TTR Barnes

For many business owners, “tax planning” is something that tends to be left until the eleventh hour, usually when the financial year-end is looming or when that reminder from HMRC lands in the inbox. But in today’s fast-moving economy, where the rules shift more often than we’d like, waiting until the last minute isn’t just stressful, it could be costly.

In this article, we explore five common tax planning mistakes we see among SMEs and how to mitigate them through simple, proactive habits that can make a big difference over the course of a financial year.

By far the most common mistake we see is companies and business owners leaving it too late to plan effectively.

Running a business often means wearing multiple hats, from client delivery to operations, staffing and compliance.  Tax planning can often be pushed to the bottom of the to-do list but this approach can drastically reduce the flexibility to plan efficiently as the end of the financial year grows closer.

Considering tax position and pathway possibilities throughout the year gives time to act. That could mean choosing the right time to make an investment, managing how profits are extracted or simply ensuring no overpayments are happening due to oversights. A well-timed conversation with an accountant early in the year can spot opportunities for tax efficiency that may not be available later in the year.

HMRC provides a number of reliefs designed to support innovation, investment, and growth, yet many businesses don’t claim them – often because they’re not aware they exist or they assume they don’t qualify.

Research and Development (R&D) tax relief is a typical example. Many directors still think it only applies to tech start-ups or lab-based science. In reality, any SME that is working to overcome technical uncertainties – such as improving manufacturing processes, developing new systems or creating more efficient workflows – could be eligible.

From April 1, 2024, the SME and RDEC schemes were merged into a new, unified R&D tax relief framework. The new scheme offers an above‑the‑line credit of 20% on qualifying expenditure, yielding a net benefit of around 15-16.2% after Corporation Tax.

For SMEs with high R&D intensity, where R&D accounts for 30% or more of total expenditure, enhanced support continues, delivering a higher credit under the merged scheme.

There are also several important allowances and reliefs to consider, especially the Annual Investment Allowance (AIA) and various Business Rates reliefs. The AIA now permanently allows 100% tax relief on up to £1m of qualifying plant and machinery per annum (including second‑hand items), which can deliver significant cash savings.

Small Business Rate Relief offers 100% relief on rateable values under £12k (and tapered relief to £15k), while the Retail, Hospitality & Leisure Relief gives a 40% discount up to £110k per business for 2025-26.

There are also transitional, empty property and local discretionary schemes, each with its own eligibility criteria and application deadlines.  Staying aware of these options, and when to apply, can help you maximise relief and avoid missing out.

Particularly in smaller or family-run businesses, an easy mistake to make is allowing the boundary between personal and business spending to become unclear.

Even small occurrences, such as paying for lunch with the company card or covering a small personal cost in an online purchase can soon add up to complicate record-keeping and risk attracting HMRC scrutiny. Furthermore, it can lead to incorrect tax submissions, which may result in penalties or repayments down the line.

Setting up clear processes helps protect you. That means:

• Having a separate business bank account (even if you’re a sole trader),
• Documenting expenses properly
• Only claiming costs that are wholly and exclusively for business use

This also helps accountants to provide more accurate insights into financial positioning, which feeds directly into better planning and potential tax efficiency.

Since 2019, VAT-registered businesses have been required to keep digital records and submit returns using MTD-compliant software. While many businesses have now adapted, HMRC’s longer-term plan is to extend Making Tax Digital even further, most notably to Income Tax Self Assessment (ITSA) (expected from April 2026 for certain individuals).

If a business is still using manual methods it runs the risk of manual errors.  With so many easy-to-set-up options for accounting software now available, there should be no fear in moving to digital. Not just for compliance, but to reduce errors and gain better visibility over finances. According to HMRC’s own evaluation, 65% of businesses using MTD-compliant tools reported fewer tax calculation errors, with many finding that real-time data helped with broader planning, not just tax.

Many business owners and entrepreneurs think of tax planning as an annual tax – something to “get done” in January or March.  But, in a landscape where Corporation Tax has moved to a tiered system, (with a main rate of 25% for profits above £250,000 and 19% for small profit rates), timing and planning matter more than ever.

If your profits fluctuate, or if you’re approaching a new threshold, a review partway through the year could help you manage your liabilities more effectively, whether through eligible investments, timing of dividends or considering changes to your business structure.

Tax planning should be a rhythm, not a reaction. Having quarterly check-ins with your accountant, even brief ones, can help you stay informed, responsive, and in control.

Tax planning doesn’t need to be complex, and it certainly doesn’t need to be stressful. By staying aware of these common pitfalls and seeking timely, compliant guidance, you give your business the best chance to remain efficient, resilient and HMRC-ready.

Each business is different, and the best way to approach tax planning is to have open, early conversations with your accountant, someone who knows your business and can help you see the full picture.

At TTR Barnes, we are here to support you with clarity and remove complexity throughout your annual tax planning.  Please do speak to our expert tax team about your individual circumstances and let us help make the next year the most tax-efficient yet.

For more information or to speak to a member of the TTR Barnes team, feel free to contact us through all the usual channels.