Accountancy & Business Advisory Services

One of the most important considerations for SMEs is profit forecasting accuracy. With inflation easing but demand still uneven across sectors, many businesses are finding that small forecasting errors can result in unexpectedly higher tax liabilities. This is particularly relevant where quarterly instalment payments apply, as underestimating profits can lead to interest and penalties.

Another area receiving renewed HMRC attention is associated companies. Updated guidance published on gov.uk has clarified how companies under common control are counted for corporation tax thresholds. For groups and owner-managed structures, this can significantly reduce the benefit of lower marginal rates and allowances if not reviewed carefully.

Timing also matters. Businesses planning capital expenditure, bonuses, or dividend distributions before the end of the 2025/26 tax year should ensure decisions align with cash flow rather than simply tax minimisation. The interaction between capital allowances, profit recognition, and dividend taxation means poorly timed decisions can increase overall tax exposure.

Loss relief planning has also moved up the agenda. HMRC has reiterated expectations around evidence and documentation where losses are carried forward or group relief is claimed. For businesses that experienced weaker trading during 2024–25, revisiting how losses are utilised could materially improve post-tax profitability.

Ultimately, corporation tax in 2026 is less about reacting to new legislation and more about getting the fundamentals right. Businesses that take time in February and March to review structure, forecasts and distributions are far better placed to avoid surprises later in the year.

February is a critical planning period for corporation tax. Book a corporation tax planning meeting before the financial year end