You pretty much answered your own question bud. The % of sidewall is just telling you your tire side wall is X number at 40% of 295mm. Yes you will always want to drop the sidewall size(in a normal case). To answer your question more specifically you need to make sure your front and rear tires do not exceed a 3% height difference or it will throw your abs/wheel speed sensors crazy in turn disabling the VDC. So make sure that when your sizing your fronts size them accordingly to your rear.
The only reason I didn't drop down to a 265 ish tire in the front is because they don't offer it for the radial tires I have and I wanted matching front and rear treads(picky yes, but it is what it is.)
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