Year-end is coming – here’s how contractors can save tax without the headache
Here’s the thing. Most contractors don’t think about tax until January hits, HMRC reminders start pinging, and bank statements become a treasure hunt.
But a bit of year-end planning can save you serious money – and stop HMRC surprises later.
This guide breaks everything down in plain English and shows exactly what contractors (CIS, PAYE-mix, or Ltd company) can do before 5 April to cut their tax bill, tidy their books, and keep cash flowing.
We’ll use the latest HMRC rules for 2024–25 so you know everything’s up to date.
1. Check your CIS deductions line by line
If you’re under CIS, your year-end tax bill depends on whether your contractor deducted the right amount through the year.
What this really means is:
- Your CIS deductions should match the statements you’ve received
- Your income should match the monthly totals
- Any extra tax withheld (far more common than people think) should be claimed back in your Self Assessment
Common mistakes:
- Contractors deducting CIS at 30% when you’re registered
- Paid half cash, half through the books
- CIS statements missing
Tip: If a contractor didn’t give you a statement, HMRC lets you ask them directly for a replacement. You’ll need this if you want your refund processed quickly.
2. Sort your allowable expenses – the simple way
Whether you’re CIS self-employed or running a small Ltd, your expenses decide how much tax you actually pay.
Allowable costs include:
- Mileage or travel costs
- Tools and equipment
- Work boots and PPE
- Subscriptions (CSCS card, trade memberships)
- Mobile phone (business portion)
- Materials and consumables
If you’re self-employed, you claim these in your Self Assessment.
If you’re a limited company, the company claims them – not you personally.
Little receipts add up. And lost receipts mean lost tax relief.
You don’t need fancy software. Even a photo folder on your phone labelled “2024–25 TAX RECEIPTS” can save you hundreds.
Let an expert check your CIS refunds and expenses before you file – Tax2u can spot deductions most people miss.
3. Review your payments on account (HMRC’s hidden bill)
If your last tax bill was over £1,000, HMRC normally charges you “payments on account” basically pre-payments for next year’s tax.
Year-end is the perfect time to:
- Check if you’re overpaying
- Reduce them if your income has dropped
- Plan ahead if your income has increased
Most contractors don’t know they’re allowed to apply to reduce payments on account.
HMRC accepts reductions when income is genuinely lower, and it improves cash flow immediately.
4. Double-check if you should switch (or stay) as a limited company
A lot of contractors ask the same question every year:
Should I stay self-employed or form a limited company?
Here’s the clearest way to look at it.
HMRC rules mean you see a real benefit only when you hit the additional rate (income above £50,270).
To feel any meaningful saving, you usually need around £60,000–£70,000 in profit.
At £40,000–£50,000 income, there’s no major tax advantage in switching to a Ltd company.
That range is basically neutral after accounting fees and admin.
CIS workers under those thresholds are normally better off staying self-employed.
If you do run a Ltd already, year-end is the time to:
- Check your director’s salary (tax-efficient levels change each April)
- Review dividends
- Make sure you’ve kept business and personal expenses separate
5. Use the right allowances before 5 April
HMRC gives contractors several legal tax reliefs you can use each year. These expire if you don’t claim them.
Key ones:
Annual Investment Allowance (AIA)
Covers plant, machinery, and tools – up to £1 million.
If you’ve bought tools on 2 April instead of 7 April, the timing alone can change which tax year gets the relief.
Mileage allowance
If you use your own van or car for jobs, claim 45p per mile for the first 10,000 miles.
Work-from-home allowance (if partly office-based)
Flat rate if you do admin at home for your business.
Pension contributions
A powerful year-end tax reducer if you’re earning above the basic rate.
6. Keep a clean split between PAYE and CIS income
Many contractors mix the two incomes, especially those on agency jobs.
HMRC expects:
- CIS income treated as self-employment
- PAYE income taxed automatically
- Expenses only claimed against the CIS part
- No double-claiming of travel or tools
A quick year-end check avoids mistakes that delay refunds or trigger HMRC questions.
7. Make sure your Self Assessment matches HMRC’s system
This is a big one.
The number-one reason contractors get delays in tax refunds is mismatched data between:
- Your return
- HMRC’s RTI (Real Time Information)
- CIS deductions
Before you file, check:
- Your UTR and NI number are correct
- All income streams are included
- CIS deductions match HMRC totals
- You haven’t missed interest from your bank
A 10-minute check can save a 10-week delay.
8. Sort your bookkeeping before the next tax year starts
You don’t need software. You just need a system.
The easiest year-end setup for contractors:
- A separate bank account
- A weekly “photo your receipts” habit
- A simple log of income and expenses
- Monthly CIS statement folder
Clean records = faster refunds = fewer HMRC questions.
Frequently asked questions (contractor year-end tax planning)
Do I need to keep every receipt?
Yes. HMRC can ask for evidence for up to six years. Photo copies are fine.
When should I file my Self Assessment?
As soon as possible after 6 April. The earlier you file, the earlier you get your CIS refund.
What if a contractor hasn’t given me CIS statements?
You can request them. HMRC won’t process certain refunds without them.
Can I claim expenses for both PAYE and CIS?
No. You can only claim expenses on your CIS (self-employed) income.