The best time to reduce a tax bill is before the year ends, while you can still influence what goes into it. After the year-end, the numbers are fixed and the only choice is how to present them honestly. This checklist covers what to review in the final two months, so that your tax return reflects the real position and you avoid last-minute surprises.

1. Estimate the year's profit now

Pull a profit and loss statement to date and forecast the rest of the year. The monthly profit and loss statement does this, and how to read a profit and loss statement explains each line. A rough estimate of taxable profit tells you whether you need to plan a cash reserve for tax. Test the tax with the corporation tax calculator for a company, or the sole trader vs company calculator if you are weighing the structure.

2. Check your tax regime

If your turnover has changed, check whether you still qualify for turnover tax, which applies to annual sales between KES 1,000,000 and KES 25,000,000 at 3% of gross sales, or whether you have to register for VAT above KES 5,000,000. See turnover tax for small businesses and the VAT threshold monitor. Switching regimes needs notice to KRA at the start of a year, so decide before it begins.

3. Count the stock

Do a physical count on the last day of the year and value it at the lower of cost and selling price. Write off damaged or obsolete items with a record of why. Unrecorded shrinkage means your cost of sales is wrong and profit is overstated. Methods are in inventory management basics, and the inventory and stock tracker holds the count.

4. Review customers who have not paid

List invoices unpaid for months. Chase them in writing, and decide which are bad debts. A debt can be deducted as bad only when it has been written off in the books and reasonable steps to collect it have failed. Use the aged receivables tracker and invoicing and getting paid on time.

5. Time asset purchases

Equipment you need can be bought before year-end to start earning capital allowances in the year, but only if you use it in the business by then. Do not buy just for the tax: the allowance is a share of the cost, so it never covers the whole price. The rates are in fixed assets and capital allowances explained, and the capital allowances calculator shows the effect.

6. Reconcile payroll and statutory payments

Compare payroll totals with the amounts paid for PAYE, NSSF, SHIF and the housing levy, and fix any shortfall before filing the annual returns. See the employer obligations checklist. Issue P9 forms to staff soon after the year ends.

7. VAT and withholding

Reconcile your VAT account to the returns filed and make sure input VAT claims have valid invoices. Check that you hold withholding tax certificates for amounts deducted from your income, since they are credits against your tax. See how to file a VAT return and withholding tax in Kenya explained.

8. Instalment tax

Companies and businesses with expected tax above the threshold pay instalment tax in four instalments. Compare what you have paid with what the year's profit now suggests, and top up the last instalment if needed. The instalment tax calculator and instalment tax planner help.

9. Losses

If the business made a loss, record it properly, because losses can be carried forward for a limited number of years: the five-year limit on carrying forward tax losses. Keep the computation.

10. Records and filing dates

Gather bank statements, invoices, contracts, loan statements and the asset register. File on time: see the KRA filing calendar for small businesses and the 30 June tax deadline. Late returns cost more than most planning saves.

Do not overdo it

Aggressive tax schemes, back-dated invoices or personal expenses disguised as business costs create risk far greater than the saving. If you are unsure about a treatment, ask an accountant before the year ends, not after.

Frequently asked questions

Is prepaying expenses a good way to cut tax? Prepayments are normally deductible only in the period they relate to, so paying early rarely changes the tax and may hurt cash flow.

Can I pay bonuses after year end and still deduct them? If the bonus is committed before year end and paid within the period allowed by law, it may be deductible in the year. Confirm with your accountant.

Should I buy a vehicle in December? Only if you need it. The allowance covers part of the cost over several years, and private use may limit the claim.

When should I talk to an accountant? Before your financial year ends, so that any advice can still change the numbers.