Tax Planning for Business Owners: Structuring Income and Investments Early in the 2026/2027 Tax Year

Most business owners treat 5 April as a finish line. The more strategic ones treat 6 April as the starting point.

If you run a successful company, you already plan ahead in your business. You forecast cash flow. You review margins. You make decisions early, rather than waiting until pressure forces your hand. Your personal financial planning should follow the same approach.

Without early planning, it is not uncommon for successful business owners to drift into paying more tax than they expected. Once income exceeds £100,000, the tax-free personal allowance begins to be withdrawn.

For individuals whose income includes dividends or bonuses, the interaction between allowances and thresholds can increase the overall tax bill.

For that reason, many business owners review their tax planning early in the tax year. Taking time to consider how income, dividends, pensions and investments interact can help identify financial planning opportunities before allowances are lost.

The 2026/2027 Tax Landscape for High Earning Business Owners

Several tax thresholds continue to influence financial planning decisions for company directors and higher earners:

• The additional rate of 45% applies above £125,140
• The personal allowance begins to be withdrawn once income exceeds £100,000 and is completely lost once income exceeds £125,140
• The dividend allowance is currently £500
• The Capital Gains Tax annual exemption is £3,000
• The ISA allowance remains £20,000
• The pension annual allowance is £60,000, although tapering may apply once adjusted income exceeds £260,000

While these figures have remained relatively stable, frozen thresholds mean that more income may gradually move into higher tax bands over time.

For example, business owners whose income increases as their company grows may find that a larger proportion of their earnings becomes subject to higher rates of tax.

As a result, many directors choose to review how income and investments are structured at the beginning of each tax year rather than waiting until the final months of the year.

Dividend Tax Planning for Business Owners and Company Directors

For owner managed businesses, the way profits are extracted from the company can have a significant influence on personal tax exposure.

Business owners often review the balance between salary, dividends and employer pension contributions when considering how income will be taken during the year.

Factors that may be relevant include:

• Expected total income during the tax year
• Whether the personal allowance may be reduced or withdrawn
• Exposure to higher or additional tax rates
• The wider objectives of the individual and their family

Dividend tax planning is rarely about a single decision. Instead, it often involves reviewing how income is taken across the full tax year and understanding how different income sources interact.

Where appropriate, some business owners also consider how shareholdings are structured within the family and how dividend payments align with the company’s distributable reserves and wider tax position.

These decisions are often informed by discussions between accountants, tax advisers and financial planners to ensure the corporate and personal positions are considered together.

Pension Annual Allowance Tapering for High Earning Business Owners

Pensions are one of several planning tools that may be relevant when considering long term financial planning, although their suitability will depend on individual circumstances.

The standard pension annual allowance is currently £60,000. However, once adjusted income exceeds £260,000, the available allowance may begin to reduce under the tapering rules.

For business owners whose income fluctuates from year to year, particularly where dividends form part of their remuneration, it is possible to trigger the taper without initially realising it.

When reviewing pension planning, individuals may consider:

• Whether unused allowances from previous tax years may be available
• The level and timing of employer contributions
• The interaction between pension funding and dividend income
• The role pensions may play within broader long term financial planning

In some circumstances, employer pension contributions may be tax-efficient in certain circumstances for both the company and the individual. However, the appropriateness of any approach will depend on the individual’s financial position and objectives.

Capital Gains Tax Planning Before Selling a Business

For many founders, the eventual sale of their company may represent one of the most significant financial events of their career.

Capital Gains Tax planning is therefore often considered well before a potential sale takes place.

Areas that may be relevant include:

• The use of the annual Capital Gains Tax exemption
• Eligibility for Business Asset Disposal Relief
• Shareholding structures between family members
• The timing of disposals
• Interaction with other capital gains or losses in the same tax year

Business Asset Disposal Relief may allow qualifying gains to be taxed at 10 percent on up to £1 million of lifetime gains. However, a number of conditions must be met in order for the relief to apply.

Where a business sale may be possible in the future, some business owners find it helpful to discuss the potential tax implications with advisers in advance so that they understand the options available to them.

Pre-Exit Tax Planning for Business Owners

Even if a potential sale is several years away, reviewing how personal wealth sits alongside the business can be useful.

Questions that business owners sometimes consider include:

• Whether their wealth is concentrated in a single asset
• Whether surplus cash is retained efficiently within the company
• Structures such as family investment companies or trusts may be considered as part of longer term planning in some circumstances, although their suitability depends on individual circumstances and tax advice
• How personal investments align with the level of risk associated with the business

Preparing for a future transaction may also involve reviewing financial reporting, governance and distributable reserves within the company.

Considering these matters early can help business owners understand the potential implications of different decisions and the range of options available to them.

Five Questions to Ask Yourself This Tax Year

At the beginning of the 2026/27 tax year, some business owners find it helpful to reflect on questions such as:

• Have I reviewed how income will be taken during the year?
• Could pension tapering affect my available contribution allowance?
• Is a significant proportion of my wealth linked to one business asset?
• Have I considered how a future exit might affect my personal finances?
• Are my advisers communicating effectively with one another?

Reflecting on these areas can often highlight topics that may benefit from further discussion with professional advisers.

Why Leaving Tax Planning Until March 2027 Can Limit Your Options

Tax planning decisions are sometimes delayed until the end of the tax year. While this may work in some situations, leaving decisions until the final months of the year can limit the options available.

For example:

• Allowances may not be fully utilised
• Income may fall into higher tax bands unexpectedly
• Pension contribution limits may be affected by tapering
• Capital gains may arise without prior planning
• Opportunities to review shareholdings or investment structures may be reduced

By contrast, reviewing financial planning earlier in the tax year can provide more time to consider the available options and their potential implications.

Why Independent Financial Advice Can Be Valuable

When income tax, dividend tax, Capital Gains Tax, pension rules and succession planning interact, financial decisions can become complex.

Independent financial advisers are able to consider a wide range of financial products and providers when advising clients. This allows advisers to consider a wide range of financial products and providers when assessing what may be suitable for an individual’s objectives and circumstances.

For business owners whose wealth may be closely linked to their company, understanding how personal financial planning interacts with corporate tax and long-term objectives can be particularly important.

Professional advice can help individuals understand the options available to them and the potential implications of different decisions.

A Measured Next Step

If you would like to review how your income and investments are structured for the 2026/27 tax year, you may wish to speak with a qualified financial adviser to discuss the considerations raised in this article.

Many business owners find that a short discussion early in the tax year helps clarify how different elements of their financial planning fit together.

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Important Information

Hawsons Wealth Management is authorised and regulated by the Financial Conduct Authority.

This article constitutes a financial promotion and is provided for general information only. It does not constitute financial advice or a personal recommendation.

The information reflects our understanding of current UK tax legislation and practice for the 2026/27 tax year, which may change in future.

The impact of tax rules will depend on individual circumstances, and professional advice should be sought before making financial decisions.

Tax treatment depends on individual circumstances and may be subject to change in the future.

The value of investments and any income from them can go down as well as up and you may get back less than you originally invested.