Business Tax Planning for 2026/27
Tax planning means understanding liabilities early enough to make genuine commercial decisions before deadlines pass. It is not about artificial arrangements or spending money purely to obtain tax relief.
Review the Business Structure
Sole traders pay Income Tax and National Insurance on taxable profit. Limited companies pay Corporation Tax, while directors and shareholders may pay personal tax on salary, dividends and benefits.
The right structure depends on profit, risk, administration, future plans and how much money the owner needs personally. There is no single profit level at which incorporation is automatically best.
Plan Company Profit and Expenditure
Useful areas to review before the year end include:
- Whether all allowable expenses have been recorded
- Planned equipment purchases and capital allowances
- Employer pension contributions
- Available trading losses and other reliefs
- The effect of associated companies on Corporation Tax thresholds
- Cash required for upcoming tax payments
Purchases should be commercially necessary. Spending £1 solely to save a fraction of that amount in tax leaves the business with less cash.
Salary and Dividends
Owner-managed companies should review salary, dividends and pension contributions together. Dividends require sufficient distributable profits and proper paperwork; they cannot simply be declared because cash is available.
Personal income from other sources also matters. Read our guide to paying yourself from a limited company.
Personal Tax Planning
For 2026/27, the standard Personal Allowance remains £12,570 and begins to reduce when adjusted net income exceeds £100,000. Pension contributions and Gift Aid may affect adjusted net income.
Sole traders should consider payments on account, available losses and the timing of expenditure. Qualifying taxpayers must also budget for the additional administration created by Making Tax Digital for Income Tax.
VAT registration, employment decisions and finance arrangements can also affect tax and cash flow. Tax should be considered before contracts are signed or transactions completed; changing the paperwork afterwards cannot necessarily change the underlying tax treatment.
Any plan should be tested against both the immediate tax saving and its wider commercial, personal and cash-flow consequences.
Start Early
Tax planning after the accounting period or tax year has ended is limited. Current management accounts and reliable forecasts provide time to assess options properly.
GMS Accountants provides tax planning for businesses and directors in Cambridge and Nottingham. Contact us to review the figures before your year end.
