As we approach 2026, it is essential for businesses to already begin their tax planning strategies. This need for planning in the UK is more apparent than ever, with budget announcements changing important aspects of how tax works in the UK.
At Tax Driven Accountants, we make it our mission to ensure that all the businesses we support are prepared for the next tax year, and we aim to emphasise the importance and convenience of pre-planning for business.
In this guide, we will give our tips for business tax strategy and tax planning for 2026, so keep reading to learn more.
Key Legislative Changes to Expect in 2026
Following Rachel Reeves’ latest budget announcement, businesses are advised to look at their corporation tax planning for 2026 earlier than ever before, with some key legislative changes set to change how businesses will pay tax.
In 2025, we recommended forming an accountancy checklist for your business, and we recommend you do the same as we enter 2026, as early as possible, to ensure that your business is properly prepared.
Some key legislative changes that you should expect in 2026 include:
Corporate Tax and Capital Allowances
Although the government’s Corporate Tax Roadmap reaffirms its commitment to stabilising main Corporation Tax rates, with the main rate remaining at 24% for the fiscal year starting April 2026, some changes have been introduced.
These updates involve modifications to capital allowances, particularly concerning full expensing for specific plant and machinery investments. Businesses should also be aware of revisions to the Annual Investment Allowance (AIA) and potential changes to loss relief rules, which may impact tax strategies.
The government also intends to reform R&D tax relief, tightening eligibility criteria and enhancing compliance efforts to prevent misuse while encouraging authentic innovation.
International Tax
Cross-border businesses are facing significant shifts as the UK implements the OECD’s Pillar Two global minimum tax rules, mandating that large multinationals pay at least 15% tax in every country they operate. Additionally, transfer pricing documentation standards are becoming more stringent, demanding more comprehensive reporting for transactions between related parties.
The government is examining controlled foreign company (CFC) rules and may implement measures affecting offshore structures, so any businesses that operate internationally are recommended to seek professional advice to understand these legislative changes in international tax so they don’t get caught out.
Employment and Personal Taxes Affecting Businesses
Employer National Insurance contributions are increasing, with rates rising and the secondary threshold lowering, significantly impacting payroll costs. The National Living Wage and National Minimum Wage are set to undergo substantial increases, requiring businesses to review pay structures and labour budgets.
IR35 regulations for contractors continue to evolve. Proposed reforms to worker classification criteria could enhance clarity. Companies should also prepare for increased pension auto-enrollment obligations and potential adjustments to employment allowance caps. Additionally, consultations are underway regarding employee share schemes and taxes on benefits-in-kind.
With changes to employment tax, it might be time to review your current payroll system with an accountant.
Cut on Transfer of Business Assets
From April 2026, businesses will no longer be able to transfer an unlimited value of qualifying business assets into a trust free of inheritance tax, with a new £1 million cap on Business Property Relief. Anything above the £1 million threshold will be subject to a 50% relief.
For any business wishing to transfer qualifying business assets, now is the time to do so, with assets moved before April 2016 still benefiting from the 100% relief.
Optimising Business Structure for Tax Efficiency
Before the tax changes are introduced in April 2026, it is recommended that businesses start optimising their structure. Optimising your structure is the ticket to not only working with the new updates but also benefiting from them.
Optimising your structure might look like adjusting your company’s team arrangement, workflows and reporting lines to adapt to the latest tax changes.
Something many businesses may wish to change is their legal structure, which has different impacts on their tax liabilities. Structures that businesses may consider include:
Sole Trader
Sole traders have a straightforward setup, but they provide fewer tax planning options and carry unlimited personal liability. Additionally, profits are taxed through Income Tax and National Insurance Contributions, which rise as your business profits grow.
Limited Company
A Limited structure is a much more tax-efficient option for growing businesses with significant profits, offering limited liability protection that safeguards personal assets and enhances overall financial security. It also provides more flexibility in terms of dividend tax rates and dividend allowance.
Partnership/LLP
Partners pay tax on their share of profits through their personal self-assessment, allowing flexible profit sharing. An LLP offers liability protection while keeping the tax advantages of a standard partnership, which can be beneficial for businesses navigating tax changes.
