With the new tax year starting on 6 April, this is the right time to step back, review your position, and put a clear plan in place for the year ahead.
Why the new tax year matters
Much of the focus at this time of year is on what can still be done before 5 April. But just as important is what happens next.
The start of a new tax year creates a clean slate. Allowances reset, thresholds refresh, and planning opportunities reopen. For business owners and directors, this is often the best point to take a more structured approach rather than reacting later in the year.
The difference is not usually about doing more. It is about doing things earlier, with more clarity and fewer constraints.
Start with a clear view of your expected income
Before making any decisions, it is important to understand what the next year is likely to look like.
That includes:
- expected business profits
- how much you plan to extract personally
- whether income is likely to increase or fluctuate
- any planned one-off events such as asset sales or investments
Without this baseline, it is difficult to plan effectively. Decisions around salary, dividends and pension contributions are all influenced by your expected income position.
Set your salary and dividend strategy early
For company directors, one of the most effective steps is to set a clear remuneration strategy at the start of the year rather than adjusting it later.
This involves:
- deciding on an appropriate salary level
- planning how and when dividends will be taken
- ensuring this aligns with your personal tax position
The dividend allowance has reduced significantly in recent years. That means taking dividends without a plan can quickly lead to unnecessary tax.
A structured approach also ensures dividends are:
- supported by distributable reserves at the time they are declared
- properly documented
- aligned with company performance
Plan pension contributions properly
Pension contributions are often left until the end of the tax year. While that can still be effective, planning earlier gives you more flexibility and control.
At the start of the year, consider:
- how much you want to contribute over the year
- whether contributions will be regular or one-off
- whether unused allowances from previous years are available
- whether tapering applies to your position
Carry forward can allow unused pension annual allowance from the previous three tax years to be used, provided you were a member of a registered pension scheme in those years.
For higher earning directors, tapering can significantly reduce the available allowance. This makes early planning particularly important.
Make full use of allowances from the outset
The new tax year brings a fresh set of allowances, but these are no longer as generous as they once were.
In particular:
- the dividend allowance has been reduced significantly
- the capital gains annual exemption has also reduced
Rather than waiting until year-end, it is more effective to plan how these will be used from the beginning.
This may involve:
- structuring dividend payments
- planning asset disposals
- considering transfers between spouses where appropriate
Early planning gives you options. Late planning limits them.
Keep your director’s loan account under control
A new tax year is a good opportunity to reset how the director’s loan account is managed.
Best practice includes:
- avoiding informal drawings where possible
- clearly separating salary, dividends and loans
- regularly reviewing the account balance
Two key risks to keep in mind:
- loans still outstanding 9 months after the company year-end can trigger a tax charge
- overdrawn balances above £10,000 can create a benefit-in-kind if interest is not charged
A clear approach from the start of the year can prevent these issues from arising.
Align tax planning with business decisions
Tax planning should not sit separately from how the business operates.
At the start of the year, consider:
- planned investment in equipment or growth
- hiring decisions
- expansion plans
- changes in pricing or structure
These all have tax implications. Bringing them into a single plan ensures tax efficiency supports your commercial goals.
Do not leave everything until March (again)
One of the most common patterns is leaving planning until the final weeks of the tax year.
This often leads to:
- rushed decisions
- limited options
- missed allowances
- unnecessary tax costs
A simple plan created at the start of the year can be reviewed and adjusted as things change. That creates control and avoids pressure later.
Example
A director finishes the tax year having made several last-minute decisions, including a pension contribution and dividend declaration in the final week.
In the new tax year, they take a different approach. They:
- set a clear salary at the outset
- plan dividend payments across the year
- schedule pension contributions in advance
- monitor their director’s loan account monthly
- identify how allowances will be used early
The result is not just better tax efficiency. It is also greater clarity, fewer surprises and less stress at year-end.
What to do now
As the new tax year approaches, focus on:
- understanding your expected income
- setting a clear salary and dividend strategy
- planning pension contributions early
- identifying how allowances will be used
- keeping the director’s loan account under control
- aligning tax planning with business decisions
This does not need to be complicated, but it does need to be deliberate.
Final Thought
A quote from our Principal, Sunil Aggarwal:
“The new tax year is not just a reset. It is an opportunity. A small amount of planning now can remove pressure later, reduce uncertainty, and give you greater control over your overall position. The earlier you act, the more options you have.”
The start of the tax year is the best time to take control of your tax position. A clear plan now allows you to use allowances efficiently, avoid last-minute decisions, and align your tax strategy with your business goals. Contact us to create a plan for your business.
You can:
- Email: info@drs-tax.com
- Telephone: 020 8059 1891
- Submit an enquiry via our Contact Us page
You can also book a free 15-minute consultation to review your position and next steps.