Spring is one of the most important times of year for strategic tax planning, especially for small and medium-sized enterprises (SMEs).
With the UK tax year end approaching fast, and several significant reforms either recently introduced or on the horizon, proactive planning now can help protect profits, optimise cash flow and reduce unexpected liabilities.
This guide explains key tax developments affecting UK businesses in 2026 and includes a practical checklist to help you get ready before the crunch!
So, why does tax planning matter? Effective tax planning isn’t just about compliance, it’s about:
- Managing your cash flow
- Reducing your overall tax burden
- Making informed investment decisions
- Avoiding costly late filing penalties
The earlier you review your tax position, the more options you have to make the most of available reliefs, allowances and timing strategies.
Key recent and upcoming tax changes affecting SMEs
Here’s a snapshot of the most important developments you should be aware of in 2026:
1. Corporation tax stays at current rates.
The UK government confirmed that the headline Corporation Tax rate will remain at 25% for companies with profits over £250,000, while the 19% small profit rate will continue for companies with profits up to £50,000. Marginal relief still applies between these thresholds.
This stability gives businesses greater certainty, but effective planning is still vital to manage liabilities. Late filing penalties with Corporation Tax returns will increase for accounting periods beginning on or after the 1st April 2026, making timely compliance more important than ever before.
2. Making Tax Digital (MTD) expansion
One of the biggest changes on the horizon is the expansion of HMRC’s MTD programme.
From the 6th April 2026, many sole traders, landlords and unincorporated businesses with over £50,000 will need to submit quarterly digital updates via HMRC-approved software, not just an annual return.
Thresholds will decrease in future years to £30,000 in 2027 and £20,000 in 2028, expanding the number of businesses affected.
MTD aims to improve accuracy and real time visibility, but it requires robust digital record keeping and compatible software.
3. Capital allowances and investment incentives
Following recent changes, a new 40% First Year Allowance (FYA) for quality main rate plant and machinery expenditure is now in place (from the 1st January 2026), including assets purchased for leasing and unincorporated business. At the same time, the annual main Writing-Down Allowance (WDA) is reducing from 19% to 14% from the 1st April 2026, affecting longer-term relief on certain assets.
This combination means timing your capital investment can significantly affect your tax position.
4. Changes to EIS, VCT and EMI schemes
From 6th April 2026, several key investor-focused reliefs are being updated.
Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) limits, including gross assets and lifetime investment caps, are increasing, while VCT income tax relief is reducing from 30% to 20%.
Enterprise Management Incentives (EMI) limits, including employee numbers, company asset caps and exercise periods, are also increasing, making share-based incentives more accessible for growing companies.
These strategies can influence investment divisions and long-term growth strategies.
5. Inheritance Tax changes impacting owners
Although not a daily business tax, Inheritance Tax (IHT) changes from the 6th April 2026, cap 100% Business and Agricultural Relief on qualifying properly at £2.5 million per individual, meaning higher-value estates may face partial IHT where they previously did not.
This is especially relevant for business owners considering succession and exit planning.
Act now to stay ahead
Spring is your last meaningful opportunity to influence your tax position before key deadlines. Whether it’s harnessing new allowances, preparing for digital filing, or structuring remuneration effectively, early, proactive action pays dividends.
At Haines Watts, we help SME owners navigate the complex tax landscapes and tailor planning that fits their business goals. If you’d like support refining your plans, our teams are here to help.
SME Spring tax planning checklist
To help you get focused this Spring, we have put together a practical checklist tailored for UK SMEs:
Financial & Tax Position
- Update management accounts to the latest financial position
- Forecast pre-year-end profits and anticipated tax liabilities
- Review cash flow against upcoming payments (incl. Corporation Tax)
Business Structure & Compliance
- Confirm your year-end date is still appropriate for tax planning
- Ensure your accounting software is MTD compliant
- Check key compliance deadlines (Corporation Tax, VAT, payroll, PAYE)
Capital Expenditure & Reliefs
- Review planned capital investments and timing
- Claim AIA, Full Expensing or 40% FYA where appropriate
- Check eligibility for R&D tax relief or other incentives
Directors & Owner-Managers
- Reassess salary vs dividend strategies for optimal tax efficiency
- Evaluate pension contributions before the 5th April deadline
- Incorporate changes to EIS/VCT/EMI schemes into planning
VAT & Record-Keeping
- Conduct a VAT code check and scheme review
- Confirm VAT returns and deadlines are understood and planned
- Ensure digital records are adequate for MTD reporting
Forward-Looking Strategy
- Factor in future tax changes (MTD thresholds, penalties, relief changes)
- Align tax planning with growth, investment and expansion plans
- Consider succession/exit planning implications