Choosing the right structure for your business is crucial because it directly affects your tax liabilities, determining how you can extract profits and leverage certain tax benefits.
If you want to change your business structure and you require support with your business formation, our team at Tax Driven Accountants can help.
Maximising Allowable Deductions and Reliefs
All businesses want to make sure they’re saving money where possible, and one of the best ways to do this is through understanding the deductions and reliefs your company is eligible for.
Some ways that you can make the most of allowable business expenses include:
- Claiming all genuine business expenses that reduce taxable profits.
- Make the most of capital allowances and consider timing investments accordingly.
- Claim available reliefs and schemes such as the Small Business Rate Relief.
- Make charitable donations, which may be eligible for relief.
If you’re not sure of the allowable expenses and reliefs that your business is entitled to? Speaking to an accountant may give you a clearer insight.
Strategic Use of Tax-Efficient Investments
When appropriately used, tax-efficient investments can significantly reduce your business’s personal tax liabilities. With tax thresholds expected to remain tight and HMRC continuing to scrutinise income sources, planning how and where you invest can make a meaningful difference.
Pension contributions are a very useful tool because they give tax relief for corporations and allow tax-advantaged growth. Directors can also use schemes like EIS (Enterprise Investment Scheme), SEIS (The Seed Enterprise Investment Scheme), and VCTs (Venture Capital Trusts), which offer significant income tax reliefs and exemption from Capital Gains Tax on qualifying investments.
Within the business itself, investing in plant, machinery, or technology can unlock full expensing, helping reduce taxable profits while improving operational performance.
If you are unfamiliar with the schemes available to your business, talking with a solicitor will provide the valuable insight needed to see which schemes your business is eligible for.
Cashflow and Timing Strategies
Timing can make a big difference in managing your tax liabilities. By bringing forward essential expenses or even delaying non-urgent income, businesses can reduce their taxable profit for the current tax period.
If you plan significant investments before the end of the year, you have time to maximise reliefs. Regular cash flow management keeps you ahead when your next tax bill arrives. This includes planning for payments on account and considering the impact of quarterly reporting requirements.
Payroll and Employment Tax Considerations
Payroll decisions can have a huge impact on both business and personal tax. Directors should review the balance of salary vs dividends to optimise tax efficiency while remaining compliant with HMRC rules.
Offering tax-efficient employee benefits, such as electric company cars, cycle-to-work schemes or enhanced employer pension contributions, can reduce employer National Insurance costs and even support staff retention.
When exploring these tax-efficient options, you must remain HMRC compliant.
VAT Planning Tips
At Tax Driven Accounts, a common issue we have encountered when working with businesses is VAT mistakes.
Selecting an appropriate VAT scheme, such as the Flat Rate Scheme, Cash Accounting, or Standard scheme, can streamline reporting and potentially reduce overall payable VAT. Regularly reviewing VAT recovery, particularly for businesses with partial exemption, helps ensure no reclaimable VAT is overlooked.
Proactive Planning Matters
Proactive tax planning helps businesses stay ahead of legislative changes, avoid last-minute stress, and reduce the risk of HMRC scrutiny.
By monitoring financial performance throughout the year instead of only at year-end, business owners can identify investment opportunities, claim available reliefs, and resolve issues early. The most effective tax strategies arise from continuous, proactive advice rather than rushed decisions.
The importance of planning also underscores the need to work with an accountant who can monitor your business’s financial condition throughout the year and make cash flow projections for the next financial year. This includes staying up-to-date with Making Tax Digital requirements and ensuring your bookkeeping systems are compliant with digital submission requirements.
Take Control of Your Taxes With Tax Driven Accountants
Through this guide, we hope to have provided you with more insight into how you can plan ahead for the 2026 tax year. At Tax Driven Accountants, we have helped countless businesses stay on track with their account management and tax filings.
Need extra support or a complete tax efficiency review of your tax management? Contact us to find out how we can help with your corporation tax planning and overall business tax strategy.