Tax Year End Checklist for UK Small Businesses (2025/26)

The 2025/26 tax year ends on 5 April 2026. That's roughly four weeks away. Whether you're a sole trader, contractor, or running a limited company, the next few weeks are your last chance to get everything in order before the new tax year begins.

This isn't a theoretical guide. It's a practical, do-it-now checklist you can work through this week.

1. Chase Outstanding Invoices

If clients owe you money, now is the time to chase. Not just because cash flow matters — but because unpaid invoices affect your accounts.

Action items:

• Review all invoices aged 30+ days
• Send formal payment reminders for anything overdue
• For invoices past terms, calculate what you're owed in late payment interest — you're legally entitled to it under the Late Payment of Commercial Debts Act
• Consider writing off genuinely bad debts before year end (they're tax-deductible)

If you're still creating invoices manually, our free invoice generator can save you time on the final batch.

2. Reconcile Your VAT

If you're VAT-registered, check which quarter you're in and when your return is due. Many businesses have a quarter ending 31 March — which means your VAT return and payment are due by 7 May 2026.

Action items:

• Reconcile all sales and purchase invoices in your accounting software
• Check for any missing purchase invoices (suppliers who never sent them)
• Verify your VAT scheme — standard, flat rate, or cash accounting — is still the best fit
• Use our VAT calculator to double-check any manual figures
• If you're on the Flat Rate Scheme, confirm your sector percentage hasn't changed

Making Tax Digital reminder: All VAT-registered businesses must file digitally through MTD-compatible software. If you're still using spreadsheets with bridging software, this is the year to switch to proper cloud accounting.

3. Claim All Your Mileage

This is one of the most commonly missed deductions. If you use your personal vehicle for business, you can claim HMRC's approved mileage rates:

• Cars and vans: 45p per mile (first 10,000 miles), then 25p
• Motorcycles: 24p per mile
• Bicycles: 20p per mile

Action items:

• Go through your diary, calendar, and Google Maps timeline to identify business journeys
• Log every trip with date, destination, purpose, and miles driven
• Calculate your total claim with our mileage calculator
• Make sure commuting journeys aren't included — HMRC doesn't allow them

If you haven't tracked mileage consistently, reconstruct what you can. Partial records are better than no claim at all. Our complete mileage rates guide covers everything in detail.

4. Review CIS Deductions (Contractors)

If you work in construction, the Construction Industry Scheme affects your year-end significantly.

For contractors (those making payments):

• Verify all subcontractor deductions are correctly recorded
• Submit your final monthly CIS return before 19 April
• Reconcile CIS deductions against payments made

For subcontractors (those receiving payments):

• Collect all payment and deduction statements from contractors
• Verify deduction rates were applied correctly (0%, 20%, or 30%)
• Calculate your total CIS deductions — these offset your tax bill
• Use our CIS calculator to check the numbers

Our CIS deductions guide explains the full process if you need a refresher.

5. Gather and Categorise Expenses

Year end is when missing receipts come back to haunt you. Every unclaimed expense is tax relief you're leaving on the table.

Action items:

• Check bank statements for business purchases you haven't recorded
• Dig through email for digital receipts (search "receipt", "invoice", "order confirmation")
• Categorise expenses properly: office costs, travel, subscriptions, professional services, insurance
• If you work from home, calculate your home office allowance (£6/week flat rate, or actual costs if higher)
• Don't forget professional subscriptions, software, and training courses

Common expenses people forget:

• Professional indemnity insurance
• Accounting software subscriptions
• Business phone contract (or proportion of personal phone)
• Bank charges on business accounts
• Professional body memberships (ACCA, CIMA, ICB, etc.)

6. Check Your Tax Position

Before 5 April, you still have time to make decisions that affect your tax bill.

For sole traders:

• Estimate your profit and check which tax band you'll fall into
• If you're near the £50,270 higher-rate threshold, consider deferring income or bringing forward expenses
• Make pension contributions before 5 April to reduce your taxable income
• Use your full ISA allowance (£20,000) — it doesn't carry over

For limited companies:

• Review director salary vs. dividends split
• Consider timing of dividend declarations
• Check Corporation Tax rate — still 25% for profits over £250,000, with marginal relief between £50,000–£250,000
• Review any outstanding director's loan account balances

7. Making Tax Digital — Income Tax (MTD ITSA)

This is the big change for 2026. From April 2026, MTD for Income Tax Self Assessment becomes mandatory for sole traders and landlords with qualifying income over £50,000.

If that applies to you:

• You must use MTD-compatible software to keep digital records
• Quarterly updates to HMRC are required (not just an annual return)
• Your first quarterly update will be due in August 2026

If your income is between £30,000–£50,000, you have until April 2027. But starting digital records now makes the transition easier.

8. Tidy Up Your Books

Finally, take an hour to clean up your accounting records.

Quick wins:

• Reconcile all bank accounts — every transaction should be categorised
• Clear out the "ask my accountant" suspense account
• Match all payments to invoices (both sales and purchases)
• Export a trial balance and review it for anything unusual
• If you process invoices from suppliers manually, consider automating with AI — it's faster and catches errors humans miss

The Five-Minute Version

If you do nothing else before 5 April:

1. Chase unpaid invoices — get the cash in
2. Claim your mileage — calculate it here
3. Find missing receipts — check email and bank statements
4. Make a pension contribution — reduce your tax bill legally
5. Back up your records — download everything from your accounting software

The 2025/26 tax year is nearly done. A few hours of admin now can save you money, stress, and a panicked call to your accountant in January.

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Drakon Systems builds free tools for UK businesses — VAT calculators, mileage calculators, CIS tools, late payment calculators, and an AI-powered invoice importer that reads any invoice and pushes it straight to Xero.