Running a manufacturing business leaves little room to step back. Most days are driven by what is happening on the shop floor. Orders need to be delivered, machines need to keep moving and your team relies on you to keep things on track.
By the end of the day, you have dealt with suppliers, customers, staffing and the usual unexpected issues. It is no surprise that tax planning often gets pushed down the list, even though you know it matters.
With continued pressure to reduce manufacturing costs, alongside rising energy, labour and material prices, keeping control of cash is critical. That is where forward planning can help. Not as a paper exercise, but as a practical way to protect cash flow and avoid surprises.
We have highlighted three areas worth keeping in mind for the 2026/27 tax year. Considered early, they can make a meaningful difference.
Capital Allowances on Plant and Machinery
For most manufacturers, investing in equipment is part of the job. What is not always clear is how capital allowances on plant and machinery can influence both the timing of cash flows and the overall cost.
Reliefs such as the annual investment allowance and full expensing allow you to claim tax relief on qualifying spend. In simple terms, this can reduce taxable profits and ease pressure on cash.
Capital allowances remain one of the most valuable tax incentives for manufacturing companies. However, timing is key. Bringing an investment forward into the current year may accelerate tax relief. Delaying it could push that benefit further down the line. Depending on your profit position, that difference in the timing of cash flows can be significant.
It is also worth thinking about how these decisions sit alongside funding. Whether assets are purchased outright or financed can influence both cash flow and the overall tax position.
Taken together, these choices tend to work best when viewed as part of a wider plan, rather than in isolation.
Corporation Tax Planning and Marginal Relief
As profits change, many manufacturing businesses move between corporation tax thresholds.
Corporation tax planning is not just about knowing the rates. It is about understanding how marginal relief corporation tax applies when profits sit between the lower and upper limits.
In practice, this means profits in that range are taxed at a blended rate. The result is that your company’s marginal and effective tax rates may be higher than expected.
Having some visibility over profits can help. Even a simple forecast can reduce the risk of an unexpected tax bill.
There may also be decisions to be made surrounding around the timing of income or expenditure and how businesses are structured. These will vary from one business to another, but they can influence the overall position.
Craig Burton, Manufacturing Partner adds:
“We often speak to owners who are caught off guard by how their tax rate shifts as profits grow. Taking time to understand marginal relief can bring a bit more certainty.”
Employer National Insurance and Workforce Planning
Workforce pressures continue across the sector. Skills shortages, an ageing workforce and rising employment costs all play a part.
There are, however, some tax incentives for manufacturing companies linked to employment. For example, employer National Insurance savings may be available when hiring apprentices or younger employees, depending on eligibility. The employment allowance can also reduce the overall National Insurance Contributions bill for some businesses.
While these are unlikely to drive hiring decisions on their own, they can help reduce costs over time.
More broadly, workforce planning links closely to the future of the business. Decisions around hiring, training and succession all shape how the business develops, both operationally and financially.
Why Forward Planning Matters
These areas are connected. Capital allowances influence profits. Profits affect corporation tax. Workforce decisions shape both cost and long-term resilience.
Together, they form part of a wider manufacturing tax planning approach.
Craig Burton, Manufacturing Partner adds: “Small decisions around timing and structure can have a noticeable impact. Yet in a busy business, it is easy for these areas to be reviewed only at the last minute, rather than as part of ongoing planning.”
Looking Ahead
The right approach will depend on where your business sits.
In a growth phase, the focus is often on investment and cash flow. As the business matures, attention may turn to structuring profits and preparing for the future. During a transaction, tax becomes even more important. Afterwards, the focus often shifts to protecting what has been built.
Having advice that understands manufacturing and takes a long-term view can help bring consistency across those stages.
A Practical Next Step
If any of these areas have been on your list for a while, it may be worth a conversation with your adviser.
That could be your current accountant or someone new. The aim is simply to sense check your position, keep things clear, and make sure nothing important is missed.
If you would like to talk it through, Craig Burton and the team are always happy to help.
