Tax year: 2026/27 | Last reviewed: 2 October 2026
Tax planning is not about aggressive schemes. It is about knowing what tax is coming, using the reliefs Parliament intended you to use, and timing decisions so more of your profit stays in the business. Done properly, it funds growth. Done at the last minute, it mostly means paying more than you needed to.
1. Better cash flow
Most cash flow crises in small businesses are caused by tax bills that were not planned for: a VAT quarter, corporation tax nine months after the year end, or a January Self Assessment bill with payments on account. A tax forecast, updated quarterly, means you can set the right amount aside and invest the rest with confidence. See how our management accounts track both profit and cash.
2. Using capital allowances when you invest
- Annual Investment Allowance: 100% relief on up to £1 million a year of plant and machinery
- Full expensing: unlimited 100% relief for companies on new main rate plant
- 40% first year allowance: new from January 2026, including assets for leasing
- Electric cars: 100% relief on new zero emission cars until 31 March 2027
The old super-deduction ended in March 2023, but full expensing replaced it permanently. Timing a purchase just before your year end brings the relief forward by a full year.
3. Research and development relief
If your business solves technical or scientific uncertainties, for example developing software, new products or processes, it may qualify for R&D relief under the merged scheme, with extra support for R&D-intensive loss-making SMEs. Claims now require advance notification in many cases and detailed reports, so plan ahead.
4. Extracting profit efficiently
The mix of salary, dividends and pension contributions makes a big difference to your personal tax. With dividend tax up from April 2026, employer pension contributions have become relatively more attractive. See how much to take in dividends and best director salary.
5. Managing corporation tax bands
Profits between £50,000 and £250,000 are taxed at an effective 26.5% at the margin. Pension contributions, equipment purchases and bonuses in that band give the most relief. Watch out for associated companies, which share the limits. See corporation tax rates 2026/27.
6. Choosing the right VAT scheme
Cash accounting helps businesses that give credit, the Flat Rate Scheme suits some low-cost service businesses, and voluntary registration can help if you sell to VAT-registered customers.
7. Rewarding staff tax-efficiently
With employer NI at 15%, benefits such as pensions, electric cars through salary sacrifice and training deliver more value than pay rises. See investing in employees.
8. Planning for the future
- Business Asset Disposal Relief: CGT on qualifying business sales rose to 18% from April 2026, up to a £1 million lifetime limit.
- Inheritance tax: from April 2026, 100% Business Property Relief is capped at £2.5 million of combined business and agricultural property per person, with 50% relief above that. Unused allowance can transfer between spouses.
- EMI share options: to attract and keep key people.
- Group structures: holding companies to protect assets and reinvest profits.
9. Staying compliant
Good planning starts with good records. Cloud bookkeeping and Making Tax Digital make it easier to see where you stand all year, and avoid penalties that wipe out savings. See digitising your finance function.
FAQs
When should I plan my tax?
At the start of the year and again two to three months before your company year end and before 5 April. Most savings require action before the year end, not after.
Is tax planning legal?
Yes. Using reliefs and allowances as intended is entirely legitimate. We do not use artificial avoidance schemes.
Talk it through with Digivolve
Our advisory clients get a tax plan at the start of each year and a review before year end, so decisions are made with the numbers in front of them.
This article is general information based on the rules for the 2026/27 tax year as at October 2026. It is not personal tax advice. Rates and thresholds can change, so please speak to us before acting.