New Year Tax Planning for Small Businesses: Budget Update & Key Changes to Plan For

by | Jan 1, 2026 | Accounting & Business

New Year Tax Planning for Small Businesses: Budget Update & What to Plan for in 2026

As we move into the new year, it’s the ideal time for small business owners and limited company directors to review their tax position and plan ahead.

The recent Budget introduced several changes that affect corporation tax planning, dividends, payroll costs, employee obligations and personal tax. While some areas remain stable, others require forward planning to avoid higher tax bills and cash-flow pressure later.

Below we explain what’s changed, what hasn’t, and how small businesses can plan more effectively in 2026 and beyond.

Corporation Tax: Stability for Small Businesses

What’s changed

There have been no further increases to Corporation Tax rates, providing welcome certainty for business owners.

Current rates remain:

  • 19% for profits up to £50,000

  • 25% for profits over £250,000

  • Marginal relief applies in between

Planning tips

  • If profits are increasing, continue forecasting at the 25% corporation tax rate.

  • Consider whether retaining profits or reinvesting in the business may be more tax-efficient than extraction.

  • Regular reviews with your corporation tax planning adviser help prevent unexpected liabilities.

Dividend Tax & Director Remuneration: Changes Ahead

What’s changing

Dividend tax rates will increase from April 2026, affecting most owner-managed limited companies.

Planned rates:

  • Basic rate dividends: 8.75% → 10.75%

  • Higher rate dividends: 33.75% → 35.75%

Planning tips

  • Review your salary and dividend planning strategy well before the change.

  • Consider the timing of dividends over the next 12–18 months.

  • Personal tax planning is becoming increasingly important for directors relying on dividends.

Capital Allowances: Investment & Tax Planning Opportunities

What’s changed

  • A new 40% first-year allowance applies to certain assets that don’t qualify for full expensing.

  • From April 2026, writing-down allowances on some assets will reduce from 18% to 14%.

Planning tips

  • Review upcoming purchases such as equipment, machinery or technology.

  • Consider bringing expenditure forward where appropriate to maximise relief.

  • Capital expenditure should be reviewed as part of wider tax planning for small businesses.

National Minimum Wage: Increased Payroll Costs

What’s changing

National Minimum Wage and National Living Wage rates are increasing from April, impacting many small employers.

Planning tips

  • Update payroll budgets and cash-flow forecasts early.

  • Review pricing and margins to protect profitability.

  • Ensure payroll systems and processes are compliant.

Payroll Services

Employment Law & Employee Rights: Ongoing Changes

What’s changing

There is continued focus on employee protections, including:

  • Flexible working rights

  • Worker protections

  • Employer compliance requirements

Planning tips

  • Review employment contracts and HR policies regularly.

  • Factor potential additional employment costs into forecasts.

  • Good compliance reduces risk and disruption.

Personal Tax: Savings, Investments & Rental Income

What’s changed

Tax on savings interest, rental income and investments has increased, affecting many directors personally.

Planning tips

  • Review how personal and company finances interact.

  • Consider whether profits are better retained within the company.

  • Personal tax planning should align with your limited company accounting strategy.

Local Support for Birmingham & Walsall Businesses

Greystone Accountants works with small businesses and limited companies in Birmingham, Walsall and across the West Midlands, providing proactive tax planning alongside compliance.

Whether you’re a growing business or an established company, early planning helps reduce tax, protect cash flow and avoid last-minute decisions.

Frequently Asked Questions (SEO & Featured Snippet Friendly)

Do small businesses need to plan now for dividend tax changes?

Yes. Although dividend tax increases apply from April 2026, planning early can help reduce personal tax and improve cash flow.

Has corporation tax increased again?

No. Corporation tax rates remain unchanged, but businesses with growing profits should continue budgeting at the higher rate.

Should small businesses bring capital expenditure forward?

In many cases, yes. With capital allowance changes ahead, timing purchases correctly can improve tax efficiency.

How does minimum wage affect small businesses?

Higher minimum wage rates increase payroll costs, making cash-flow forecasting and pricing reviews more important.

Plan Ahead with Greystone Accountants

The new year is the best time to:

  • Review profit extraction strategies

  • Update tax and cash-flow forecasts

  • Plan investments more strategically

  • Identify risks and opportunities early

If you’d like help reviewing your tax position or planning ahead, contact Greystone Accountants to arrange a consultation.

Book your free discussion or call Greystone Accountants to discuss how we can help you turn your business idea into a success story.