Tax changes affecting limited companies from April 2026

With the new tax year just around the corner, it's a good time to review the tax changes that will affect your limited company from April 2026.

In some cases, the changes may prompt directors to undertake a full review of your corporate and personal finances and tax position. You should also consider addressing changes to your overall business costs and whether being a limited company remains the right business structure.

The key areas of change are outlined below.

• a) Capital allowances relief changes

The main rate of writing-down allowances (WDA) for plant and machinery will be reduced from 18% to 14% for corporation tax purposes. This change means that tax relief for many capital assets will be claimed more slowly each year than under the current regime. However, a new 40% first-year allowance (FYA) is now available for qualifying expenditure, supporting investment for assets that don't qualify for full immediate relief.

Impact for limited companies:

• If your company owns qualifying plant and machinery, a lower WDA rate can increase taxable profits year-on-year.
• The new 40% FYA can be used to accelerate tax relief on certain capital purchases, but planning is needed to ensure your assets qualify.

• b) Dividend tax rate increases

The tax rates on dividends received above the annual dividend allowance will rise by 2 percentage points:

• Basic rate: from 8.75% to 10.75%
• Higher rate: from 33.75% to 35.75%
• Additional rate remains unchanged at 39.35%

Impact for limited company directors:

If you take income in the form of dividends, you should review how this affects your personal tax planning and profit extraction strategies. Being a limited company may no longer be the most suitable business structure.

• c) Business rates reforms

The Valuation Office Agency (VOA) has reassessed the rateable values (RVs) for all commercial and other non-domestic properties across England and Wales. The revised valuations will come into force on 1 April 2026. At the same time, the Government is introducing new business rate multipliers and reliefs.

For those businesses involved in retail, hospitality and leisure (RHL), the temporary RHL business rate relief will end on 31 March 2026.

From 1 April 2026, the following business rate multiplier will come into effect:

Eligible small retail, hospitality and leisure (RHL) properties with RVs below £51,000 pay a multiplier of 38.2p.

Standard RHL properties with an RV of £51,000 to £499,999 will pay a multiplier of 43p.

For non-RHL properties, the multipliers, which use the same small and standard RV thresholds mentioned above, have been reduced to 42p for small businesses and 48p for standard businesses.

The high-value multiplier of 50.8 per cent applies to properties with an RV of £500,000 or more.

Impact for limited companies that pay business rates:

If your company occupies commercial property, this can affect your operating costs. Check the details the VOA hold about your property are correct, as well as checking the valuation of your property.

• d) Business Asset Disposal Relief

For disposals made on or after 6 April 2026, the Capital Gains Tax rate for individuals claiming Business Asset Disposal Relief and Investors' Relief will rise from 14% to 18%. This applies to both basic and higher rate taxpayers.

Impact for directors and shareholders:

This means that company directors and shareholders planning to sell shares or dispose of qualifying business assets may face a higher personal tax liability from April 2026. Advance tax planning and timing of disposals will be very important.

• e) Share options and investments

Enterprise Management Incentives (EMI)

From April 2026, the eligibility criteria for Enterprise Management Incentive (EMI) schemes will expand significantly. The employee limit for qualifying companies will increase from 250 to 500 employees, while the gross assets threshold will rise from £30 million to £120 million. In addition, the company share option limit will increase from £3 million to £6 million. The maximum term for EMI options will also extend from 10 years to 15 years.

Enterprise Investment Scheme (EIS)

Changes to the Enterprise Investment Scheme (EIS) will also take effect from April 2026. The annual investment limit which companies can raise will increase from £5 million to £10 million, rising to £20 million for Knowledge Intensive Companies. The lifetime funding limit will also increase to £24 million, or £40 million for Knowledge Intensive Companies.

Impact for limited companies:

These changes significantly widen access to tax-advantaged share schemes and investment funding. The higher employee and asset thresholds mean more businesses will qualify for EMI, making it easier to attract and retain key staff through share incentives. The increased EIS funding limits also improve opportunities to raise external investment, particularly for innovation-driven and knowledge-intensive businesses.

Other points company directors need to be aware of

Changes to the National Living Wage and National Minimum Wage

From 1 April 2026, the statutory minimum wages increase in line with the Low Pay Commission's recommendations:

Impact for limited companies:

If your company employs staff on minimum wage contracts, this change increases the base payroll cost from April 2026. It's essential to plan for this in budget forecasts, pricing, and HR cost models.

Freeze on income tax and NIC thresholds

Although not strictly a new change in 2026, the freeze on income tax and National Insurance thresholds continues under the 2025 Autumn Budget, a phenomenon known as fiscal drag. This means more employees could move into higher tax brackets over time as wages rise but thresholds remain static.

Impact on companies:

As employees are pulled into higher tax bands, directors may need to review remuneration strategies to ensure employees maintain their net income. Owner-managers of limited companies should also review how they structure their own pay between salary and dividends to consider any fiscal drag implications.

What should company directors do now to prepare?

The advice from DWilkinson&Company is to:

1) Review capital expenditure plans by assessing whether planned equipment purchases qualify for the new 40% FYA. You should also model the impact of the reduced WDA rate on future tax bills and profitability.

2) Revisit your dividend policy and your remuneration extraction strategies and timings.

3) Update your payroll and HR forecasts to ensure wage budgets reflect the NLW and NMW rate increases. You should also discuss payroll changes with your payroll provider or internal team to ensure compliance.

4) Monitor business rates valuations by engaging with your advisor or property agent to check rateable values.

Contact us

If you would like tailored advice for your company, based on the forthcoming changes, please get in touch at 0113 320 0001 or email office@dwco.co.uk.