Tax Planning for 2025

As we step into 2025, it’s the perfect time for small and medium-sized businesses (SMEs) in the UK to take stock of their financial health and plan for the year ahead. Effective tax planning can help you maximise savings, ensure compliance, and set your business up for success in the new year. Here’s what you need to know and do to make 2025 a financially strong year for your business.

1. Review Changes to Tax Laws

The UK tax landscape evolves regularly, and staying updated on changes is crucial. For 2025, key updates include:

• Corporation Tax: The main rate remains at 25% for profits above £250,000, with a lower rate of 19% for profits under £50,000. Businesses with profits between these thresholds can benefit from marginal relief.

• Making Tax Digital (MTD): All VAT-registered businesses, regardless of turnover, must comply with MTD requirements. Ensure you’re using compatible software for seamless submissions.

• Employer Contributions: Review changes to National Insurance thresholds and rates to ensure accurate payroll calculations.

2. Maximise Tax Reliefs and Allowances

Take advantage of available reliefs and allowances to reduce your tax burden. Key opportunities include:

• Annual Investment Allowance (AIA): Claim up to £1 million for qualifying capital expenditures.

• R&D Tax Credits: If your business invests in innovation, explore research and development tax relief.

• Employment Allowance: Offset up to £5,000 of your employer’s National Insurance contributions.

3. Plan for VAT and Cash Flow

VAT can significantly impact cash flow, particularly for growing businesses. Consider:

• VAT Schemes: Evaluate whether schemes like the VAT Flat Rate Scheme or Annual Accounting Scheme can simplify your VAT obligations.

• Timely Submissions: Late VAT submissions result in penalties under the new penalty regime, so prioritise timely filing.

4. Budget for the Future

Start the year with a robust financial plan. Include:

• Forecasting: Estimate income and expenses for 2025 to identify potential cash flow challenges.

• Contingency Funds: Set aside reserves for unexpected expenses or economic changes.

• Debt Management: Review existing debts and plan repayments to avoid unnecessary interest costs.

5. Seek Professional Advice

Tax laws and financial planning can be complex, and a professional accountant can help you navigate the nuances. They can:

• Identify additional savings opportunities.

• Ensure compliance with HMRC requirements.

• Provide strategic advice tailored to your business needs.

6. Invest in Technology

Leverage technology to simplify financial management. Cloud-based accounting software can:

• Automate bookkeeping and invoicing.

• Provide real-time financial insights.

• Ensure compliance with Making Tax Digital requirements.

7. Prepare for the Unexpected

As we have seen over the last 10 years the economic landscape is unpredictable. Stay proactive by:

• Regularly reviewing financial performance.

• Keeping up with government announcements that may impact taxes or funding opportunities.

• Diversifying income streams and build new income streams to mitigate against risks.

Conclusion

The start of a new year is an ideal time to align your tax planning and financial strategy with your business goals. By staying informed, maximising available reliefs, and seeking expert advice, your SME can thrive in 2025 and beyond.

Need help preparing for the year ahead? Our team of experts is here to provide personalised support. Contact us today to ensure your business is ready for a successful 2025.