As the end of the tax year approaches, many business owners ask the same question:
Should I spend now to reduce my tax bill later?
The answer is sometimes yes, but only if the spending is part of a smart and deliberate plan.
A well-timed investment can reduce your tax liability, strengthen your business, and set you up for a better start to the new financial year. Unnecessary purchases, on the other hand, can drain cash flow without offering any real benefit.
This guide outlines what you should consider buying before 5 April and what is usually best avoided.
What You Should Consider Buying Before Year-End
1. Essential equipment and tools
If you have been planning to upgrade laptops, machinery, phones, or other operational equipment, doing so before year-end might allow you to claim Annual Investment Allowance or other capital allowances sooner.
Why this helps:
- It reduces taxable profits in the current year.
- It spreads the cost effectively.
- It helps improve productivity.
Only purchase items that the business genuinely needs. HMRC reviews non-essential spending closely.
2. Software, systems and digital tools
Most business software is tax deductible, which makes year-end a good time to invest in improved systems.
Examples include:
- Cloud accounting software
- Payroll or HR systems
- CRM tools
- Cybersecurity solutionsThese tools often pay for themselves through improved efficiency and compliance.
3. Repairs and maintenance
If equipment or tools require repair, completing the work before year-end can be fully deductible. Repairs are treated as revenue expenses, while improvements may be treated differently, so clarity matters.
4. Staff training and development
Training that improves existing skills is usually an allowable business expense. This includes compliance courses, leadership development and technical training.
A well-trained team strengthens your business and the deduction is a helpful added benefit.
5. Pension contributions
Sole traders and director shareholders may reduce income tax liabilities through additional pension contributions before the deadline.
For limited companies, employer pension contributions are generally a deductible business expense if they meet the test of being wholly and exclusively for business purposes.
This remains one of the most effective long-term tax planning strategies.
6. Marketing and professional fees
Investments in marketing, branding, website improvements, consultancy or professional advice are typically allowable expenses. These costs can support growth and improve business performance in the coming year.
What You Should Not Buy Before Year-End
1. Unnecessary purchases made simply to reduce tax
A tax deduction does not make a bad purchase worthwhile. If you spend one pound to save nineteen pence in tax, you still spend eighty-one pence overall. If an item does not add value, it is not a good investment.
2. Personal items presented as business expenses
This creates problems during an HMRC review.
Common issues include:
- Personal electronics
- Clothing that is not protective or uniform
- Home furniture
- Travel that cannot be shown to be business related
If something is not wholly for business use, it should not be claimed.
3. Large capital purchases that are not essential
Significant investments should be considered carefully. A large purchase at year-end might reduce tax, but it can also create a difficult cash flow position.
Before any major spend, ask:
- Does the business genuinely need this now
- Is the timing appropriate
- Could the money be used more effectively elsewhere
4. Stockpiling supplies
Yes, consumables are allowable. However, buying far more than is reasonable or needed can attract unwanted attention from HMRC.
5. Paying too far in advance for future services
Some prepayments are allowable. Excessive advance payments may not be treated as deductible this year. It is often better to plan expenses realistically rather than rushing them into the current tax period.
Year-End Tax Planning Tips
- Review profit and cash flow early.
- Check which allowances you can use such as AIA, R&D relief or pension limits.
- Prioritise spending that improves efficiency, compliance or performance.
- Keep clear evidence of the business purpose behind purchases.
- Speak to your accountant before committing to major expenses.
Need tailored year-end tax advice
Every business is different. The most effective spending decisions depend on your goals, cash flow and future plans.
The team at Kingston Burrowes can help you:
- Identify genuine tax saving opportunities
- Avoid unnecessary or risky spending
- Plan effectively for the new financial year
- Keep your business running smoothly and profitably
If you are considering any year-end purchases, get in touch. We can help you make informed decisions before 5 April arrives.
