SPECIAL REPORT | January 2026 | Year End Tax Planning 4 if income is over £80,000, and partial for income between £60,000 and £80,000. You may be able to keep some or all of your child benefit by switching income between you and your partner, or by taking other steps to bring your income below one of these limits. PLANNING FOR DIRECTORS, EMPLOYEES AND THE SELF-EMPLOYED My income varies considerably from year to year. How can I minimise my tax bills? ● If your income is less than £125,140 this year but you expect it to exceed that figure next year, you could bring forward income into 2025/26 to avoid the additional or top rate next year. ● Conversely, if your income will fall below £125,140 in 2026/27, you might be able to avoid the additional or top rate of income tax this year by delaying a bonus until after 6 April 2026. You could consider a similar strategy to keep your income below the level at which you would lose your personal allowance. Alternatively, you could sacrifice salary to bring your income below any of the thresholds in exchange for a tax-free employer's pension contribution or a low-emission company car. Other considerations ● If you have had to work from home this year, you can claim a tax-free amount of £312 for 2025/26 to cover the additional costs involved (provided your employer does not reimburse them). Relief is only available if you have to work from home, not if you merely choose to do so. For 2025/26, a claim must be made to HMRC by post, and evidence has to be submitted in support of the claim. This is the last year that such a claim can be made. ● This is also a good time to review your company car situation, especially if you have been working from home and expect this to continue long term. If you are hardly using your company car, you can return it to your employer to remove the tax charge. Alternatively, switching to a fully electric car or an ultra-low emission hybrid with a high electric motoring range will drastically lower your tax cost. Such a switch will also save tax and NICs for your company. ● If you are going to work abroad for more than a year, it may help to leave the UK before 6 April 2026. There are complex rules around residency, so you should seek specific advice. How can I manage dividends to minimise my tax liability? Using the dividend tax-free allowance of £500 could save you up to £197 a year in tax. If you are the owner of a limited company, it would be wise to ensure you make use of this allowance for 2025/26. From 6 April 2026, the basic and higher tax rates on dividends will increase by two percentage points, so there will be a tax advantage if you bring forward dividends to 2025/26, although this will mean paying the related tax liability a year earlier. Similarly, if you are a higherrate taxpayer and may become an additional-rate taxpayer in 2026/27, you could bring forward a dividend to avoid the additional rate next year. But you should avoid bringing forward a dividend if it is more likely to fall into a higher band this year than next year. Dividends are subject to the same tax rates and thresholds as the rest of the UK if received by a Scottish taxpayer. You could even give shares to your spouse or civil partner shortly before paying a dividend if they pay tax at a lower rate than you, provided you genuinely transfer ownership. It is advisable to leave as much time as possible between the gift and the subsequent dividend payment. Credit: AlisaRut\shutterstock.com Planning point You may be able to reorganise your finances now to make use of some of these opportunities for 2025/26, but you should plan ahead for 2026/27 to gain the maximum income tax saving.
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