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There’s just over a month until the end of the tax year on April 5, and if you have any available tax allowances that you haven’t used up completely, now is the time to start working out how to use as much of them as you can this tax year.
Various tax rules are set to change from April 6, so it is important to use up what is available this tax year to maximise the current rules.
There are many ways to reduce your tax liability each year through proper and full use of the allowances, but it is always best to work with your accountant to do everything the right way, so you don’t create a problem for yourself further down the line.
Check that your State Pension NICs record is complete
One important thing to check is that your National Insurance contributions (NICs) record for your State Pension is complete. You need to have 35 years of qualifying NICs payments to receive the new full State Pension, and at least 10 years to receive any State Pension at retirement age.
Missing years can occur if, for example, you’ve had any time off to look after children, or missed work years for any other reason, such as being ill or taking time off to travel. Even if you haven’t taken time off, you need to check your record is correct, because mistakes happen.
People who have stayed at home to look after their family should have received their NICs contribution years for this period under the Home Responsibilities Protection scheme, or by the National Insurance Credits for Parents and Carers in 2010, which replaced it. Both schemes would give you qualifying credits for the State Pension while you weren’t working. But the system hasn’t been perfect, so there is currently a government initiative to correct missing HRP records between 1978 and 2010. If you think you or someone you know may have been affected during this time, it is even more important to check your record.
If you have any gaps that aren’t mistakes, it is possible to pay voluntary contributions for up to the past six years to fill those gaps in your National Insurance record and boost your qualifying years. These payments must be made before April 5 each year.
You can get a State Pension forecast at Gov.uk which will tell you if you have any years where your contributions weren’t complete. This is an important step, because not checking could result in paying contributions that aren’t necessary to make.
Make the most of your pensions contributions
You can put as much as you like into a personal pension scheme, but there are limits on how much of your contributions will benefit from tax relief. For example, if you’re not earning at all, you can add a maximum of £3,600 including tax relief into a pension. If you are earning, you can put up to 100% of your relevant UK earnings into a pension to get tax relief, up to a maximum of £60,000. So, even if you earn enough to get more tax relief than this, you won’t receive it on contributions above this figure.
You also cannot reclaim more tax relief in a year than you were due to pay in tax, so you need to ensure your pension planning takes this into account. But you can do something called Carry Forward, which enables you to use any unused annual allowance from the previous three years, to maximise the benefits of any unused amounts from these years.
If you earn more than £200,000 a year, your annual allowance for pension contributions could reduce from £60,000 to a slow as £10,000, so you must take this into account when making decisions about optimising your tax allowances towards the end of the tax year.
One important thing to remember is that if you are a 40% or 45% taxpayer, you may need to reclaim your additional pension contribution tax relief – anything above the basic rate of tax relief of 20% - through your tax return directly from HMRC. So, if this hasn’t been done, even in previous years, you should speak to your accountant for advice.
Company owners should pay themselves in dividends
Company directors can often take money out of their business more tax efficiently through dividends than as a salary, but you can only distribute dividends if you have enough ‘distributable reserves’. Bear in mind though that from April 6, 2026, the basic and higher dividend tax rates will rise by 2 percentage points, to 10.75% and 35.75% respectively, which reduces the benefit to some degree.
Also, it is typically more tax efficient if the company pays your pension contributions for you, so if there is enough money in the business to do this, then speak to your accountant about how to action this properly.
If you’re an experienced business owner, you may also want to consider investing in a Seed Enterprise Investment Scheme(SEIS), which is designed for fledgling companies looking for investment, or Venture Capital Trusts (VCTs). These both offer tax benefits that help reduce your liabilities.
Qualifying Enterprise Investment Schemes (EISs) – which would include some AIM-listed companies –offer tax relief at 30% on investments up to £1m, or £2m if the company you’re investing in qualifies under the ‘Knowledge Intensive Companies’ rules, which typically refer to companies heavily involved in research in areas such as technology or biotechnology.
The VCT tax relief is currently available on qualifying investments up to £200,000 at 30%, but this reduces to 20% from April 6, 2026.
Contact us
If you are keen to optimise the tax relief available before the end of the tax year, then please get in touch with us and we will explain what you need to know.