Tax Planning for UK Entrepreneurs: The 2026/27 Framework for Active Owner-Managers

For most UK entrepreneurs, tax planning content is written around the exit moment: what to do when you sell, how to claim Business Asset Disposal Relief, and how to reinvest sale proceeds. That is useful, but it is not the most useful question for someone who is still actively running a business.

For active owner-managers, the real question is different: what does the 2026/27 tax landscape look like today, and where are the planning levers before exit becomes the priority?

The answer matters because the landscape has changed materially. Dividend tax rates rose in April 2026, employer National Insurance increased in April 2025, and business and agricultural property relief changed from 6 April 2026. Together, those changes alter the calculus around remuneration, retained profits, and succession planning.

What has changed

Three developments now shape the owner-manager planning environment.

First, dividend tax rates increased from 6 April 2026. The basic rate is now 10.75%, the higher rate 35.75%, and the additional rate remains 39.35%. The dividend allowance is still £500. For owner-managers who extract material profits through dividends, that is a real increase in personal tax leakage.

Second, employer National Insurance rose to 15% from 6 April 2025, with the secondary threshold reduced as well. That makes salary more expensive for the company, but it also increases the value of employer pension contributions funded through the business.

Third, business and agricultural property relief changed from 6 April 2026. The new cap and the reduced treatment for AIM-linked planning mean that succession and inheritance tax planning now needs to be thought about much earlier than before.

Remuneration planning

For active owner-managers, the first issue is usually salary versus dividends.

The old default of “take a minimal salary and extract the rest as dividends” is less compelling than it used to be. Dividend tax is higher, and employer NIC is now more expensive, so the split should be reviewed rather than assumed.

For many owner-managers, the real planning lever is not just the salary/dividend mix, but whether the marginal profit should be extracted at all. Employer pension contributions can now be a more efficient use of company money than additional salary, especially where the owner-manager still has pension headroom available.

The practical point is simple: the remuneration decision should be made in the context of the whole personal balance sheet, not just the company’s profit for the year.

Pension contributions

Employer pension contributions are one of the most valuable owner-manager planning levers.

A company-funded pension contribution avoids employer NIC and can be far more efficient than equivalent salary extraction. Where carry forward is available, it may also be possible to make substantially larger contributions in one year, which can be particularly useful after a strong trading period.

The decision still needs to be coordinated with wider retirement planning, but the direction of travel is clear: the post-2025 NIC environment makes employer contributions more attractive than they were.

Reliefs and capital spend

Two further levers are worth keeping in view.

R&D tax relief remains relevant for businesses carrying out genuine qualifying research and development, particularly in technology, engineering, and life sciences. The rules are tighter than many owner-managers assume, so the quality of the claim matters.

Capital allowances also remain important. The Annual Investment Allowance and full expensing can materially reduce corporation tax where a business is investing in qualifying plant and machinery. For businesses planning significant capital expenditure, timing the spend can make a real difference.

Exit planning

For entrepreneurs who expect to exit eventually, the main planning question is whether the business structure is ready in time.

Business Asset Disposal Relief still offers a lower CGT rate than the standard position, but the qualifying conditions and timing matter. If the share structure is going to change, or if investors are likely to come in, that needs to be thought about well before the sale.

Business relief for inheritance tax now matters more too, because the 2026 reform has made the relief landscape less generous. For owner-managers who have built up retained earnings, investment assets, or family ownership structures inside the company, the trading status of the business should be reviewed regularly.

Personal tax interactions

Owner-managers sit at the intersection of corporate and personal tax, which means several rules interact.

The 60% effective marginal band between £100,000 and £125,140 is still highly relevant for those taking remuneration in that range. Pension contributions can be especially valuable there because they help reduce adjusted income and can restore personal allowance.

The annual allowance taper also matters for higher earners, but some owner-managers can manage their income level to preserve more pension headroom than they expect.

The main point is that corporate and personal planning cannot be separated cleanly. The best answers usually come from looking at both together.

Common mistakes

The mistakes we see most often are predictable.

• Continuing with the old salary/dividend pattern without revisiting the new dividend rates.

• Underusing employer pension contributions.

• Leaving exit planning until the share structure is already fixed.

• Assuming the business will automatically qualify for relief on death without checking the trading position.

• Failing to coordinate the accountant and the financial planner.

Each of those mistakes is avoidable, but only if the planning starts early enough.

What this means in practice

If you are an active owner-manager, three questions are worth asking now:

• Is your remuneration split still optimal under the 2026/27 rules?

• Is your business structure ready for an eventual exit?

• Are your corporate and personal advisers actually working together?

The best owner-manager planning is not a single tax trick. It is an ongoing strategy that coordinates remuneration, pensions, capital allowances, succession, and exit planning over time.