Year-end tax planning: Key considerations before 5th April

With the 2025/26 tax year drawing to a close, many business owners and private clients are turning their attention to how best to optimise their income before the end of the financial year with smart year‑end tax planning. With confirmed increases to dividend tax rates from April 2026 and further changes to the wider tax landscape on the horizon, timely year-end tax planning is essential.

Below, we outline the key areas to review before 5 April and some of the questions you might be asking yourself:

Should I take dividends before the end of the tax year?

Dividend tax rates remained unchanged for 2025/26, but from 6 April 2026, both the basic and higher rates will increase by 2 percentage points – from 8.75% to 10.75% (basic rate) and 33.75% to 35.75% (higher rate), while the additional rate remains at 39.35%.

The dividend allowance remains at £500, so only the first £500 of dividend income will be tax‑free.

What this means for planning:

• Where cashflow permits, consider bringing forward dividends before 5 April, particularly if you expect to remain in the basic or higher rate bands next year.
• Director-shareholders may need to reconsider their split of remuneration between salary and dividends going forward.  In some scenarios, it could become more efficient to pay higher salaries, where traditionally owner-managers have relied on lower dividend tax rates to optimise their remuneration.
• Couples may consider spousal shareholdings where appropriate to ensure both allowances and lower rate bands are utilised.

This is an ideal time to review your remuneration strategy – factoring in salary, bonuses, pension contributions, and dividends – to ensure you’re optimising profit extraction ahead of the confirmed dividend rate increases.

Does making pension contributions reduce tax liabilities?

Personal pension contributions remain one of the most effective year-end tax planning tools. Higher and additional rate taxpayers benefit by extending the basic/higher rate bands, reducing exposure to higher tax rates – including the increased dividend rates coming in next year.‑rate taxpayers benefit by extending the basic/higher rate bands, reducing exposure to higher tax rates – including the increased dividend rates coming in next year.

From 2029, salary sacrifice NIC benefits will be restricted, but current rules remain unchanged for 2025/26, so now remains an efficient window for planning.

Key points to consider:

• Contributions can help restore the personal allowance for those with income above £100,000.
• They may also reduce or remove the High-Income Child Benefit Charge, where applicable.
• Ensure you remain within annual allowance limits. For 2025/26, the standard annual allowance remains at £60,000; however, high earners with income in excess of £260,000 can see this tapered down to a minimum of £10,000.

What can I do before the end of the tax year to reduce my exposure to tax?

1. Review Allowances and Reliefs

With dividend and CGT allowances remaining low, consider disposals or rebalancing of portfolios where this fits your wider strategy.

Income-generating assets may be shared between spouses to reduce combined exposure.

2. Consider Deferring or Advancing Income

Where your expected income fluctuates between tax years, consider deferring/advancing bonuses, dividends, or other taxable receipts – particularly relevant given the rising rates ahead.

3. National Insurance Contributions

If you have gaps in your NI record, voluntary Class 3 contributions may help secure entitlement to the full State Pension. The window to fill gaps for the 2019/20 tax year remains open until 5 April 2026.

4. Tax-Efficient Investments

EIS, SEIS and VCT investments continue to offer income tax relief and, in the case of EIS/SEIS, CGT deferral or exemption. These should always be considered as part of a wider risk‑managed strategy – these reliefs exist to encourage investment in inherently higher risk assets.

A quick reminder: upcoming Agricultural Relief, Business Relief & Making Tax Digital changes.

A brief recap for clients

• Agricultural Relief (AR) and Business Relief (BR) Changes
  From 6 April, the current 100% relief for assets qualifying for BR/AR will be capped at £2.5 million per person, meaning individuals could be hit with a much bigger inheritance tax (IHT) bill than previously anticipated.  Clients should review their IHT position in view of these changes, and take action where appropriate.
• Making Tax Digital (MTD) for Income Tax will introduce new reporting requirements from 6 April 2026 for many unincorporated businesses and landlords.

How can AAB help?

Year-end tax planning can feel overwhelming. But it’s not something you have to do alone. A few well-timed decisions now can protect your income and put you in a stronger position for the year ahead. If you’re unsure where to start, that’s where we can help.

If you would like to discuss any of the points raised above, please do not hesitate to get in contact with Kerry Griffin or Gillian Ruston, or any of our experts in the Private Client tax or Business Advisory team.