Christmas break: A perfect time for tax planning

19 December 2025 | posted in Business & corporate tax

The festive season is a great time to relax and reset before the new year begins. It is also an ideal moment to think ahead about your finances and tax planning. Here are key areas to consider while you have some time off:

1. Accelerate Dividend Payments

Dividend tax rates will rise by 2% from 6 April 2026. If you own a company, dividends paid before this date will be taxed at the current lower rates.

YOUR INCOME

Action: Review distributable reserves with us and, where appropriate, pay dividends before 6 April 2026 to lock in current rates.

2. Savings Income

From April 2027, tax on savings income will increase by 2% across all bands (basic 22%, higher 42%, additional 47%).

Action: Use your Personal Savings Allowance and ISAs fully; consider moving excess cash into tax‑efficient wrappers before April 2027.

3. Cash ISA Changes

From April 2027, under‑65s can only put £12,000 into a cash ISA (overall ISA limit remains £20,000). Over‑65s retain the £20,000 cash ISA allowance.

Action: Review ISA allocations now; plan to use Stocks & Shares ISAs for the remaining allowance where suitable.

4. EIS and VCT Relief

Enterprise Investment Scheme (EIS) continues to offer 30% income tax relief; Venture Capital Trust (VCT) income tax relief drops from 30% to 20% from April 2026. EIS company and investor limits increase from April 2026.

Action: Consider VCT subscriptions before 5 April 2026 to secure 30% relief; explore EIS for ongoing 30% relief and potential IHT benefits after two years.

5. Insurance Bonds

Insurance bonds offer tax‑deferred growth: gains are not taxed annually and tax is generally due on withdrawal. Top‑slicing relief can reduce tax on large encashments.

Action: Assess whether onshore/offshore bonds could smooth future income and mitigate rising savings/dividend tax.

YOUR CAPITAL

6. Property Incorporation

Moving a genuine property business into a company can reduce exposure to higher personal tax rates. This strategy is well‑suited to properties owned jointly by spouses/civil partners or where part ownership will be transferred to a spouse/civil partner. HMRC expects a genuine business (multiple properties, active management, record‑keeping, and significant time spent).

Action: Discuss a spouse partnership route and incorporation plan, including SDLT/CGT implications and evidence to satisfy HMRC’s ‘business’ criteria.

7. Principal Private Residence (PPR) Relief

PPR (Principal Private Residence) relief exempts gains on your main home from Capital Gains Tax when you sell it. It can also cover certain periods you were absent, including the final nine months of ownership.

Action: If downsizing or selling, map eligibility periods to maximise PPR; consider timing and occupation evidence for second homes.

8. High‑Value Property Charge

From April 2028, homes worth over £2m face an annual owner‑paid charge (£2,500–£7,500). Companies may still face ATED; interaction rules are awaited.

Action: Review holding structures, ATED exposure and potential de‑enveloping before April 2028.

9. Business Property Relief (BPR)

From 6 April 2025, Agricultural and Business Property Relief will be capped at £1m per individual for 100% relief. Value above £1m attracts only 50% relief, creating an effective 20% IHT on the excess. Transfers between spouses/civil partners may allow unused relief to be carried, subject to conditions.

Action: Identify qualifying assets and consider gifts or trust settlements before 6 April 2025; update wills/succession plans to reflect the cap and spousal transfer rules.

10. Offshore Trust Changes

A £5m cap on certain trust charges applies from April 2025 alongside stricter anti‑avoidance rules for trusts and offshore structures.

Action: Undertake a compliance review of offshore arrangements; document commercial purpose and update filings.

YOUR BUSINESS

11. EMI Expansion

From April 2026, EMI eligibility widens to companies with up to 500 employees and £120m assets; option limits and terms are relaxed.

Action: Design or refresh EMI schemes to retain key staff; obtain HMRC advance assurance where appropriate.

12. Capital Allowances

From April 2026, Writing Down Allowance reduces to 14% on the main pool and a new 40% First‑Year Allowance applies to qualifying main‑rate assets.

Action: Time asset purchases to optimise relief (consider current full‑expensing vs new 40% FYA); align with cash‑flow.

13. Electric Cars & P11D

From April 2028, a mileage‑based tax applies to EVs (3p per mile electric; 1.5p hybrid). Benefit‑in‑kind rates and workplace charging policies should be reviewed.

Action: Update company car strategy and employee communications; evaluate EV benefit‑in‑kind vs mileage cost.

14. Pensions & Salary Sacrifice

From April 2029, only the first £2,000 of salary‑sacrifice pension contributions per year is NI‑exempt; income tax relief on pension contributions remains unchanged.

Action: Model remuneration strategies and adjust pension funding to maximise reliefs before/after April 2029.

15. Construction Industry Scheme (CIS)

New verification checks and stricter penalties target fraud and non‑compliance in CIS.

Action: Audit subcontractor onboarding and monthly returns; strengthen verification controls.

16. R&D Relief

HMRC’s advance clearance service provides certainty on major projects and qualifying activities.

Action: Use the clearance route for large projects; maintain technical documentation and cost tracking.

17. Stamp Duty Reserve Tax (SDRT)

Newly listed UK shares benefit from a three‑year exemption from SDRT to support domestic listings.

Action: Consider listing/reorganisation timing to leverage the three‑year SDRT relief.

Book your New Year tax planning meeting – contact your local Moore firm today!