Running a business is demanding, and tax can feel like one more moving part. Our top tax-saving tips show practical ways to keep more of what you earn in 2025/26 while staying compliant. It matters now because margins are under pressure and every pound counts. The Office for Budget Responsibility (OBR) expects inflation to average around 3.2% in 2025, which pushes up input costs and squeezes profitability (OBR, 2025). At the same time, small and medium-sized enterprises (SMEs) employ around 16.9m people, so smart tax planning has a real impact on jobs and growth (Office for National Statistics (ONS), 2025). In this article, we set out straightforward actions you can take – whether you’re a sole trader, partnership or company – and when to get advice.
If you’d like a quick steer on where to start, send us a note via our contact page or learn more about how we support owner-managed businesses.
Plan capital spending to maximise reliefs
Well-timed investment can reduce your corporation tax or income tax bill. These are the two key reliefs to know.
- Annual investment allowance (AIA): Most businesses can deduct the full cost of qualifying plant and machinery up to £1m per year. The limit is permanent, so you can plan multi-year spend with confidence (HMRC AIA guidance).
- Full expensing (companies only): Incorporated businesses can claim a 100% first-year deduction on qualifying new and unused main-rate plant and machinery, with a 50% first-year allowance for special-rate assets. Cars and second-hand assets are excluded. This regime has been made permanent, so aligning purchases with your accounting year-end can bring a meaningful in-year saving (HMRC, 2023).
Practical example: A limited company spending £120,000 on eligible IT and equipment could deduct the full amount against profits this year under full expensing. A sole trader buying the same assets would normally use the £1m AIA to get 100% relief.
Use the VAT threshold and schemes to your advantage
The VAT registration threshold is £90,000 of rolling 12-month taxable turnover, with a £88,000 deregistration threshold. If you’re near the line, forecast sales carefully and consider timing of invoices to avoid an unplanned registration (HMRC, 2024). For those already registered, consider the following.
- Flat-rate scheme: Simple admin for small businesses with low input VAT. It’s not for everyone – run the numbers before choosing it.
- Cash accounting scheme: Pay VAT when customers pay you, which can help cashflow if you offer credit terms.
- Partial exemption and fuel scale charges: If relevant, review annually to avoid overpaying.
Record-keeping tip: Keep digital records up to date and reconcile monthly. Small errors compound over a year and often show up as assessments or penalties later.
Cash basis is now the default for many unincorporated businesses
From 6 April 2024, the cash basis became the default method for calculating taxable profits for most sole traders and partnerships, with the previous turnover thresholds removed. You can still opt for accruals if that gives a fairer result – for example, where you carry stock or large year-end debtors/creditors (Low Incomes Tax Reform Group (LITRG), 2025).
When might cash basis help?
- Tighter cashflow: You’re taxed on money in and out, not invoices raised. That can reduce tax in a growth phase where customers pay later.
When might accruals be better?
- Significant stock or work in progress: Accruals can match profit to when work is done, which sometimes reduces volatility and supports borrowing.
We’ll help you test both methods and elect the approach that fits your business.
Owner-directors: Get the pay mix and pensions working
For many owner-managed companies, setting a sensible blend of salary and dividends still matters. While dividend allowances are now low, dividends can remain tax-efficient once salary is set at a level that protects state benefits and pension participation. Always consider the following.
- Salary level: Ensure eligibility for state pension credits and make employer pension contributions.
- Employer pension contributions: Company-paid pension contributions are usually deductible if wholly and exclusively for the business. They’re a reliable way to extract value tax efficiently while building long-term wealth.
- Dividends: Check reserves and maintain proper paperwork. Review your marginal rates and personal allowance interactions. HMRC’s guidance on dividend taxation sets out how rates apply above the annual allowance.
Example: A director targeting £60,000 of total drawings might use a modest salary, employer pension contributions within allowances and the balance as dividends – adjusted for other household income and childcare/tax-free childcare interactions.
Keep an eye on Companies House filing changes
Companies House reforms under the Economic Crime and Corporate Transparency Act will change what small companies must file. Key points coming through the transition plan include: no more abridged accounts, more detailed profit-and-loss information, and software-only filing (Companies House, 2025). These changes mean more transparency and potential lender scrutiny.
What to do now
- Review disclosures: If you’ve relied on minimal filings, plan for the extra detail to be visible.
- Tidy balances: Clear old suspense balances and director loan mispostings before your next year end.
- Move to software: If you still rely on spreadsheets, migrate in good time.
Top tax-saving tips for 2025/26: Quick wins you can action
- Owner-director pay mix: Review salary, employer pension contributions and dividends together. Optimise for tax and long-term planning.
- Timing capital spend: Align purchases with profits and year end to maximise AIA or full expensing.
- R&D and creative reliefs: If you innovate or produce qualifying content, assess eligibility early; documentation is key.
- Bad debt reviews: Write off genuinely irrecoverable debts before year end to claim tax relief; consider VAT bad debt relief rules.
- Home and car apportionments: Use reasonable, consistent methods and keep records; revisit annually as usage changes.
- Pre-year-end review: Identify provisions, stock write-downs and repair vs improvement classifications before the accounts are finalised.
If you’re unsure which steps apply, we’ll prioritise actions based on your sector and goals. Professional services, hospitality and retail each face distinct cost pressures, and the right mix of these top tax-saving tips can vary.
Why this matters for your cashflow
Cost pressures haven’t disappeared – with inflation still above the 2% target on OBR forecasts, disciplined cashflow and tax planning help smooth the bumps. SME employment remains significant at around 60% of private-sector jobs, underscoring how better tax management supports stability and growth. Practical steps – timely capital claims, the right accounting basis and tuned VAT processes – can free cash for hiring, stock and marketing.
We’ve covered the essentials without jargon: the top tax-saving tips that make a measurable difference. To recap, focus on the timing of capital spending, confirm whether cash basis or accruals works best, fine-tune your owner-director pay mix, and prepare for Companies House filing changes. These are low-risk actions with clear benefits, but each requires accurate records and, sometimes, elections or claims at the right time. Get in touch and we’ll map out a 90-day plan for your business.
For tailored advice and a calm run-through of your numbers, book a call with our Croydon team – we’ll apply the top tax-saving tips that fit your goals and keep you compliant. Start here: contact us.
