Five tax tips before the end of the tax year for family businesses

Key tax year end considerations for family businesses

With the tax year end approaching, family businesses should consider a few key areas where early action could make a real difference:

1. Consider dividends before 6 April

Dividend tax rates for basic and higher-rate taxpayers will increase by 2% from 6 April. Where profits and cashflow allow, declaring a dividend before the end of the tax year may reduce the overall tax cost.

2. Review ownership structures for Business Relief

A £2.5 million cap on 100% inheritance tax (IHT) Business Relief for gifts of shares in family trading companies will take full effect from 6 April. Now is an important time to review ownership and succession planning.

3. Prepare for Making Tax Digital (MTD) for income tax

From April 2026, sole traders and landlords with total gross annual trading and/or rental income of £50,000 or more will need to comply with Making Tax Digital for income tax. Under MTD, records must be kept digitally, with quarterly updates submitted to HMRC as well as a final tax return at year-end. Preparing now will help avoid disruption and provide a smooth transition.

4. Use income tax allowances across the family

Personal allowances and dividend allowances are use-it-or-lose-it. Ensuring income is structured appropriately between family members involved in the business is important. Care is needed to ensure that remuneration is proportionate to each individual’s role and contribution, as arrangements that appear excessive or artificial can be open to HMRC challenge.

5. Review directors’ loan accounts

Overdrawn directors’ loan accounts can trigger a corporation tax charge (currently at 33.75%) if not repaid within nine months of the year end, as well as potential benefit-in-kind issues. Clearing balances or putting formal arrangements in place before year end can avoid unexpected tax costs.

Next steps

A short year-end review now can help avoid missed opportunities and ensure the business – and the family behind it – are well prepared for the new tax year ahead. Get in touch to discuss how these steps could benefit your family business.