Here’s a truth that catches too many plumbing and heating business owners off guard: once your company’s year-end date passes, most of the best tax-saving opportunities disappear with it. The window closes. You’re left filing a return based on decisions you’ve already made — or didn’t make.
If your limited company’s accounting year-end is approaching in the next few months, this is your guide to the smart moves you should be making right now.
Why Does Year-End Planning Matter So Much?
Your Corporation Tax bill is calculated on your company’s profit for the accounting period. Every legitimate expense, contribution, or write-off that falls within that period reduces your taxable profit. Miss the date, and those same actions count towards next year instead.
Consider this: a £20,000 pension contribution made one week before your year-end saves you between £3,800 and £5,000 in Corporation Tax this year. Make that same contribution one week after, and you wait another 12 months for the benefit. Same money, completely different tax outcome.
When Should You Start Planning?
The answer is simple: at least two to three months before your accounting year-end. Not after. Not during. Before.
Why so early? Because the best tax-saving moves need time. Pension contributions need arranging. Equipment purchases need ordering and paying for. Director’s loan account issues need sorting out. If you leave it to the last fortnight, you’ll run out of room.
If your year-end is in March, start planning in January. If it’s in December, get moving in October. The sooner you sit down with your accountant and look at the numbers, the more options you’ll have.
Your Company Year-End vs the Tax Year-End
This trips people up regularly. Your company’s accounting year-end can be any date you choose. It doesn’t have to be 5th April (the personal tax year-end) or 31st March. Some plumbing and heating companies run January to December. Others run April to March. Some use completely different dates based on when they incorporated.
Your Corporation Tax is based on your company’s accounting year-end — not the personal tax year. So when we talk about year-end planning here, we mean your company’s specific year-end date. If you’re not sure when yours is, check your last set of accounts or ask your accountant.
Salary and Dividend Planning
If you’re running a limited company, you should already be using a salary and dividend strategy to take money out of the business tax-efficiently. But year-end is the moment to check whether you’ve got the split right.
Ask yourself:
- Have you taken your optimal salary for the year (typically £12,570 for 2025/26)?
- Have you declared enough dividends to use your £500 dividend allowance?
- If your company has had a strong year, can you take additional dividends before year-end while profits allow?
- If your spouse is a shareholder, have they used their personal allowance and dividend allowance too?
The key point: dividends can only be paid from retained profits. You need to know your profit position before declaring them. Get your management accounts up to date, review the numbers with your accountant, and make a decision before the year-end date — not after it.
Pension Contributions: The Big Corporation Tax Saver
This is one of the most powerful year-end planning tools available to limited company directors, and it’s consistently underused by trades businesses.
When your company makes a pension contribution on your behalf, it counts as a tax-deductible business expense. There’s no National Insurance to pay on it — not employer’s NI, not employee NI. It comes straight off your taxable profit.
Let’s put numbers on it. If your company has £20,000 of profit that you don’t need to draw as income, putting it into your pension saves:
- £5,000 if your company pays Corporation Tax at the main rate of 25%
- £3,800 if your company qualifies for the small profits rate of 19%
That’s a genuine, immediate tax saving. The money grows tax-free inside the pension, and when you eventually draw it, 25% comes out completely tax-free as a lump sum.
The annual pension allowance for 2025/26 is £60,000 (or 100% of your earnings, whichever is lower). You can also carry forward unused allowance from the previous three tax years, meaning some directors can contribute significantly more. But the contribution must be made and paid before your year-end to count in this period. Don’t wait.
Capital Expenditure: Timing Your Purchases
Thinking about buying a new van? Upgrading your tools? Investing in equipment for the business? The timing of that purchase can make a real difference to your tax bill.
The Annual Investment Allowance (AIA) lets your company claim 100% tax relief on qualifying capital expenditure up to £1,000,000 per year. That means the full cost of the van, the tools, or the equipment gets deducted from your taxable profit in the year you buy it.
Buy it before your year-end, and the deduction falls in this accounting period. Buy it a week later, and it falls in the next one. If you were already planning to make the purchase, bringing it forward by a few weeks can save you a full year of waiting for the tax relief.
This applies to commercial vehicles, specialist tools, workshop equipment, computers, and most tangible assets used in the business. Our guide to tax deductions for plumbers covers the full list of what qualifies.
Stock and Work-in-Progress: The Profit Trap
This is one that catches plumbing and heating businesses out more than most. If you have jobs that are started but not yet invoiced at your year-end, the value of that work-in-progress (WIP) gets added to your profit figure.
