The 2026/27 tax year isn’t business as usual. A series of changes are landing at once – some subtle, some more visible – and together they can have a real impact on how you pay yourself, how you invest, and how much money stays in your pocket.
For many business owners, this year is less about dramatic tax rule overhauls and more about understanding how the pieces now fit together. That’s exactly what this guide is here to help with – below, we’ve broken down the key changes, the biggest opportunities, and the common traps to watch out for.
If you want a deeper dive, you can download the full Vibrant Accountancy 2026/27 Tax Planning Guide below:
What’s changed for 2026/27, and why it matters
This year’s tax landscape brings several shifts that affect business owners in ways that aren’t always obvious at first glance. Some changes increase overall costs, while others affect how lenders or HMRC interpret your numbers. Getting ahead of them now helps you navigate the year with clarity rather than being caught out during year-end.
Here’s what matters most:
- A phased rollout of Making Tax Digital for Income Tax for higher earning sole traders and landlords (view our dedicated blog post on MTD for more information).
- Business Asset Disposal Relief increasing to 18%.
- Mandatory payrolling of benefits confirmed for April 2027.
- Personal allowance and tax bands frozen – increasing fiscal drag.
- Higher dividend tax and increased employer NI above £5,000.
Income tax, allowances and the £100k trap
Allowances have been squeezed over recent years, and although the headline numbers look unchanged, the effects stack up quickly. The personal allowance remains fixed at £12,570, the dividend allowance has dropped to just £500, and the CGT annual exemption sits at £3,000 – meaning seemingly small decisions can have meaningful tax impacts.
A key pressure point is the £100k trap. As soon as your income crosses £100,000, your personal allowance starts to taper, effectively pushing your marginal tax rate close to 60% until income reaches £125,140. Thankfully, it’s easy to plan around: pension contributions, Gift Aid, or adjusting when you take dividends can all bring your adjusted income back below the threshold.
Salary vs Dividends: What’s optimal for 2026/27?
There isn’t a universal formula for paying yourself – context matters. Your optimal setup depends on corporation tax rate, Employment Allowance eligibility, profitability, and whether you’re close to the £100k taper zone. A structure that worked perfectly a couple of years ago may now be less efficient because so much else has shifted.
Still, two salary bands remain common starting points:
- £6,725 to secure NI credits without triggering NI.
- £12,570 when the Employment Allowance is available.
Dividends can make up the rest, but only if:
- The company has sufficient distributable reserves, and
- You have the proper board minutes and dividend vouchers in place.
These aren’t optional admin steps – they’re legal requirements HMRC actively checks.
Director’s loan accounts: Opportunity & Risk
Director’s loan accounts (DLAs) can be helpful, but they’re also one of the biggest sources of avoidable tax charges. If your loan account is overdrawn nine months after year end, the company faces a 33.75% s455 charge, which is only repayable when the loan is cleared. Larger balances may also trigger a beneficial loan charge if interest isn’t charged at HMRC’s official rate.
HMRC also looks closely at repeated “loan and repay” patterns. Keeping the DLA tidy throughout the year protects you from unpleasant surprises.
Pensions: The most powerful tax tool you have
Pension contributions remain one of the most effective ways to extract profit from your business. They save corporation tax, avoid employer and employee NI, and build long term wealth outside the company. The annual allowance is £60,000, and with carry forward, some directors can contribute significantly more.
Just ensure contributions are commercially justifiable. HMRC can spread the relief for unusually large payments over several years, and the “wholly and exclusively” rule still applies.
Corporation tax: Understanding the real rate you pay
Corporation tax is now graduated based on profit levels, but many SMEs overlook the fact that the 26.5% marginal rate applies to profits between £50,000 and £250,000 – a band many businesses sit in. This makes timing decisions around capital expenditure and pension contributions more important than ever.
If you have multiple companies under your control, your thresholds shrink. This catches many owners off guard, especially if additional companies were created for new ventures or property.
CGT & exit planning: A changing landscape
Business Asset Disposal Relief is now 18%, up from 14% and 10% in previous years – meaning delayed exits now carry a higher tax cost. If you plan to sell in the next few years, now is the time to start preparing. Exit planning is never a last minute exercise.
With the CGT exemption at £3,000, structuring disposals across tax years and making use of both spouses’ allowances can improve your position.
Family tax planning: Opportunities and honest warnings
There are strong planning opportunities for families, from using the marriage allowance to paying family members who perform genuine work and making pension contributions on their behalf. These strategies allow you to use more of the household’s combined allowances and lower-rate bands.
But a word of caution: tax shouldn’t drive personal decisions. Transfers to spouses are permanent, and roles must be commercially justifiable. HMRC is familiar with attempts to stretch the rules here – and it’s not worth the risk.
Property tax: Ongoing traps
Property remains one of the most complex areas for business owners. Mortgage interest relief is still restricted to a 20% credit for individuals, and the distinction between repairs (revenue) and improvements (capital) causes many accidental errors. These mistakes can trigger penalties if not corrected.
Common pitfalls also include:
- Missing the two year window for main residence elections
- Incorrect treatment following changes to the Furnished Holiday Let regime
- Assuming married couples are taxed based on actual ownership (default is always 50/50 unless Form 17 is filed)
Benefits, cars and allowances
A number of tax efficient benefits remain available if you use them intentionally. Electric vehicles still have very low benefit-in-kind rates, making them especially appealing for directors. In contrast, double cab pickups no longer qualify as vans for tax purposes, which may change what’s cost effective for your business fleet.
Underused tax-free benefits include:
- Trivial benefits (up to £50 each, up to £300/year for directors)
- Staff events up to £150/head
- One company mobile phone per employee
- Homeworking allowance (where homeworking is required)
Bookkeeping: Where tax problems really start
Many tax problems are actually bookkeeping problems in disguise. Personal expenses coded to the business, missing receipts, inaccurate mileage logs, and dividends without proper documentation are all common issues that create unnecessary risk.
Keeping tidy, accurate records throughout the year isn’t just for compliance – it protects you from HMRC scrutiny and creates clearer financial visibility for better decision making.
Your 2027/27 Tax Planning Checklist
A quick annual review helps you stay ahead:
- Salary/dividend planning
- Pension contributions and available carry forward
- Director’s loan account position
- Property ownership and elections
- ISA and CGT allowance usage
- MTD readiness
- Benefit-in-kind changes coming in 2027
For a full in-depth checklist, download the full Vibrant Accountancy 2026/27 Tax Planning Guide below.
Final thoughts: Tax planning is a conversation, not a deadline
Tax planning isn’t something to rush through – it’s a conversation you should be having throughout the year as your business and personal goals evolve. The rules change, your circumstances change, and what worked last year may not be the most effective approach today. But that’s also where the opportunity lies: when you know the landscape, you can make better decisions that protect more of what you’ve built.
If something in this guide made you pause or wonder whether your current setup is still working for you, that’s the perfect place to start. We’re here to help you unpack it, model the numbers, and build a plan that supports your goals – not just your tax return.
If you’d like to explore your tax position in more depth, get tailored advice, or sense‑check your current strategy, get in touch with the Vibrant Accountancy team – we’d love to help.
