Maximising Tax Savings Ahead of March 2026 Year End

Looking at your profits ahead of the next year end to forecast and take advantage of any planning opportunities may help reduce your tax liabilities due in January 2027.

Maximising allowances and reliefs

Individuals are entitled to a tax-free personal allowance of £12,570 for the 2025/26 tax year. Ensuring that each family member involved in the business uses their full allowance can significantly improve tax efficiency. Where children or other family members carry out genuine work for the business, paying them a reasonable wage can help to use up their tax-free allowances. This must be commercially justifiable and properly documented, but it can be an effective planning tool.

In partnership structures, bringing family members in as partners can help share profits across more tax bands and personal allowances. This can be particularly beneficial in high-profit years, but should be considered alongside long-term succession, responsibilities, and pension planning.

Pension contributions

For those earning higher or additional-rate income, making pension contributions can be a very effective way to reduce your tax exposure. Pension payments extend your basic rate tax band, meaning more of your income is taxed at 20% and less at 40% or 45%.

For example, if you paid a net contribution of £5,000 into a pension, your basic rate band would increase from £50,270 to £56,520. This has the effect of pushing the threshold at which you begin to pay higher-rate tax further up, lowering the overall tax due.

Beyond the immediate tax saving, this is also an opportunity to build long-term financial security. Reviewing pension options before the year end can therefore be a particularly effective strategy, reducing tax liabilities today while investing for the future.

Capital Expenditure

Thinking of purchasing a new tractor or piece of farm machinery? Businesses can take advantage of the Annual Investment Allowance (AIA), which provides 100% tax relief on qualifying purchases such as plant, machinery, equipment, and qualifying infrastructure like silage clamps and slurry storage, up to a limit of £1 million per year.

It’s not usually advisable to purchase machinery unless needed, but if you are considering significant investment in plant or machinery in the near future, bringing this expenditure forward into the current year may help reduce taxable profits, provided the asset is purchased and brought into use before the year end.

Hobby Farming Losses

Farming losses can be offset against other income sources, such as employment income. However, where farmers consistently make a loss for more than five years, HMRC may classify the activity as a “hobby” rather than a commercial venture, and the ability to offset those losses is withdrawn.

If your farm has made several consecutive losses, it is worth reviewing your Profit and Loss before the year end to ensure you continue to meet the criteria for a commercial trade and to preserve valuable loss relief.

Final thoughts

Strong profitability brings fantastic opportunities but can also result in significant tax liabilities if planning is not carried out early. Taking time before the year end to review your results, forecast profits, and consider the reliefs and allowances available can make a substantial difference to your January 2027 tax bill. If you would like tailored advice on any of the areas above or support preparing year end forecasts, please get in touch with a member of our team who will be more than happy to help.