Getting your head around small business tax changes in 2026
Running a small business in the UK means wearing a lot of hats. One of the trickiest is the "tax hat". The rules shift, the numbers move, and the language can feel like a foreign tongue. This guide breaks down the main small business tax changes for 2026 in plain English, so you know what to plan for in the 2026/27 tax year.
We will keep the jargon to a minimum. Where something is genuinely uncertain or might change at a Budget, we will say so and point you to the official source. Think of this as a friendly map, not the final word.
Tax does not have to be scary. Once you know which taxes apply to your business, you can plan ahead, set money aside, and avoid nasty surprises.
Corporation Tax: what limited companies pay on profit
Corporation Tax is the tax a limited company pays on its profit (the money left after costs). If you are a sole trader, this does not apply to you, as you pay Income Tax instead. But if you run a limited company, this is one to watch.
For 2026/27, the rates are well established:
- Small profits rate of 19% on profits up to £50,000.
- Main rate of 25% on profits over £250,000.
- Marginal relief for profits between £50,000 and £250,000. This is a sliding scale, so your effective rate sits somewhere between 19% and 25%.
The takeaway is simple. The more profit your company makes, the higher the share it pays. Ask your accountant how marginal relief affects you if your profits fall in that middle band.
National Insurance: the cost of having staff
National Insurance Contributions (NICs) are payments that fund things like the State Pension and the NHS. As an employer, you pay employer's National Insurance on top of your staff wages. It is a real cost of hiring, so it matters for your budgeting.
Employer NIC rates and thresholds are the kind of figures that can be adjusted at a Budget. Rather than quote a number that might move, check the latest on GOV.UK or ask your accountant to confirm the current rate and the point at which you start paying it. A few questions worth asking:
- What is the current employer NIC rate, and from what wage level does it start?
- Am I eligible for the Employment Allowance, which can reduce my employer NIC bill?
- How will a pay rise or a new hire change my total NIC cost?
VAT: the £90,000 question
VAT (Value Added Tax) is a tax added to most goods and services. You must register for VAT once your taxable turnover passes the registration threshold, which is £90,000 over a rolling 12-month period.
If you are growing fast, keep a close eye on your turnover. Crossing the threshold means you start charging VAT to customers and sending VAT returns to HMRC. Some businesses choose to register voluntarily below the threshold, for example to reclaim VAT on purchases. It is worth a chat with your accountant before you decide.
Going digital with your tax
HMRC's long-term direction of travel is "Making Tax Digital", which means keeping digital records and filing through approved software rather than on paper. It is already in place for VAT, and it is being rolled out to income tax for the self-employed and landlords in stages. If this affects you, our guide to going digital with your tax records explains what is coming and how to get ready.
Dividends: how company owners pay themselves
If you own a limited company, you might pay yourself partly through dividends (a share of company profit) rather than just a salary. You get a small tax-free dividend allowance each year, and anything above it is taxed at dividend rates that depend on your Income Tax band.
The dividend allowance has been trimmed in recent years, and allowances like this can change at a Budget. Confirm the current allowance on GOV.UK, then ask your accountant about the best salary-and-dividend mix for your situation. The right balance can make a real difference to your take-home pay.
Business rates: the tax on your premises
Business rates are a tax on most non-domestic properties, such as shops, offices and warehouses. If you work from home or rent a tiny space, you may pay little or nothing thanks to Small Business Rate Relief.
Reliefs and multipliers for business rates are reviewed regularly, and there have been ongoing changes for retail, hospitality and leisure businesses. Because these vary by property and can shift year to year, check the latest on GOV.UK or with your local council. Questions to raise:
- Does my property qualify for Small Business Rate Relief?
- Are there sector-specific reliefs I could claim?
- Has my rateable value changed recently?
How to plan ahead without the headache
You do not need to memorise every rule. You just need a sensible routine. Here is a simple plan:
- Set money aside for tax as it comes in, rather than scrambling at year-end.
- Keep clean records using accounting software, which also helps with going digital.
- Book a yearly review with your accountant before the new tax year starts.
- Look for ways to grow income, not just cut costs. Public-sector contracts can be a steady revenue stream, and there is plenty of funding and grant support that can help offset rising costs.
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Frequently asked questions
What is the main small business tax change to watch for 2026?
There is no single change to fixate on. The smart move is to review the whole picture each year: Corporation Tax bands, employer National Insurance, the VAT threshold, your dividend allowance and business rates. Some figures are fixed, while others can change at a Budget, so confirm the current numbers on GOV.UK.
Do sole traders pay Corporation Tax?
No. Corporation Tax is paid by limited companies on their profits. Sole traders pay Income Tax and National Insurance on their profits through Self Assessment instead.
When do I have to register for VAT?
You must register once your taxable turnover passes £90,000 over a rolling 12-month period. You can also register voluntarily below that level if it suits your business.
This article is general information, not financial or tax advice. Tax rules and figures can change. Always confirm the latest details on GOV.UK or speak to a qualified accountant before making decisions.
