March 2026 tax planning: how to reduce your 2025/26 tax bill
January’s self-assessment deadline has passed (and we’ve survived another tax season!) If you’ve just paid a bigger tax bill than you’d like, you’re probably already thinking, “How do I avoid that next time?”
It’s not too late. Late February and into March are great for tax planning – there’s still enough of the 2025/26 tax year left to make a real difference.
Don’t wait until next January to think about next year’s bill. By then it really is too late to do much that makes a difference.
Here are five straightforward, legal strategies that could meaningfully reduce your 2025/26 tax bill – but only if you act now.
- Boost your pension contributions
Pension contributions are one of the most effective ways to reduce your 2025/26 tax bill, and they’re available to almost everyone. When you pay into a pension, you receive tax relief at your marginal rate. That means a basic rate taxpayer (20%) effectively pays just £80 for every £100 contributed. A higher rate taxpayer (40%) pays just £60.
The annual allowance for 2025/26 is £60,000, so there is significant scope to contribute – up to 100% of your earnings if that’s lower. If your income is hovering near £50,270 (the higher rate threshold), a strategic pension contribution could pull you back into the basic rate band, saving you 20% on that slice of income.
Pension contributions can also reduce your adjusted net income, which matters if you earn over £100,000 (at risk of losing your personal allowance) or if your household income exceeds £60,000 (child benefit territory). A few weeks of contributions before 5 April 2026 could make a meaningful difference.
- Make the most of your personal tax allowances
It sounds obvious, but you’d be surprised how many people reach 5 April without having used allowances that are simply lost if you don’t use them. The Marriage Allowance is one of the most commonly missed. If you’re married or in a civil partnership and one of you earns below the £12,570 personal allowance, you can transfer £1,260 of that unused allowance to the higher earner, saving up to £252 in tax. It’s free to claim via HMRC and can even be backdated up to four years — so if you’ve never claimed it, that’s potentially over £1,000 sitting uncollected.
If you make charitable donations, it’s also worth checking whether you’re claiming Gift Aid correctly on your self-assessment return. Basic rate tax relief is claimed by the charity automatically, but if you’re a higher rate taxpayer, you can reclaim the additional 20% yourself, something a lot of people simply forget to do.
Finally, don’t overlook the £20,000 ISA allowance before 5 April. Putting money into a stocks and shares or cash ISA won’t reduce your tax bill this year, but it does shelter future investment growth and income from tax permanently. For business owners building personal wealth alongside their business, it’s a straightforward and effective long-term approach. Download our 2025/26 tax rates guide to make sure you’re using yours effectively.
- Involve your spouse or civil partner in the business
If your partner earns less than you, involving them legitimately in your business can reduce your overall household tax bill. Everyone has a personal allowance of £12,570 for 2025/26, and income up to £50,270 is taxed at the basic rate. By splitting income between two people, you make better use of the tax system’s structure.
For sole traders, this could mean genuinely employing your spouse to do bookkeeping, administration, or other tasks they are qualified to perform – at a commercially reasonable rate. The emphasis is on “genuinely”. HMRC scrutinises these arrangements (more and more so these days) and the salary must reflect actual work done.
For limited company directors, making your spouse a shareholder and paying dividends can be even more tax-efficient, since dividends are taxed at lower rates and are not subject to National Insurance. A higher rate taxpayer paying their spouse (who has no other income) a salary of £12,570 could save around £5,000 in tax and National Insurance a year. However, you can only pay dividends out of profits so be careful on the timing of these payments.
- Review how you extract money from your business
How you pay yourself can make as much difference to your tax bill as how much you earn. If you’re a limited company director, February and March are a good time to review your salary and dividend strategy before the tax year closes on 5 April 2026.
Many directors take a low salary (typically up to the National Insurance threshold of £5,000 for 2025/26) and top up with dividends, which are taxed at lower rates and carry no National Insurance (yet). If you haven’t used your £500 dividend allowance for 2025/26, it’s worth considering whether to take a dividend before the year-end. Remember this only makes sense if your company has sufficient distributable profits to do so legally.
