New Year, New Numbers: The Ultimate 2026 Tax-Saving Strategy for Small Business Owners
A new year brings new opportunities, and new tax rules. As we step into 2026, small business owners must proactively plan to maximise tax efficiency and protect profits. At Surrey Hills Tax, we specialise in bespoke tax planning and strategic advice for limited companies, owner-managed businesses, and ambitious entrepreneurs across the UK.
In this seasonal guide, we share our juiciest tax-saving strategies - practical, compliant, and designed to keep more of your hard-earned cash in your pocket.
1. Pay Yourself the Smart Way (Salary + Dividends)
Rather than taking all salary from your company, a small salary to secure your NI record, plus dividends, is often more tax-efficient. Dividends:
Avoid National Insurance contributions
Are taxed at lower personal tax rates
This blend can save many directors thousands of pounds compared to an all-salary approach, but it needs reviewing each year as tax rates change.
New Year action: review your pay structure in January to set yourself up for the new tax year.
2. Sometimes, a Higher Salary Is Better
With the current corporation tax rate at 25%, paying a higher salary (up to around £50,000) can sometimes be more tax-efficient than taking dividends — especially with the dividend tax increases coming on 6 April 2026. This shift can also increase pension allowances and NI contributions.
Pro tip: Let’s run a personalised salary vs. dividend calculation before year-end to ensure you’re optimised for 2026.
3. Build Wealth With Pension Contributions
Pension contributions remain one of the most powerful tax-efficiency tools available to business owners:
Company contributions reduce corporation tax
No National Insurance or income tax on contributions
Up to £60,000 annual allowance (subject to profits)
Plus, unused allowances can often be carried forward - perfect for year-end planning.
New Year reminder: Pension planning isn’t just retirement planning - it’s tax planning too.
4. Protect Your National Insurance Credits for State Pension
To secure your full UK state pension, you need 35 qualifying years of NI credits. Even if you minimise salary for tax reasons, ensure you pay enough to protect your record, and consider employing your partner or spouse on a small wage so they build credits too.
Keeping NI intact now prevents regrets later.
5. Claim All the Free Perks HMRC Allows
Many small business owners overlook everyday tax-free benefits that are entirely legitimate:
One company mobile phone per employee
Trivial benefits up to £300 per director
Relevant life insurance (deductible, no P11D)
Staff parties up to £150 per head
These perks improve employee morale and reduce tax. Small benefits, big smart savings.
6. Use Your Spouse/Partner’s Tax Allowances
If your spouse or partner genuinely contributes to the business:
Transfer shares so they can receive dividends within their personal allowance
Employ them for legitimate duties so they can use their personal tax bands
This strategy lets you use both partners’ allowances, reducing total family tax bills.
7. Drive Tax-Efficiently With Company Cars
Company car taxes are changing - especially for electric vehicles:
Electric cars are taxed at just 2% of list price (rising to 3% from April 2026)
100% first-year allowances on new EVs
If not electric, consider keeping the car personally and claim 45p/mile tax-free
Weighing mileage vs. company car ownership can make a big difference in net tax paid.
8. Put Your Kids on the Payroll Properly
If older children genuinely help with admin or social media tasks, paying them from the business:
Creates a deductible business expense
Lets them use their own tax-free personal allowance
Helps start their own tax-efficient savings journey
Always ensure tasks are real and pay is fair.
9. Claim Employment Allowance (Where Eligible)
If you employ staff:
You can reduce your employer’s NIC bill by up to £10,500
Note: This relief is not available if you’re the only employee/director, so consider genuine hires where appropriate.
10. Leverage Special Reliefs (R&D, Patent Box & More)
If your business innovates:
R&D tax credits can refund up to ~33% of qualifying expenditure
Patent Box relief can reduce corporation tax on patented profits to 10%
These incentives drive cash back into your business. Let us identify and support eligible claims.
11. Hack Your VAT Strategically
Smart VAT planning can transform cash flow:
Cash accounting - pay VAT when you’re paid
Flat Rate Scheme - retain part of the VAT you charge
Stay unregistered if under £85k turnover and mostly B2C
VAT isn’t just compliance - it’s strategic positioning.
Ready to Make 2026 Your Most Tax-Efficient Year Yet?
At Surrey Hills Tax, we provide tailored, expert tax support for UK individuals and businesses - from corporation tax planning to personal tax optimisation, R&D relief, and VAT strategy.
Start the year right: book your New Year tax review and secure a plan that keeps more of your profits working for you.
Contact Us | Expert Tax Advisors in Surrey
Get in touch:
📧 hello@surreyhillstax.co.uk
📞 01483 970 410