Tax planning tips for 2026
As 2026 gets underway, the impact of the announcements in Rachel Reeves’ Budget will begin to take effect. As such, it’s key for businesses to consider their Corporation Tax planning earlier than ever in order to be prepared for the upcoming changes. Here are our top tips for tax planning in 2026.
Corporation tax
The main rate of Corporation Tax is remaining stable at 25% for companies with profits of over £250,000 in the 2026-27 tax year. The government has pledged to keep this the same for the duration of this parliament.
The small profits rate of 19% continues to apply to businesses with profits of £50,000 or less.
Capital allowances
An update to capital allowances for plant and machinery means that companies should re-assess their tax position with these in mind. Critically, the writing-down allowance is reducing from 18% to 14% from April, and a new 40% first-year allowance (FYA) was introduced on 1 January to benefit unincorporated companies.
Top tip: Sole traders and partnerships should evaluate their capital expenditure plans to take advantage of the new relief.
Employment and personal taxes
Once again the National Living Wage and National Minimum Wage are increasing, to £12.71 per hour and £10.85 per hour respectively. In addition, tax on dividends will rise and significant changes related to IR35 will be implemented, with new thresholds for small companies.
Top tip: Companies should review their payroll system and assess how the changes may affect the balance of salary vs dividends for directors, and where the responsibility lies for determining the IR35 status of a contractor.
Transfer of business assets
From April 2026, a new £1m cap on Business and Agricultural Property Relief comes into effect, meaning businesses will no longer be able to transfer an unlimited value of qualifying business assets into a trust free of inheritance tax. Any transfers above the £1m threshold will incur a 50% tax rate.
Top tip: Businesses hoping to transfer qualifying assets of over £1m should move before April 2026 to benefit from the 100% relief.
Enterprise Management Incentive (EMI)
From April 2026, the EMI scheme will be available to more companies. This tax-efficient scheme offers rewards to employees through share options, and benefits SMEs. Companies with a gross asset limit of £120m (previously £30m), 500 employees (previously 250) and a company option pool of £6m (previously £3m) will be eligible.
Top tip: Businesses that will qualify from April 2026 should consider taking part in the scheme to maximise tax benefits for both the organisation and its employees.
Company vehicle and EV-related changes
From April 2028, electric and plug-in hybrid vehicles will move to a per-mile charging system. This will influence how companies budget for their fleets and could impact employees with company cars.
Top tip: Review the impact of per-mile charges on fleet budgets and employee expenses.
Assistance with tax planning
Tax changes can be challenging to navigate, particularly without professional advice. If your business requires help with tax planning for 2026, speak to a trusted accountant today.
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