Year-End Tax Planning for Businesses: What to Review

February and March are often strange months in business.

The January Self Assessment rush has passed. Spring trading has not quite arrived. And for many businesses and franchises, there is a brief window to pause and think strategically.

But from a tax perspective, February is one of the most important months of the year.

With the tax year ending on year-end for many businesses, there is still time to make informed, proactive decisions. Leave it until May and those opportunities disappear.

For franchisees, tax planning is rarely just about tax. It is about cash flow, personal income, future growth and protecting what you are building. And because franchising has its own commercial structures, generic advice often misses key opportunities.

Here is what we recommend reviewing now. However, we always recommend that you speak to your accountant for expert and up to date advice before making any decisions. Don’t have an accountant? Speak to us.

1. Salary and Dividends: Is Your Mix Still Right?

For limited companies, the balance between salary and dividends should be reviewed before the end of every tax year.

The optimal structure can change depending on:

• Changes to National Insurance thresholds
• Dividend tax rates
• Company profitability
• Your personal income position
• Other sources of income in your household

Many businesses set a structure at the start of the year and do not revisit it. But if profits are stronger than expected, or lower than forecast, adjustments may be sensible before year-end.

This is particularly important for:

• Multi-unit franchisees
• Husband and wife shareholders
• Directors with fluctuating royalty costs

A review now allows you to extract profits efficiently while keeping future growth plans in mind.

2. Pension Contributions: A Tax-Efficient Opportunity

Pension contributions remain one of the most effective ways to reduce corporation tax and personal tax exposure.

For businesses operating through limited companies, employer pension contributions can:

• Reduce corporation tax
• Extract funds efficiently
• Build long-term personal wealth

February is the right time to assess:

• How profitable the business has been
• Whether excess cash is sitting in the company
• Whether reinvestment or extraction is the better strategy

For many businesses, pensions are overlooked because growth feels more urgent. But building personal financial security alongside business growth is part of responsible ownership.

3. Bringing Forward Allowable Expenses

Timing matters.

If you are planning legitimate business expenditure in the next few months, consider whether bringing it forward before the year-end makes sense.

Examples might include:

• Marketing campaigns
• Equipment purchases
• Professional fees
• Training and development
• Software subscriptions

The key is commercial justification, not tax-driven panic spending. But if expenditure is already planned, accelerating it can reduce this year’s taxable profits.

Franchisees often have predictable marketing cycles or seasonal peaks. Aligning tax planning with those cycles is far more effective than reacting after year-end.

4. Capital Allowances and Asset Purchases

If you are considering purchasing equipment, vehicles, or technology upgrades, the capital allowance position should be reviewed carefully.

Items might include:

• Vans or vehicles
• Fit-out upgrades
• New machinery or specialist equipment
• IT infrastructure

Understanding whether Annual Investment Allowance or other reliefs apply can significantly affect your tax position.

For franchisees expanding capacity ahead of a busy spring or summer period, this is particularly relevant. But purchases should be commercially justified and cash flow tested.

Tax relief is valuable. Cash flow stability is essential.

5. VAT Position and Cash Accounting

VAT planning is rarely glamorous, but it is critical.

February and March is a sensible time to review:

• Whether you are on the most appropriate VAT scheme
• Whether cash accounting may improve cash flow
• Whether you are approaching the VAT threshold
• The impact of royalty payments and management service fees

Franchise businesses often have regular outgoing royalty costs. The timing of VAT recovery and payment can have real cash flow consequences.

Small structural adjustments now can improve liquidity heading into the new tax year.

6. Loss Relief for New or Early-Stage Franchisees

If you are in your first year or early stages of trading, losses are not a failure. They are part of the investment phase.

The key question is how those losses are utilised.

Depending on structure and circumstances, losses may be:

• Carried forward
• Offset against other income
• Used strategically to reduce future liabilities

Too often, new franchisees focus solely on operational growth and overlook tax optimisation in the early years.

Getting this right at the outset can significantly improve long-term financial efficiency.

7. Directors’ Loan Accounts

Directors’ loan accounts can quietly become problematic if not reviewed regularly.

Common issues include:

• Overdrawn loan accounts
• Unplanned personal withdrawals
• Tax charges arising from balances at year-end

February is the ideal time to review your position and correct any imbalances before the year-end.

Left unchecked, director loan issues can create unnecessary tax charges and compliance complications.

8. Preparing for Making Tax Digital for Income Tax

While immediate deadlines may vary depending on income levels and business structure, the direction of travel is clear.

Making Tax Digital is changing how the self-employed and landlords interact with HMRC. Franchisees who fall under this change and already operate with clean, up-to-date accounts will find the transition smoother, but there will be changes for those who earn over £50,000.

Year-end is an opportunity to assess:

• Whether your bookkeeping is robust
• Whether software is HMRC compliant
• Whether reporting gives you real-time visibility

Strong compliance systems are not just about HMRC. They are the foundation for confident decision-making. You can read more about MTD for IT and whether it impacts you here.

9. Multi-Unit and Growth Considerations

If you operate more than one territory or are planning expansion, tax planning becomes more complex.

You may need to consider:

• Group structures
• Inter-company transactions
• Management fee allocations
• Financing arrangements

Expansion decisions should never be made in isolation from tax and cash flow planning.

This is where specialist business and franchise advice matters. For example: A generic accountant may not fully understand the interplay between royalties, franchise agreements and multi-site growth strategies.

Tax Planning Is Not About Avoidance. It Is About Clarity.

Effective year-end planning is not about aggressive schemes or unnecessary risk.

It is about:

• Understanding your numbers
• Making informed decisions
• Aligning tax with your commercial goals
• Protecting cash flow
• Building long-term security

Franchisees operate within proven systems. But your financial strategy should be just as structured as any other business.

Why Specialist Franchise Advice Makes a Difference

Franchise businesses are different.

Royalty models, marketing levies, territory rights and franchisor relationships all influence financial decisions. A strategy that works for an independent SME may not translate effectively in a franchise environment.

At the dt group, we work extensively within the franchise sector. We support franchisees and franchisors with:

• Specialist accountancy
• Business planning
• Funding support
• Strategic advisory

Because we understand the commercial realities of franchising, our year-end reviews go beyond tax calculations. They focus on what your business needs next.

Do Not Leave It Until After year-end

The difference between proactive planning and retrospective reporting is significant.

February and March are your opportunity to:

• Adjust
• Optimise
• Correct
• Plan

After year-end, options reduce. Before it, you have control.

If you are a franchisee and have not yet reviewed your position ahead of the 2025/26 year-end, now is the right time.

A structured year-end review could be one of the most valuable financial conversations you have all year.

Remember, we always recommend that you speak to your accountant for expert and up to date advice before making any decisions. Don’t have an accountant? Speak to us.