Small Business / SME Tax Check: Key Areas to Review Before Year-End

Introduction
As the financial year draws to a close, small businesses and SMEs have a valuable opportunity to review their tax position. Year-end tax planning is essential to ensure compliance with UK tax regulations, minimise liabilities, and take advantage of available reliefs. This guide highlights the key areas to focus on for effective tax planning.

Key Areas to Review

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Capital Allowances
Review your capital expenditure to maximise available tax reliefs such as the Annual Investment Allowance (AIA) or first-year allowances under full expensing (available until 31 March 2026). Consider bringing forward planned purchases of equipment or machinery to accelerate relief. If you are planning to sell fixed assets, delaying the disposal until after the year-end may help preserve the value of your capital allowances pool.

Chargeable Gains
Timing is crucial when it comes to chargeable gains. If you are planning to sell assets, consider whether delaying the disposal could reduce your tax liability. Explore reliefs such as rollover relief, holdover relief, or the Substantial Shareholdings Exemption (SSE) to defer or exempt gains. If you operate within a group structure, joint elections can help move gains and losses between group companies to optimise tax outcomes.

Allowable Expenses
Ensure you are claiming all allowable expenses to reduce your taxable income. For property businesses, this includes agent fees, council tax liabilities, and the cost of replacing domestic items in residential properties. However, remember that legal fees for buying or selling property are not deductible against property income but may be allowable for capital gains tax purposes.

Cash Basis Accounting
If you are an unincorporated business using cash basis accounting, check that your capital expenditure deductions comply with the rules for small trading businesses. For residential rental properties, ensure you are claiming relief for replacing domestic items where applicable.

Practical Tips for Year-End Tax Planning
Review your financial records to ensure all income and expenses are accurately recorded and categorised. Plan ahead by considering the timing of major transactions, such as asset purchases or disposals, to optimise tax reliefs. Seek professional advice from your accountant or tax adviser to make the most of available reliefs and ensure compliance with current regulations.

Conclusion
Year-end tax planning is a vital step for small businesses and SMEs to optimise their tax position and prepare for the year ahead. By focusing on key areas such as capital allowances, chargeable gains, and allowable expenses, businesses can reduce their tax liabilities and improve their financial health. Taking the time to review and plan now can make a significant difference to your bottom line.