Is Saving Tax Ever a Bad Idea?

You’ve probably heard me talk a lot about tax-saving strategies. I’m all for being smart with tax but here’s something I tell clients regularly:

Trying to save tax at all costs isn’t always the right move.

That might sound odd coming from your accountant, especially when the tax burden on business owners keeps rising. But here’s the thing: most tax-saving strategies involve spending money to save money. And if cash is tight, that trade-off can do more harm than good.

You might be considering buying new equipment, topping up pension payments, paying out bonuses, or making other deductible expenses before year-end. And yes, those can reduce your Corporation Tax bill.

But saving 25% tax on £10,000 doesn’t help if you had to spend the £10,000 just to get the saving and you’re now left with not enough cash in the bank.

There are two situations where I often advise clients not to focus on tax saving for tax saving’s sake:

• Startups in their first year
  At this stage, cash is king. It’s usually better to keep cash on hand than to spend just to reduce a tax bill that isn’t even due yet. Focus on building stability and surviving the first 12–18 months.
• Established businesses after a lean trading year
  When profits are lower than usual, it’s tempting to look for ways to claw back tax. But if cash reserves are already stretched, spending now to save a bit of tax later could leave you exposed.

A client recently asked whether they should put £60,000 into their pension before year-end to reduce their tax bill.

After reviewing the numbers, we decided to contribute £30,000 now, and agreed to revisit their cashflow at the end of the next quarter to assess whether a further deposit was sensible. This way, they achieved some tax efficiency without putting unnecessary pressure on the business.

The tax saving, assuming rates stay the same, is equal, it’s just about picking the right moment to act.

And it’s not just about cash today. Be cautious about making spending decisions based on overly optimistic forecasts. A quiet quarter or a few late-paying clients can quickly change your cash position and that can undo all the benefits of the saving.

This is exactly what I help clients assess during their pre-year-end consultation making sure any tax-saving decisions are sensible, calculated, and aligned with the bigger picture.

For most B2B service businesses, I recommend building three to six months of operating costs in cash reserves before getting aggressive with tax planning. That cushion gives you breathing room, flexibility, and peace of mind.

Once your business is on solid ground, then we can explore tax-saving strategies that genuinely support your growth, not undermine it.

Cash keeps you alive. Tax can wait.

Tax planning should be part of your overall business strategy, not just something you rush through at year-end. If you’re unsure whether now is the right time to spend for tax reasons, or you want a clear plan for the months ahead, let’s talk it through.

Book your free pre-year-end consultation here: