With the new tax year now underway, the headline tax changes for 2026/27 tax year may appear limited, but the impact on tax planning for businesses is starting to build.
If you are running a business, the focus is rarely on individual tax rates in isolation. It is about the bigger picture. Cash, costs, investment and long-term plans.
This is where effective business tax planning becomes more important.
Here are five areas we are already discussing with clients and why they matter.
Key Areas Covered in this Article
Profit Extraction is Becoming more Expensive
For many owner managed businesses, dividends remain a core part of how profits are taken out of the company. Over time, this has become a more expensive route.
For the 2026/27 tax year, dividend tax rates are:
- 10.75% for basic rate taxpayers, increased from 8.75%
- 35.75% for higher rate taxpayers, increased from 33.75%
- 39.35% for additional rate taxpayers, unchanged
Dividends rates have increased for basic and higher rate taxpayers. For many, this brings the salary versus dividends question back into focus and raises some practical considerations:
- Is the current mix of salary and dividends still the most efficient?
- Should profits be retained for future investment?
- Are there more efficient ways to extract value?
For businesses with multiple shareholders, timing and individual tax positions become more important. This is where tailored tax planning strategies for businesses can make a real difference.
Increasing Pressure on your Wage Bill
Employment costs are rising and it is well known that employer NIC increased to 15% from 13.8% on 6 April 2025 which has had a significant impact on margins for many businesses. This has been compounded by increases to the National Living Wage which has increased to £12.71 per hour from 1 April 2026, up from £12.21 per hour in April 2025 for those aged 21 years old or above. That feeds directly into payroll, along with employer NIC and pension contributions.
At the same time, frozen income tax thresholds are pulling more employees into higher tax bands. People feel worse off, even if salaries have not changed significantly. That often leads to pressure for further increases.
The combined effect is clear:
- A higher cost base
- More pressure during pay reviews
- Tougher decisions around hiring and pricing
For many businesses, this is one of the most immediate impacts of the recent tax changes in 2026/27 tax year, even though it is not always driven by headline announcements.
Capital Allowances Remain a Real Opportunity, but Need Planning
The current capital allowance regime continues to offer strong relief for qualifying investment. For businesses investing in plant, machinery or infrastructure, this can make a real difference to cash flow.
However, the benefit is not automatic.
Timing, asset type and business structure all matter. Opportunities are often missed simply because tax has not been considered early enough. This is particularly the case when commercial buildings are being purchased where there are opportunities for capital allowances on fixtures which are often missed.
If you are planning significant investment over the next 12 to 24 months, getting this right from the outset is a key part of effective tax planning for business and can reduce the overall cost of that investment.
Corporation tax still needs careful handling
Corporation tax is no longer a flat, simple rate. The effective rate varies depending on profit levels and becomes more complex where there are associated companies.
While the headline rates are unchanged, the structure still creates challenges. Profits between £50,000 and £250,000 fall into the marginal band, with an effective rate of 26.5%, before moving to 25% above £250,000.
For growing businesses, this can lead to surprises:
- Tax bills higher than expected
- Profit growth not translating into cash
- Group structures affecting the overall position
This is where a more considered approach to business tax planning becomes important, particularly as businesses scale or operate across multiple entities.
Corporation Tax Rates can be found here.
Cash and Tax Planning Need to be More Joined Up
Step back and a clear theme emerges.
Higher extraction costs. Rising employment costs. Complex corporation tax. Missed opportunities on investment.
These do not sit in isolation.
Decisions made in one area often affect another. A pay rise increases NIC. A dividend affects personal tax. Investment decisions affect both cash and future relief.
Decisions made in isolation are becoming more expensive.
Strong tax planning for businesses now relies on taking a joined-up view across tax, cash flow and long-term plans. This is where many of the most valuable opportunities are found.
For Business Owners Personally
Alongside the business, there are a couple of areas worth keeping in mind. If you are also thinking about how to structure income and investments early in the tax year, we have covered this in more detail in our guide to tax planning for business owners in 2026/27.
IHT and Business Property Relief
Changes to Business Property Relief, including the capping of full relief at £2.5m, mean more of the value in a business could fall within the scope of Inheritance Tax.
For many owners, this brings succession planning into sharper focus and highlights the importance of early, joined up planning.
Company Pension Contributions
Pensions remain an efficient way to extract value from a company, particularly through employer contributions.
Making full use of available allowances can form an important part of wider tax planning strategies for businesses, particularly where dividend extraction is becoming more costly. This is because subject to certain conditions the contributions are deductible for corporation tax and not subject to income tax on the individual provided, they are within the available annual allowance.
Bringing it All Together
The new tax year is a useful moment to take stock. Not just of the numbers, but of how they affect your decisions.
The 2026/27 tax changes may not all be headline grabbing, but their combined impact on businesses are significant.
We work with business owners at every stage, from growth through to exit and beyond. That often means bringing together tax, accounts, corporate finance and wealth planning so decisions are aligned.
If you would like to talk through your approach for tax planning in the year ahead, we are always happy to help.
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