What you need to know

Tax planning is one of the most effective ways to keep more profit in our pockets. In 2025, small businesses face a mix of opportunities and challenges when it comes to minimising their tax bills. The rules have shifted, allowances have changed, and some reliefs are more valuable than ever.

This guide will walk you through practical tax-saving strategies you can apply right now to optimise your position this year.

What’s new for 2025

The tax landscape for small businesses has changed in several areas:

• Corporation tax: The main rate remains at 25%, but the small profits rate for companies earning £50,000 or less stays at 19%.
• VAT threshold:The registration threshold has risen, meaning some small businesses will now fall outside compulsory registration.
• Capital allowances: The Annual Investment Allowance (AIA) continues at £1 million, giving businesses a big incentive to invest.
• Income tax bands: No changes to thresholds, but the freeze on personal allowance and higher-rate limits means more people will drift into higher bands.

Choosing the right business structure

Your legal structure affects how much tax you pay and how you can extract money from your business. 

• Sole trader: Simple to run, but you pay income tax and National Insurance on all profits.
• Partnership: Similar to a sole trader, but profits are split between partners.
• Limited company: Often more tax-efficient once profits reach a certain level, as you can pay yourself via a mix of salary and dividends.

Reviewing your structure could reveal ways to save on tax, especially if your profits are growing.

Making the most of allowances and reliefs

Many businesses miss out on reliefs they qualify for

• Annual Investment Allowance: Claim 100% tax relief on qualifying plant and machinery in the year of purchase.
• Research & Development relief: Even small businesses can claim if they’re innovating or improving products, services, or processes.
• Business rates relief: Check if you qualify for small business rates relief or sector-specific discounts. 

Managing income and expenses wisely

Good timing can make a big difference:

• Bring forward costs into the current year if you expect higher profits now
• Delay invoicing until the new tax year if it helps keep you in a lower band.
• Keep detailed records of all allowable expenses – from travel and home office costs to training and marketing.
• Avoid claiming for items that HMRC doesn’t accept, as this can trigger unwanted attention. 

Tax-efficient ways to take money from your business

If you run a limited company, think about how you take income:

• A salary keeps you in the National Insurance system.
• Dividends are taxed at lower rates than salary once you use your personal allowance.
• Pension contributions can be paid by your company and deducted as a business expense, giving you long-term savings.

Using loss relief to your advantage

If your business makes a loss, it’s not always bad news for tax –

• Offset the loss against other income in the same year to reduce your overall bill.
• Carry it forward to reduce the tax on future profits. 

Planning for VAT

VAT decisions can impact your bottom line

• Register voluntarily if it lets you reclaim more than you pay.
• Consider schemes like the flat rate scheme to simplify accounting and possibly reduce what you owe. 

Staying compliant while saving tax

Tax savings only count if you stay on the right side of HMRC

• Keep accurate, up-to-date records for all transactions.
• Use accounting software to track income, expenses, and deadlines.
• Store receipts digitally to make audits less stressful.

When to seek professional advice

Some situations are worth paying for expert help

• Selling assets or a business
• Complex VAT issues.
• Multiple income streams.
• International transactions. 

An accountant can help you avoid costly mistakes and uncover savings you might miss.

Taking control of your 2025 tax bill

By reviewing your structure, claiming all reliefs, and planning ahead, you can cut your tax bill and improve cash flow. Small, consistent actions now will make a big difference at year-end.

If you want tailored advice, speak to a tax professional who understands small business needs – it’s often the most profitable investment you’ll make this year.

Ready to get expert help?

At RH Accountant, we help growing businesses like yours stay on track with clear, practical support.

Let’s talk about how we can help you be as tax-efficient in 2025 as possible.