A sticky note labelled Tax Efficiency with a drawing of coins sits on a leather wallet. Nearby, Heelan Associates’ tax tips are shown on charts and papers, along with a pen and paper clips, all arranged neatly on a wooden desk.

The most tax efficient year of your life: increase income without working harder

Kirsty Young Tax

Most small business owners try to improve their finances by doing more:

  • More hours
  • More stress
  • More customers

(And hopefully)

  • More turnover

However, one of the biggest improvements to your wallet can come from simply becoming more tax efficient. We’ve seen it time and time again with our own clients. Tax efficiency mean more money, for the same ‘work’.

Just to say, this article is primarily about business tax, but as we know, for both limited company owners and the self-employed, business and personal tax are intertwined.

Act now to save more

In early stages of a new tax year, the tax allowances have just reset. So it’s prime time to get set up for the most tax efficient year of your life! Doing this early in the tax year (like now) can often give you the most opportunities.

So, this isn’t just your usual ‘pay into a pension TICK’ style list. We wanted to cover more of the strategies and habits the most tax efficient owners carry out, and how you can become one of them.

 

The Basics

🔑 Planning for the admin

When it comes to tax success, there is one key point with your tax administration that you really want to be on top of:

Getting your tax return done early can help your cashflow.

You’ve usually got until 31st January following the end of the tax year to submit a digital tax return. Doing this far earlier can help you know your next tax liability for next January early in the previous year. So you can plan for that payment and not get caught out.

If you make ‘payments on account’ twice a year, an early submission can help you. It may mean that your July payment might be less than expected, or not due at all. This is because these payments on account are basically an HMRC “guess” that you will have the same income as the year before. If your income is actually lower, HMRC can change the amount required on account, based on real figures from your tax return.

🔑 Educate yourself so you don’t miss out

Maximising your tax relief requires understanding what your business can (and can’t!) pay for, especially some of the more niche and/or complex deductions.

As a limited company owner, for example, knowing the available tax treatment of the following can really help. You can then compound your tax efficiency when buying or paying for things, effectively making them cheaper:

  • Trivial benefits
  • Mobile phones
  • Annual parties
  • Loaning yourself money
  • Employing spouses or children
  • Use of home
  • Mileage
  • Meals and canteen

… and many more!

Take the time to learn this detail. Even if you use an accountant to help you, they can’t be in your head and with you for every potential purchase decision!

This article would definitely be TL:DR if we tried to list everything you could possibly buy. So instead we have some resources to help:

🔑 Capture it all

Many owners are overpaying tax simply because they are not claiming all of their expenses. This is usually a basic practical issue in that they don’t capture all of them in their records.

Say you are travelling on business. You buy your lunch (your ‘subsistence’) with your own funds (whether cards or cash), not ask for or lose the receipt, and forget it ever happened. Those small ‘lost’ expenses can really add up over a year!

To help with this, you can use technology. Most of the good accounting applications have a way to snap a receipt on a phone camera to get it into your accounting records.

You can then use your phone camera to take a photo of your receipt for your records. If can then get into the habit of snapping the receipt before leaving the till, you will never miss a tax deduction again!

Our personal favourite is Xero. We also like ‘Dext’ but to get those most out of that you would want something like Xero connected to it. You can also get a great discount on Xero here, so try it!

🔑 Digital records and MTD for sole traders

If you are a sole trader who now has to comply with the new ‘Making Tax Digital’ (MTD) rules, you will need to keep digital records. Whilst pictures of receipts themselves are not 100% required, it’s also a great workflow to get the transaction details you have to keep into your system at the time of spending, rather than close to the MTD regular deadline.

Check out our guide to Making Tax Digital to learn more.

 

Don’t accidentally grow an inefficient business

“Turnover is Vanity, Profit is Sanity”

For most business owners, profit matters more than turnover. Turnover doesn’t generally pay your mortgage and support your personal goals.

Keep an eye on your profit/loss is crucial for running a successful business that is tax efficient, especially as it grows. Take time to review the items below.

🔑 The right business structure

Choosing the right way for your business to be structured can help save tax from day one, and allow you to build long term wealth. Whilst the headline tax rate for a limited company and a sole trader/partnership are now quite close, there are still significant savings to be had by incorporating your business in the right circumstances.

🔑 VAT

Should you be VAT registered? Whilst most businesses don’t have a choice once turnover exceeds £90,000 (at the time of writing), for those under it, there is a choice of voluntary registration. It can actually be beneficial to be VAT registered from a financial point of view. This is very often true with B2B (business to business) enterprises.

If you are VAT registered, you often have a choice to be able to use certain HMRC VAT ‘schemes’, which could also cut your VAT bill. So asking your accountant or researching these options is a good task to set yourself early in the tax year. (If you don’t have an accountant or not sure yours is quite on top of this, do get in touch.)

🔑 Plan your headcount

If you are creating or expanding your team, understanding the best time to hire is key to maintaining your profits. This need for careful timing has hit home for many businesses as Employer’s National Insurance went up in 2025. This extra 15% ‘tax’ bill for your business can really start to eat into your profits.

Check out our blog on the subject of Employers Allowance to help cut your team costs.

