Reviewed October 2026. Figures apply to the 2026/27 tax year (corporation tax: the financial year from 1 April 2026). General information, not advice.
What tax planning is, and what it is not
Tax planning is deciding, before the year end, how to use the reliefs Parliament has provided: capital allowances, employer pension contributions, and the timing of purchases and drawings. Done after the year end, most choices have gone.
It is not artificial arrangements. The general anti-abuse rule in Part 5 of the Finance Act 2013 lets HMRC counteract abusive arrangements: those that cannot reasonably be regarded as a reasonable course of action. Finstem does not recommend arrangements aimed at a tax advantage of that kind, and every plan is tested against that rule and the other anti-avoidance rules.
The figures directors plan around, 2026/27
Each figure checked at GOV.UK, in HMRC’s manuals or on legislation.gov.uk, October 2026.
| Corporation tax | 19% up to £50,000 of profit, 25% over £250,000, marginal relief between. Both limits are divided by one plus the number of associated companies and reduced for accounting periods shorter than 12 months, and relief is worked out on augmented profits. The examples below assume none |
|---|---|
| Marginal relief | Tax at 25% on taxable profits, less relief of 3/200 × (£250,000 − augmented profits) × taxable profits ÷ augmented profits; 26.5% on each extra £1 in the band |
| Dividend tax | £500 allowance, then 10.75% basic, 35.75% higher, 39.35% additional rate (dividend tax calculator) |
| Income tax | Personal allowance £12,570, cut £1 for every £2 of adjusted net income over £100,000; 20% to £50,270, 40% to £125,140, 45% above (England, Wales, Northern Ireland; salary and dividend calculator) |
| National Insurance | Employer 15% above £5,000; employee 8% from £12,570 to £50,270, then 2% |
| Employment Allowance | £10,500; not available if the sole director is the only employee liable for employer NI; only one company in a connected group can claim |
| Pensions | Annual allowance £60,000 including employer contributions; unused allowance from the previous three tax years can be carried forward; tapered if threshold income is over £200,000 and adjusted income over £260,000, and reduced if the money purchase annual allowance applies |
| Capital allowances | Annual investment allowance £1 million a period (not cars); full expensing 100% on new and unused main-rate plant and machinery from 1 April 2023 (not cars); writing down allowance on the main pool 14% for accounting periods starting on or after 1 April 2026 and 18% for periods ending before it (a period that includes 1 April 2026 uses a hybrid rate), special rate pool 6% |
| Director’s loan | Section 455 tax: 35.75% of loans made from 6 April 2026 (33.75% from 6 April 2022 to 5 April 2026), due nine months and one day after the period end; none if repaid within nine months |
| Deadlines | Corporation tax nine months and one day after the period end (profits up to £1.5 million; how to pay corporation tax); CT600 twelve months after |
Three worked examples
Company-level only: 12-month period, no associated companies, taxable profits equal to augmented profits.
Employer pension contribution
Illustrative example, not advice or a client. Year to 31/03/2027, £120,000 profit before a £30,000 employer pension contribution. Paid by 31/03/2027, it cuts the corporation tax bill from £28,050 to £20,100, saving £7,950. Paid on 07/04/2027, the relief arrives in the next period instead.
Equipment purchase
Illustrative example, not advice or a client. Same year end, £80,000 profit before allowances, £40,000 of new main-rate equipment (not a car). Bought in the year, full expensing cuts the bill from £17,450 to £7,600, saving £9,850. Bought after 31/03/2027, the claim moves to the next period.
Director’s loan
Illustrative example, not advice or a client. Year to 31/12/2026, £20,000 lent to a director on 01/09/2026. If it is not repaid by 30/09/2027, section 455 tax of £7,150 is due on 01/10/2027. Repaid by then, no section 455 tax is payable. A loan of more than £10,000 can still create a taxable benefit unless interest is paid at the official rate.
