Year-end tax planning for sole traders: 6 moves to make before 5 April


The tax year ends on 5 April, and for sole traders the weeks before it are the highest-value planning window of the year. Once the year closes, most reliefs are locked in. Before it closes, you still have choices. Here are six practical moves worth making now, none of which require exotic schemes, just good timing and tidy records.

1. Bring forward planned spending

If you are a cash-basis trader or you report on an accruals basis with costs incurred before year end, buying equipment, software, or stock you genuinely need before 5 April pulls the tax relief into this year. The annual investment allowance covers most plant and machinery up to a generous limit, so a laptop, tools, or a van bought in March reduces this year's taxable profit.

Do not buy things you do not need just for the relief. Spending £1,000 to save £200 of tax is still £800 gone. But genuine planned purchases should be timed deliberately.

2. Use your pension allowance

Personal pension contributions extend your basic-rate band, which directly cuts higher-rate liability. If your profits are pushing you toward the higher-rate threshold, a pension contribution before 5 April can pull you back under it. Check how much of your annual allowance remains, unused allowance from the previous three years can be carried forward.

3. Mind the payments-on-account trap

January's tax bill often shocks traders because it includes a payment on account toward next year, calculated at 50% of this year's liability. If your profits are falling, you can apply to reduce your payments on account, but do it with evidence and care. HMRC charges interest if you reduce them too far and turn out to be wrong. If profits are rising, budget for the January sting now rather than discovering it in December.

4. Review your expense claims

The expenses most sole traders underclaim are the boring ones: a reasonable proportion of home office costs, phone and broadband, professional subscriptions, and mileage at HMRC's approved rates. Go through your bank statements line by line for the year. Every legitimate cost you missed is profit you are being taxed on unnecessarily. Traders who work with accounting outsourcing providers often find this review turns up hundreds of pounds in missed claims, because a second pair of eyes catches what familiarity misses.

5. Consider your structure for next year

If your profits are consistently above £50,000, the maths of incorporation deserves a proper look. Running as a limited company changes your tax profile: corporation tax on profits, then salary and dividends to extract them. It is not automatically better, there are admin costs and IR35-style considerations for some, but the crossover point is lower than many traders think. Get specialist tax advice before the new tax year so any change starts cleanly on 6 April.

6. Get your records MTD-ready

From April 2027, Making Tax Digital for Income Tax pulls in sole traders with qualifying income over £30,000, with around 1.07 million more businesses entering the regime. If you are still on spreadsheets or paper, use this year-end as the moment to move onto MTD-compatible software. Starting the new tax year on proper software means your 2026/27 records are digital from day one, and the quarterly update habit has a full year to bed in before it counts.

A final word on timing

Tax planning is mostly about doing ordinary things at the right time. None of these six moves is complicated, but each one loses most of its value after 5 April. Block out an afternoon, work through the list with your records open, and start the new tax year with the decisions already made.

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