🔑 Buying things “for tax reasons”

Don’t just spend money to save tax! For every £1000 you spend, you are likely to be saving around £190-250. So it simply doesn’t make financial sense to do this unless you need to make that investment anyway.

If you do need to invest and spend in your business, doing so before the end of your financial or tax year will generally be a good idea, as it will reduce your next bill. However, don’t let the idea of saving tax get you into the habit of just spending money for the sake of it. Plan your purchase dates within your tax year.

🔑 Bad debt and cash flow – planning

Whilst not strictly a tax-efficiency task, advance planning can be key to being able to make purchasing decisions that will reduce your tax bill.

For example, you may be considering purchasing your new van on finance. This will usually result in a far lower tax bill, without having to part with all the cash on day one. However, before buying anything, you need to understand if your business can afford it.

Simple budgeting in a spreadsheet can help. For a ridiculously simple spreadsheet to help with this exercise, see our blog on the subject.

 

Review how you pay yourself

Tax savings can really mount up when you understand what your business can pay for that benefits you personally. Let’s take mobile phones as an example.

  • As a sole trader, paying for your mobile you use for business may well allow you to gain some tax relief.
  • As a limited company, if the company has the phone contract, there is a tax exemption. This means you can use it personally and still obtain full tax relief.

Check out our videos on this subject:

🔑 Limited Company Directors

As a limited company director, reviewing how you are being paid each tax year is important, as income tax rates and allowance change between tax years. This is always something to research yourself and/or review with your accountant early in the tax year.

Here’s what you will want to assess:

  1. Should you pay yourself any payroll salary, and if so how much?
  2. If you are paying dividends, are there any limits and dates to be mindful of?
  3. Could making changes to your pension contributions save more tax?

If you are interested in reading more about dividends, these will help.

If you are wondering about how else you might ‘pay’ yourself as a limited company owner, check out this video.

 

Think about future you

These may be the more mundane tax-reducing strategies, but they are the mainstay of future savings and wealth-building.

🔑 Pension contributions

If you are a business owner thinking about saving for your retirement, pensions are often a way to do this very tax efficiently, particularly if you are a limited company.

To start, just ask yourself three simple questions:

  1. How much can I afford to put in this year?
  2. How should I contribute (limited company owners have a choice)?
  3. When should I make the payment?

The three ways to help answer these are:

  1. Sharpen up your financial planning and budgeting
  2. Research what’s best for you (it’s one of the biggest tax savings you can make through a limited company)
  3. Capture your payments within your financial year to reduce the next tax bill

🔑 ISA allowances

Dull but dependable! If you are into tax free savings, using these accounts for tax free interest can be a solid idea. Just be aware that for 2026/27 the limits have slightly changed. Whilst the headline is still £20,000 max contributions per tax payer, per year, it’s only £12,000 per year for a cash ISA if you are aged under 65.

🔑 Capital gains exemption

Thinking of selling shares or crypto? You will get the first £3,000 of ‘profit’ tax free via your Capital Gains Tax Annual Exempt Amount. This can be extra useful if you are thinking of selling some close to the end of the tax year. You could sell some before the end of the tax year to use this year’s £3,000 allowance, then sell some more in the new tax year, when allowances have reset.

🔑 Married? It might be tax efficient!

You might be eligible for Marriage Allowance if:

  1. You are married

and

  1. You and your spouse/civil partner are both basic rate taxpayers (earning under around £50,000 per year)

Using Marriage Allowance can save £250+ a year in tax in the right scenario.

🔑 Tax-efficient investments

If you are thinking about investing money, there are some investments that can provide a tax refund at a decent size (30-50% of the investment):

  • The Seed Enterprise Investment Scheme (SEIS)
  • Enterprise Investment Scheme (EIS)
  • Venture Capital Trusts (VCTs)

The downside is they are viewed by many as high-risk investments. So this is definitely one to speak to your financial advisor about, as generally they are only suitable for experienced investors.

 

Build tax efficiency into your weekly routine

The most tax efficient business owners set themselves a ‘finance routine’ which usually includes:

  • Spend 15 minutes daily on finances
  • Keeping bookkeeping live, not retrospective
  • Separating personal and business spending
  • Using technology properly (and efficiently)
  • Photographing and logging receipts immediately
  • Reviewing their numbers regularly

For more thoughts on a finance focused morning routine, check out our blog the perfect morning routine for small business growth!

 

Final thoughts: small changes compound

You probably do not need to work twice as hard this year to improve your finances. Small improvements made early in the tax year can create surprisingly large savings by next April.

What you will need is:

  • Better systems
  • Better planning
  • Better habits
  • Better advice

Talking of better advice, if you don’t have an accountant, or not sure yours is really up to speed with all the opportunities to be more tax efficient, talk to us at Heelans.

 

 

 

About the author

Dan Heelan is the Business Services Director of Heelan Associates, an accounting firm that helps small business owners across the UK start, survive, and grow.

With a background as a small business owner himself, he discovered his passion for accounting and tax early in his journey and now focuses on empowering fellow entrepreneurs with the knowledge and tools to navigate the financial side of running a business.

You can see and hear Dan in action in his regular: