Every tax year brings new changes to year-end planning and 2025/26 is no exception! April 2025 will see an increase in Class 1 NI, the termination of furnished holiday let status, the beginning of a decrease in benefits of business asset disposal relief (BADR) and restriction of inheritance tax relief for business assets. These are all major players that need to be kept in mind when planning ahead to remain as tax efficient as possible.
The first strategy that springs to mind to compensate for these changes is to take a small salary and extract anything else needed as dividends. If this is the case, you need to think about what is the best level to set the salary at to maximise savings- should it be the primary or secondary threshold? Just like last year, there is a minimal difference but worth thinking about!
If you need additional short-term cash, but no profits to extract as a dividend, you can make a bonus payment (subject to the company being able to fund it!). However, remember that this will be more expensive from the 6th April due to the secondary NI rate increase! If the amount needed is relatively low, the company can make an advance of expenses or a loan instead.
Give us a call at 01622 738165 today to get some advice about setting next year’s dividend level and what you can do to make sure you are moving forward as tax efficiently as possible.