2026 pre year-end tax planning for limited companies

Capital Expenditure

Are you planning to purchase any new assets soon? If so, can you acquire them before your company year-end?

Most plant, machinery, and computer equipment qualify for Capital Allowances, often providing a 100% deduction against taxable profits. If assets are delivered before the year-end (i.e. before 31 March 2026), this will subsequently reduce your Corporation Tax liability due for payment on 1 January 2027.

If you acquire the asset after the year-end, or it is delivered on or after 1 April 2026, the reduction in Corporation Tax liability will instead apply to the payment due on 1 January 2028 (assuming tax is payable at the normal due date).

If you’re looking to acquire a new vehicle, there are additional tax benefits for choosing an electric car. Other cars will not qualify for 100% Capital Allowances, whereas an electric car will, and you will pay less Class 1A National Insurance on this vehicle under the benefit-in-kind rules.

Pension contributions

A company can contribute to a Director’s or any employee’s pension scheme. This will reduce the company’s accounting profits and is generally allowable for tax purposes, reducing taxable profits and the Corporation Tax liability.

An individual has a maximum pension contribution allowance of £60,000 per tax year (restrictions apply for those with high income). There may also be scope to contribute more if prior-year allowances remain unused.

It’s always important to take financial advice regarding pension contributions, but the opportunity to claim Corporation Tax relief, and for the pension payments to be made without suffering Income Tax or any National Insurance Contributions (NIC), make them extremely tax efficient.

For any very large contributions being made, it is important you are aware of the pension spreading rules. If you are looking to make pension contributions, please do reach out to our Financial Planning team.

Interest on Directors’ current accounts

If the company owes a Director funds through a Director’s current account (e.g. due to funds introduced or dividends declared but not yet taken as cash), the Director can charge the company interest on this loan account. This interest will appear as income on the Director’s Self‑Assessment tax return, but it is generally a tax‑deductible expense for the company, saving Corporation Tax, and can be extracted by the Director in cash.

There are additional reporting requirements and Income Tax deduction obligations for the company, but interest can be paid without any National Insurance burden, making this an often‑overlooked but tax‑efficient profit extraction method.

Bad debts

If the company is owed customer debts that are not expected to be paid, it is worth including a specific ‘bad debt provision’ in the accounts. This reduces debtors on the balance sheet and creates an expense for the company. If the provision is against specific debts (rather than a general percentage), it is an allowable Corporation Tax deduction, reducing the Corporation Tax liability.

Bonus accruals

Consider if any bonuses are payable to staff or Directors because of any profits or targets achieved in the financial year. If any such bonuses are payable and will be included on the payroll within nine months of the year-end, then this expense will also reduce the taxable profits and subsequent Corporation Tax liability.

From a Director’s perspective, it is important to look at remuneration before 5 April to ensure you have used all your allowances and to ensure your remuneration is as tax efficient as possible. Some key things to consider from a personal perspective are:

Salary

Salaries and any resulting employer NIC are deductible for Corporation Tax purposes.

If an individual has income below £100,000 in the tax year to 5 April 2026, they are entitled to a personal allowance, which is currently £12,570.

Often, a remuneration strategy is to pay a salary of the personal allowance of £12,570, with the remainder as a dividend, see below. A salary of £12,570 ensures the Director does not pay employee NIC and gives the Director a qualifying year for State Pension.

If you have not taken a salary in the current tax year, it may be beneficial to take an annual salary from the company in one of the final months.

Dividends

Generally, the remainder of income is best taken as dividends. Although dividends are not a tax‑deductible expense for the company, the first £500 of dividends in the 2025/26 tax year is tax-free.

Dividend tax rates are:

• 75% for basic rate taxpayers (up to £50,270 total income)
• 75% for higher rate taxpayers
• 35% for additional rate taxpayers (income over £125,140)

These rates are significantly lower than Income Tax rates on salary, making dividends a more efficient extraction method.

Dividends may only be paid from distributable profits, and the appropriate paperwork must be prepared at the time the dividend is declared. It is therefore important to consider any dividend declarations before the tax year-end.

It’s worth highlighting that the dividend rates are increasing from 6 April 2026 to 10.75% (basic rate) and 35.75% (higher rate). Your remuneration strategy should account for both tax years.

Everybody has different financial situations and what is most appropriate for one company or Director will be different for another. The above is a general and simplistic overview of remuneration and pre year-end planning but we recommend that you seek advice from an adviser to ensure you are doing what is most appropriate for you, considering your personal position.

If you’d like help with your pre year-end tax planning – get in touch.