Requirements
MTD is transforming how businesses interact with HMRC, requiring digital recordkeeping and submissions. From 2025, smaller companies and sole traders may face expanded MTD mandates.
– Check Eligibility: Confirm whether your business falls under MTD requirements based on turnover or other criteria
– Choose Compliant Software: Ensure your accounting system is MTD-compatible and approved by HMRC
– Train Your Employees: Educate your team on using digital tools to avoid errors and delays. Teamwork makes the dream work!
8. Seek Professional Advice
Tax laws can be complex, and professional guidance can save you time, money, and stress.
– Hire an Accountant: A qualified accountant can identify opportunities for savings, ensure compliance, and represent you in case of HMRC inquiries. Looking for an accountant? Then contact us today
– Use Tax Advisory Services: Services like ours at TaxGem provide tailored advice to small businesses navigating tax regulations. This can help majorly if you’re unsure or just starting out on a new business venture
9. Consider Environmental Incentives
The government continues to promote green initiatives, offering tax incentives for businesses that reduce their carbon footprint.
– Energy-Efficient Equipment: Invest in machinery or vehicles eligible for enhanced capital allowances
– Grants for Sustainability Projects: Explore grants for solar panels, heat pumps, or other eco-friendly upgrades
10. Evaluate Employee Benefits and Payroll Efficiency
The new tax year is an opportunity to reassess employee benefits and ensure payroll compliance.
– Review PAYE Systems: Ensure that your payroll software is updated with the latest tax codes and thresholds
– Provide Tax-Efficient Benefits: Offering benefits like cycle-to-work schemes or childcare vouchers can reduce tax liabilities for both employees and employers.
– Track Workplace Pensions: Confirm compliance with auto-enrolment obligations and review contribution levels
Kicking off the new tax year doesn’t have to be daunting. Your small business can turn tax compliance into a brilliant advantage by staying informed, using technology, and seeking expert advice. Prep early and adopt these tips, and you’ll be in for a successful and financially sound 2025/26 tax year.
