Mid-Year Tax Planning for Small Business Owners

Most tax planning happens far too late. By the time the year ends, the choices that could have shaped your bill are already behind you. Mid-year tax planning flips that around: in June you still have six months to time purchases, fix your records, adjust what you set aside and ask your accountant the right questions.

Tax is one of those topics that most small business owners would rather not think about until they absolutely must. That is understandable. But waiting until the end of the year, or worse, until the filing deadline, means you can only record what happened. Planning in June lets you influence what happens.

This guide gives you a practical mid-year routine for freelancers, sole traders, partnerships and small companies in the US and UK. It focuses on questions to ask and records to gather, because tax rules change often and depend heavily on your structure and location. Treat everything here as general information, not tax advice, and confirm the details with a qualified accountant or tax adviser before you act.

Why June is the right time to plan

By early June, you have five months of actual results. That is enough to spot a trend, but early enough that your decisions still count. A few other things make this moment useful:

• US owners have a second-quarter estimated tax payment due on 15 June 2027, which naturally prompts a look at whether your estimates still fit.
• UK employers providing benefits in kind need P11D forms in by 6 July, so June is when the paperwork gets pulled together anyway.
• Many businesses are heading into a seasonal change, so cash and spending plans for the second half are being set right now.

If your financial year does not follow the calendar year, the same idea applies: pick the halfway point of your own tax year and run this routine then.

Step 1: Project your full-year profit

Everything in tax planning starts with a reasonable estimate of what you will earn this year. You do not need precision, just a sensible range.

1. Bring your books up to date. Reconcile your bank accounts through 31 May and make sure all sales and expenses are recorded.
2. Pull year-to-date profit. Take your profit and loss figure for January to May.
3. Adjust for seasonality. If your second half is usually busier or quieter, do not simply double the first five months. Use last year's pattern as a guide.
4. Add known changes. Include contracts you have already won, a planned price rise, a new hire or a large purchase you are committed to.
5. Create three versions. A cautious, a likely and an optimistic estimate. This gives you and your accountant a useful range to plan around.

Step 2: Compare your set-aside with your likely bill

Now compare your projected profit with the money you have set aside for tax. Your accountant can estimate the likely bill; your job is to make sure the cash will be there.

• Check your tax savings account balance. Is it in line with your year-to-date profit, or has it fallen behind?
• Review your payment schedule. In the US, estimated payments are due during the year. In the UK, self-employed people may have payments on account toward their self assessment bill. Companies have their own corporation tax deadlines. Check the dates for your structure on the official government website.
• Adjust your regular transfer. If profit is up, the share you move to your tax account each week or month should go up too.

We will not repeat the full mechanics of estimated payments here. The key point for mid-year planning is simple: if your income has changed, your set-aside and your payments may need to change with it.

Step 3: Think about timing of income and expenses

Timing is one of the main levers small businesses have, and it only works if you plan ahead. Talk to your accountant about whether any of these make sense for you:

Large purchases

If you need new equipment, a vehicle, computers or tools, the tax treatment can depend on when you buy, how you pay and the rules on capital allowances (UK) or depreciation and expensing (US). These rules and their limits change, so ask your accountant how a planned purchase would be treated before you commit. Never buy something you do not need just to cut a tax bill; you still spend the money.

Prepaid expenses

Paying for something in advance, such as a year of insurance or software, does not always mean you can claim it all at once. Under accrual accounting, prepaid expenses are recorded as assets and expensed over the period they cover. Ask how your accounting method treats them before you prepay to "use up" profit.

Unpaid invoices and bad debts

Mid-year is a great time to look at old unpaid invoices. Chase what you can. For anything you truly cannot collect, ask your accountant about relief. In the UK, VAT bad debt relief is available once a debt is more than six months overdue and written off. In the US, businesses using accrual accounting can generally deduct business bad debts when they become worthless. Both have conditions, so get advice first.

Step 4: Tidy your records and deductions

Good records do not lower your tax by themselves, but poor records almost always raise it. Missing receipts mean missed deductions, and messy books make your accountant's job slower and more expensive.

Business vehicles and mileage

Vehicle costs are a common area of confusion, so check yours now.

• US: If you use the standard mileage method, you need a mileage log showing dates, destinations, business purpose and miles. The IRS standard mileage rate for 2026 business use was 72.5 cents per mile; check the IRS website for the rate that applies to 2027.
• UK: Company cars are a taxable benefit in kind for the employee, and they are reported on P11D forms, which are due by 6 July. If you run a company and drive a company car, ask your accountant whether that setup still makes sense for you.

If your mileage log has gaps since January, rebuild it now from your calendar and invoices while the trips are still fresh.

Home office, phone and shared costs

If you work from home or use personal items for business, make sure you understand how your share is calculated and that you have the records to support it. The rules differ between the US and UK, and between employees, sole traders and company directors, so check the official guidance or ask your accountant.

Step 5: Review how you pay yourself and your structure

How you take money out of your business affects your tax. Mid-year is a good time to ask whether your current approach still fits.

• Sole traders and single-owner LLCs: Your profit is usually taxed whether you withdraw it or not. Your focus is setting aside enough.
• Company owners: The mix of salary and dividends (UK) or salary and distributions (US) can matter. Ask your accountant whether to adjust it for the second half.
• Retirement contributions: Many countries offer tax advantages for pension or retirement contributions. Ask what options suit your structure and when contributions need to be made.

Is your business structure still right?

If your profit has grown a lot, it may be worth revisiting your structure. For example, in the US an LLC offers pass-through taxation and simpler early admin, while a C-Corp has different tax treatment, and eligible C-Corp shares held long enough may qualify for a federal exclusion on gains under Section 1202 (check current rules). In the UK, some sole traders look at forming a limited company as profits rise. Changing structure has costs and paperwork, so get professional advice before deciding.

Your mid-year tax planning worksheet

Copy this into a spreadsheet and bring it to your accountant. Fill in the first three columns yourself.

All amounts are made-up examples. Add rows for vehicles, unpaid invoices and retirement contributions as needed.

Frequently asked questions

The bottom line

Mid-year tax planning is about giving yourself options. Project your profit, check that your set-aside keeps pace, think about timing, tidy your records and review how you pay yourself. Then take a short worksheet of real questions to your accountant.

An hour or two in June can turn next year's tax season from a scramble into a formality. Pick a date this week, pull your numbers, and start the conversation while there is still time to act on the answers.