The 10 checks that can save business owners thousands by 5 April

A dividend declared on 5 April and one declared on 6 April look identical on paper. In reality, they fall into different tax years and interact with different income thresholds.

If your income is close to £50,270 or £125,140, that small shift in timing can determine whether you remain in one tax band or quietly tip into another. It can also mean part of your personal allowance or basic-rate band goes unused.

Often, a modest additional dividend before the year end is more tax-efficient than leaving profits sitting in the company.

For directors, this is frequently the most tax-efficient step available, and one that’s often overlooked.

An employer pension contribution made by your company reduces corporation tax, avoids dividend tax and income tax, and attracts no National Insurance. What’s more, you can make use of unused allowances from the previous three tax years (assuming you’ve had the pension in those tax years).

If your spouse of partner works in the business and is paid through payroll, the company may also be able to make pension contributions on their behalf. This can be a highly efficient way to use allowances within the family, while keeping costs inside the company rather than funded from taxed personal income.

In many cases, this is significantly more efficient than extracting the same money as dividends and contributing personally. It’s also where teamwork between your accountant and your financial planner is of huge value.

This is also a point where other tax-efficient benefits can be reviewed. For example, a Relevant Life Policy allows your company to provide life cover for you (and potentially your spouse or partner if they are employed by the business) as an allowable business expense, without a personal income tax or National Insurance charge. It’s another example of how the company can fund personal protection far more efficiently than you doing so personally.

The Annual Investment Allowance allows your company to deduct the full cost of qualifying equipment purchases, up to £1 million, from this year’s profits.

This often applies to ordinary items: laptops, office furniture, tools, fixtures, commercial vehicles. Things that sit on a to-do list for “later in the year”.

Timing these purchases before 5 April can materially reduce this year’s corporation tax bill.

It is surprisingly common for directors to dip into the company during the year and not realise they now have an overdrawn loan account. Overdrawn director’s loan accounts are believed to feature in around 75–80% of business insolvency cases, illustrating how often directors inadvertently get into this position.

Left unresolved, this can trigger a 33.75% tax charge for the company if not cleared within nine months of the year end. Cleared before 5 April using dividends or salary, avoids it becoming an expensive problem later.

In many family-run companies, it’s common for a spouse to be a shareholder on paper, yet their available allowances and tax bands go largely unused in practice.

HMRC studies show that many spouses in jointly-owned businesses don’t fully use their personal allowance and tax bands because income isn’t actually paid to them through shares or salary. This is particularly common in smaller family-run companies where one partner is more involved in the business than the other.

Taking time before the tax year ends to review who owns what and how income is distributed can allow better use of personal allowances, dividend allowances and basic-rate bands. Opportunities that are easily missed if nothing changes by 5 April.

Leaving profit in the company can feel prudent. But it’s not always the most tax-efficient option.

The right approach depends on your personal tax position this year versus next, expected changes to corporation tax, and what you plan to do with the business in the future.

A short review now can prevent profits building up unnecessarily when they could have been extracted more efficiently.

If you’re considering selling part of the business, introducing shareholders or disposing of assets, timing matters again.

You might want to use this year’s capital gains tax exemption before it resets, and check eligibility for Business Asset Disposal Relief, which can reduce capital gains tax to 10% on qualifying disposals.

Many business owners routinely pay for things themselves that the company could cover more tax-efficiently: mobile phone contracts, broadband used for work, professional subscriptions, training courses.

Even small items such as trivial benefits or a staff event before the end of the year can be more tax-efficient when handled through the company rather than personally.

Charitable donations made by your company are an allowable business expense and help reduce your corporation tax bill. This can be simpler and more efficient than giving personally and reclaiming tax relief through Gift Aid.

If charitable giving is already part of your plans, it’s worth considering whether the donation should come from the company before the tax year ends.

After profit extraction, pension funding, capital allowances and expenses have been reviewed, the usual checklist still matters: ISAs, Junior ISAs, gifting allowances and personal pension top-ups.

But for business owners, these are often the final step, funded by profits that have already been extracted from the business in the most tax-efficient way possible.