With 5 April 2026 fast approaching, now is the time for company directors to review their tax position. Acting before the tax year ends can help you protect company profits, reduce unnecessary tax, and extract value from your business in a controlled and tax-efficient way. In this article, we set out the most important areas of year-end tax planning for limited company directors for the 2025/26 tax year, based on the changes announced in the Autumn Budget 2025.
Overview
The Autumn Budget 2025 introduced several targeted measures that directly affect owner-managed businesses, including:
Company profit extraction
Most directors extract profits using a combination of salary and dividends. While a modest salary often remains sensible (particularly for National Insurance and state benefit purposes), dividend planning has become more important due to upcoming tax increases.
From April 2026, dividend tax rates increase to:
This means the net cash you retain from dividends will fall, especially at higher income levels.
As part of your year-end planning, consider:
Rather than waiting until the accounts are finalised, it is usually better to model profit extraction scenarios before 5 April so informed decisions can be made.
Pension contributions: tax-efficient profit extraction
Getting your company to make a pension contribution remains one of the most emost powerful planning tools available to directors.
They offer several advantages:
The Budget confirmed that from April 2029, employee National Insurance relief on salary sacrifice pension contributions will be restricted to £2,000 per year. While this does not immediately affect most directors, it underlines the importance of long-term pension planning.
Before 5 April 2026, you should review:
For many directors, making or increasing employer pension contributions before the year end remains one of the most efficient ways to reduce corporation tax while building long-term personal wealth.
Frozen tax thresholds and fiscal drag
Personal tax allowances and income tax thresholds are frozen until at least 2028/29.
As earnings increase over time, this results in more income being taxed at higher rates, even if real purchasing power remains unchanged. This so-called fiscal drag can significantly increase overall tax bills.
Year-end planning should therefore include a review of:
Forward planning in this area can produce meaningful savings over multiple years.
Investment reliefs: EIS and VCT timing
The government has increased the maximum investment limits for the Enterprise Investment Scheme (EIS). However, income tax relief for Venture Capital Trust (VCT) investments will fall from 30% to 20% for investments made on or after 6 April 2026.
If you already use EIS or VCTs as part of your tax planning strategy, consider:
Investment reliefs can be valuable, but they should complement, not replace, a sensible investment strategy based on diversification and long-term objectives.
Employee benefits and homeworking expenses
From 6 April 2026, employees will no longer be able to claim tax relief for non-reimbursed homeworking expenses. However, employers can still reimburse certain costs tax-free where HMRC conditions are met.
If your company employs staff, consider reviewing:
You may also wish to consider other straightforward, tax-efficient benefits, such as:
These benefits can improve staff retention and wellbeing while remaining cost-effective for the business.
Capital allowances and expenditure planning
A new 40% first-year allowance will apply to qualifying capital expenditure incurred from 1 January 2026, covering certain types of plant and machinery used for leasing. Second-hand assets and cars are excluded.
At the same time, the standard writing-down allowance will reduce to 14% from April 2026.
Before your year end, it is sensible to:
HMRC may challenge expenditure that appears to be accelerated solely for tax reasons, so commercial rationale should always come first.
Summary: practical year-end tax planning for directors
Effective year-end tax planning is not about aggressive tax avoidance schemes. It is about making informed, well-documented decisions based on current legislation and your company’s financial position.:
Before 5 April 2026, you should consider:.:
A structured approach can help protect profits, smooth personal income, and reduce unnecessary tax liabilities.
For more useful information, check out our Ebooks here.
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