Here’s why. Your accounts need to match costs with the income they relate to. If you’ve bought materials and spent time on a job but haven’t invoiced yet, those costs sit on your books without matching revenue. The WIP adjustment adds the estimated value of that unfinished work back into your profit, increasing your Corporation Tax bill.
Where possible, try to invoice jobs before your year-end so income and costs are both recognised in the same period. If that’s not practical, make sure your accountant has accurate information about any jobs in progress — the materials used, labour time, and expected invoice value.
Bad Debt Review: Write Off What You’ll Never Collect
Every plumbing and heating business has them. Those invoices from months ago that the customer is never going to pay. The disputed bill. The small job where chasing the debt costs more than the invoice is worth.
If an invoice is genuinely uncollectable, writing it off as a bad debt before your year-end reduces your taxable profit. You’re removing income that was never really income.
Go through your aged debtors list before year-end. Be honest about which ones are realistically going to be paid. For anything that’s clearly a write-off, record it properly in your accounts. Across several bad debts, it can make a meaningful difference to your profit figure.
Director’s Loan Account: The 33.75% Warning
This is the one that causes the most unpleasant surprises. Your director’s loan account (DLA) tracks the balance between you and your company. Every time you take money out that isn’t salary or dividends, it goes on this account.
If your DLA is overdrawn at your year-end — meaning you’ve taken out more than your salary, dividends, and any money you’ve put in — your company faces a Section 455 tax charge of 33.75% on the outstanding balance. That’s on top of any other tax you owe.
Let’s say you’ve drawn £10,000 more than your declared salary and dividends. If that balance is still overdrawn at year-end, your company owes HMRC £3,375 in Section 455 tax. You do get this back eventually (when the loan is repaid or cleared), but it’s still cash out the door that could have been avoided entirely.
The fix: review your DLA balance before year-end. If it’s overdrawn, you have options. You can declare additional dividends (if profits allow) to clear the balance. You can repay the money to the company. Or you can adjust your salary. The important thing is to deal with it before the year-end date, not discover it afterwards.
Corporation Tax Payment: Know Your Deadline
Your Corporation Tax is due 9 months and 1 day after your company’s accounting year-end. If your year-end is 31st March 2026, your CT payment is due by 1st January 2027. If your year-end is 31st December 2025, payment was due by 1st October 2026.
This isn’t the same as your filing deadline (which is 12 months after your year-end). The payment comes first. Miss it, and HMRC charges interest from day one — plus potential penalties.
Part of good year-end planning is making sure you’ve set aside enough cash to cover the bill when it arrives. If you’ve been taking dividends all year without reserving for Corporation Tax, you could hit a cash flow wall. A simple rule: ring-fence 19% to 25% of your estimated profit throughout the year. Don’t touch it until the CT bill is paid.
Five Steps to Take Right Now
If your year-end is approaching, here’s your practical checklist. Don’t overthink it — just work through each one.
- Check your year-end date — confirm your company’s exact accounting year-end. If you don’t know it, your accountant does. Everything else depends on this date.
- Get your management accounts up to date — you can’t plan without knowing your current profit position. Get your bookkeeping caught up, reconcile your bank, and ask your accountant for a draft profit figure.
- Review your salary, dividends, and DLA balance — have you taken the optimal salary? Are there dividends to declare? Is your director’s loan account overdrawn? Sort this before year-end, not after.
- Decide on pension contributions and capital purchases — if you have surplus profit, can you make a pension contribution or bring forward a planned equipment purchase? Both reduce your Corporation Tax bill if done before year-end.
- Book a year-end planning meeting with your accountant — this is the single most valuable meeting you’ll have all year. A good accountant will run through all of these areas with you and identify savings specific to your situation. Don’t skip it.
Year-End Planning Is an Investment, Not an Expense
The plumbing and heating business owners who pay the least tax aren’t doing anything exotic. They’re simply making decisions at the right time. A pension contribution here. A capital purchase there. A dividend declaration before the deadline. These are straightforward moves that add up to thousands of pounds in savings every single year.
The ones who pay too much? They’re the ones who only think about tax after their year-end has passed, when the accountant is preparing the annual accounts and it’s too late to change anything.
Don’t be in that second group.
If you want to understand how your business structure affects your year-end options, or you’re not sure whether your current salary and dividend setup is right, those are exactly the conversations worth having before your year-end — not after.
Year-end approaching? Don’t leave tax savings on the table. Book a year-end planning review — we’ll look at your numbers, identify what’s available to you, and make sure you’re not paying a penny more than you need to.