As we approach the end of the tax year on April 5, 2025, private company owners must ensure they have optimised their profit extraction strategies. Effective year-end tax planning helps minimise tax liabilities and maximise available reliefs.

In his session, Year End Tax Planning 2025, Carl Bayley gave key considerations and actions to take before the deadline.

1. Optimal Salary Payments

For directors who take a salary, it is crucial to determine and pay the optimal salary amount before April 5. The most common optimal salary for 2024/25 is £12,570, as it aligns with the personal allowance and minimises National Insurance contributions. However, some circumstances may warrant a lower salary, such as £9,100 for certain cases or a higher amount for directors above state pension age. Ensuring these salaries are processed in time allows the company to benefit from corporation tax relief.

2. Salaries for Family Members

If family members are employed within the business, their tax-efficient salaries or bonuses should also be paid by April 5. This applies to private companies, sole traders, and partnerships. Utilising family members' tax allowances effectively can help distribute income tax-efficiently across the household, reducing overall tax liabilities.

3. Dividend Planning

Dividends are a common way for private company owners to extract profits. The tax-free dividend allowance is minimal, so it is crucial to consider whether further dividends should be paid before April 5 to utilise lower tax thresholds. Proper dividend planning ensures that income tax is minimised while maintaining efficient cash flow.

4. Corporation Tax Considerations

While personal income tax planning is the primary concern for directors, the company's year-end date also plays a role, particularly in determining corporation tax relief for salaries. Ensuring that payments align with the financial year helps in optimising tax benefits.

5. Utilising Other Allowances and Reliefs

Besides salaries and dividends, company owners should review other available allowances and tax reliefs. This could include pension contributions, capital allowances, and business expense deductions. Ensuring that all allowable expenses are recorded and claimed before the tax year ends can provide additional savings.

Effective tax planning is a year-round process, but the final months before April 5 provide a crucial opportunity to fine-tune financial strategies. Private company owners should work with their accountants to ensure all income and expense decisions align with their overall tax strategy. By taking proactive steps now, they can maximise their tax efficiency and prepare for the new tax year ahead.

For the full session, please click here. In this course Carl Bayley covers the following topics:

• Personal tax planning: pensions, savings, and capital gains
• Business tax planning: action to consider before the year end or delay until after it – but without letting the tax tail wag the commercial dog
• Planning for private company directors
• The end of the furnished holiday letting regime: what can still be done?
• Inheritance tax: what steps can be taken now to save tax in the long run?
• Why 5th April 2025 is such a critical date for Making Tax Digital

The contents of this article are meant as a guide only and are not a substitute for professional advice. The author/s accept no responsibility for any action taken, or refrained from, as a result of the material contained in this document. Specific advice should be obtained before acting or refraining from acting, in connection with the matters dealt with in this article. The information at the time of publishing was accurate and could be subject to final changes.