Timing matters here too. If your income is already pushing you into the higher rate band (above £50,270), taking an additional dividend this tax year could cost you 33.75% in dividend tax. In that case, it might be more efficient to hold off and take the dividend in 2026/27 instead, spreading your income across two tax years.
It’s also worth revisiting your overall business structure. If you’re still operating as a sole trader but your profits have grown significantly, switching to a limited company could save you money. Corporation tax is currently 19-25% compared to income tax rates of up to 40% plus Class 4 National Insurance. Timing this transition correctly is important though, so it’s a conversation to have with your accountant sooner rather than later (and it’s probably too late to have a material impact this tax year).
- Time your income and expenses carefully
If you’re a sole trader using cash basis accounting, you pay tax on money when it actually lands in your bank account. That gives you some flexibility in how you manage your income and expenses around the 5 April 2026 tax year-end.
Some practical options to consider:
- Delay sending invoices for work completed near the year-end, so income falls into 2026/27 rather than 2025/26
- Pay for annual subscriptions, professional memberships, or insurance renewals before 5 April to bring the expense into this tax year
- If you have a big project completing soon, consider whether a staged payment plan would spread income across two tax years.
A word of caution: cash flow should always take priority. Delaying invoices is only sensible if it won’t put pressure on your business finances or damage your client relationships. The goal is to be smart about your tax, not to create new problems, such as running out of money to pay your bills on time.
Start now – you still have time to reduce your 2025/26 tax bill
The biggest mistake business owners make is waiting until January to think about tax. By then, the year is over and most of your options have gone. February and March are valuable months – there’s still time to make pension contributions, plan equipment purchases, review your household tax position, and adjust your income timing.
If you’d like help working out which strategies are right for your business, our friendly team is here. Whether you’re a sole trader, landlord, or limited company director, we can help you put a straightforward plan in place before the tax year ends. No question is too silly – that’s a promise.
Contact Adams Accountancy today for a free, no-obligation chat. Call 01322 250001 or book online.
About the author
Michelle Adams is a qualified accountant and director at Adams Accountancy, based in Dartford, Kent. With over 15 years of experience supporting sole traders, landlords, and limited company directors across Kent and beyond, Michelle and her all-female team specialise in making complex tax matters simple, friendly, and jargon-free.
Frequently asked questions about reducing your 2025/26 tax bill
When should I do tax planning to reduce my 2025/26 tax bill?
With around five weeks until the 5 April 2026 year-end, there is still time to make pension contributions, bring forward equipment purchases, and review your income timing. Acting now is far better than doing nothing and facing the same situation next January.
Do pension contributions really reduce the tax I owe?
Yes. Personal pension contributions receive tax relief at your marginal rate, which means they directly reduce your taxable income and for limited company directors, they are an allowable deduction for Corporation Tax. For higher rate taxpayers, the effective cost of contributing £100 to a pension is just £60 once relief is claimed via your self-assessment return. They can also protect your personal allowance and child benefit entitlement if your income is above the relevant thresholds.
Can I put my spouse on the payroll even if my business is small?
Yes, you can – but the arrangement must reflect genuine work at a commercially reasonable rate. There is no minimum business size required, but HMRC does look carefully at spouse salary arrangements. Your accountant can help you set this up correctly so you get the tax benefit without any compliance risk.
What if I’m not sure which strategies apply to me?
That’s exactly what we’re here for. Not every strategy suits every business – your personal circumstances, business structure, and income level all affect which options are worth pursuing. A short conversation with our team can help you identify the most effective steps for your situation. Contact us for a free, no-obligation chat and we’ll help you work out where to start.
About the author
Michelle Adams is a qualified accountant and director at Adams Accountancy, specialising in helping small business owners and high earners optimise their tax position. With over 15 years of experience supporting limited companies, sole traders and professionals across Kent, Michelle and her team make complex tax planning simple and accessible. For expert advice on how to reduce your 2-25/26 tax bill and all other aspects of running a business, contact Adams Accountancy or call 01322 250001 for a free consultation.