A Corporation Tax Rise in 2026: The Implications for Advisers

General information for practice owners, written in July 2026. This article deliberately does not state any rate, measure or timetable as fact — it is scenario planning, not tax advice. Check the current position on GOV.UK and take your own advice before acting.

Speculation about corporation tax builds ahead of every fiscal event, and 2026 is no different. Advisers are being asked about it in meetings and on calls, usually in the form of a question nobody can honestly answer: is it going up? The useful response is not a prediction. It is a piece of work you can do today, without knowing the outcome, that makes your clients better prepared and your firm visibly more valuable.

This is scenario planning, and it is one of the cheapest pieces of advisory work a practice can produce. The mechanics of a rate change are entirely predictable even when the rate itself is not. What follows is a framework for thinking it through — for your clients first, and then for your own firm, which is usually the part principals forget.

Why you should plan for it before anything is announced

Every fiscal event produces the same pattern in practice. A change is announced, the professional press covers it within hours, and clients email their accountant that evening asking what it means for them. Firms that have not thought about it in advance spend the following fortnight writing individual replies under time pressure, in the middle of whatever else was already in the diary.

Firms that have modelled the scenarios send one clear note the next morning, then book the twenty conversations that actually need a conversation. Same event, completely different experience — and a very different impression left with the client. The work that separates the two is done before the announcement, not after it.

The first-order effect: your clients' cash

Strip away the commentary and a rate rise does one thing directly: it reduces post-tax profit, and therefore the cash a company has available to reinvest, to hold as a buffer, or to pay out to its owners. The arithmetic is simple enough to do on the back of an envelope, which is exactly why it makes such a good client-facing tool.

Presented as a small table — profit down the side, candidate rates across the top — this becomes a one-page briefing you can send to an entire client base. It costs almost nothing to produce and it demonstrates, unmistakably, that you were thinking about their business before they were.

The second-order effects are where the advice actually sits

The cash impact is the headline. The advice is in what clients do next, and a rate change quietly moves the answer to four or five questions your clients have already asked you at some point.

• Extraction. The salary-versus-dividend answer is a function of the combined burden of corporation tax and the personal tax on each route. Move one side of that equation and deductible routes — salary, employer pension contributions, genuinely incurred business costs — become relatively more attractive against non-deductible ones. The direction of travel is predictable; the right answer for each client is not, so it needs recalculating rather than assuming.
• Timing. If a change takes effect from a known date, the period straddling it matters. Whether it is worth accelerating deductible expenditure, or the reverse, depends on the direction of the change and on each company's accounting period — and it is a conversation that only has value if it happens before the year end, not when the accounts land nine months later.
• Investment decisions. Capital expenditure appraisals run on post-tax returns. A higher rate increases the value of every available deduction and allowance, which cuts both ways: it makes qualifying investment relatively more attractive, while reducing the post-tax profit available to fund it. Clients weighing a significant purchase in the next eighteen months should be modelling both scenarios, not one.
• Structure. Where a system retains a lower rate for smaller profits and a marginal band in between, companies sitting inside that band feel a change most sharply. Group structures, associated-company positions and the timing of profit between entities all become worth a look. This is the point at which some clients need a genuine planning exercise rather than a note.
• Incorporation. Expect at least a few clients to ask whether the limited company still makes sense. Usually the answer is that it does, because incorporation was never solely a rate arbitrage — limited liability, credibility with customers, access to funding, the ability to retain profit and the route to an eventual sale all still count. But where a client incorporated purely to capture a differential that has narrowed, the question deserves a proper answer rather than a reassuring one.

What it means for your own firm

Here is the part that gets skipped. Most accountancy practices are limited companies. A corporation tax rise lands on your firm's profit with exactly the same arithmetic it applies to your clients — and unlike your clients, you do not have an adviser sending you a briefing about it.

Three consequences follow. First, partner and director drawings. If post-tax profit falls, either drawings fall or the reinvestment budget does. Deciding which, deliberately and in advance, is better than discovering it in the management accounts.

Second, pricing. Most firms are already absorbing the cost of a heavy compliance cycle — MTD for Income Tax, Companies House identity verification and mandatory adviser registration have all landed inside the same window. A squeeze on post-tax profit on top of that is a prompt to look properly at whether your fees reflect the work, particularly on long-standing clients who have never been repriced. Our guide to pricing and packaging advisory services covers how to approach that without a difficult conversation.

Third, valuation. Where a firm's worth is being assessed on earnings, profitability is part of the picture — so is the resilience of the fee base that produces it. If a sale, a merger or a succession plan is anywhere on your horizon, a change in the post-tax profile is worth understanding rather than discovering during due diligence. Our guide to how accountancy practices are valued sets out how the numbers are read.

The advisory opportunity — and the capacity problem behind it

Scenario planning of this kind is genuine advisory work. It is proactive, it is specific to the client's numbers, and it is exactly the sort of thing owner-managed businesses say they want from an accountant and rarely get. It is also chargeable, either as a standalone piece of planning or as part of an advisory retainer.

The obstacle is never the idea. It is capacity. A firm whose senior people are consumed by production work cannot free up the days needed to model scenarios across a client base, however obviously worthwhile it is — and a fiscal event lands whether or not the compliance cycle has a gap in it. That is the same structural problem behind the 2026 capacity crunch, and it has the same answers: reprice, automate, or move production work off the desks of the people who should be advising. Some firms solve it by outsourcing the compliance back office so their experienced staff are free for exactly this kind of work; the route matters less than making the decision consciously rather than defaulting into another year of the same.

What to do now

• Run the sensitivity. Pull taxable profit for every corporate client and produce the cash effect at a handful of candidate rates. It is a spreadsheet exercise, not a research project.
• Segment your list. Identify the clients where a change is material — high taxable profit, a large capital decision pending, a marginal-band position, or a structure question already outstanding. Those are the calls; everyone else gets the note.
• Draft the note before you need it. Write the client briefing now with the rate left blank. On announcement day it becomes a ten-minute job rather than a two-week one.
• Model your own firm. Same exercise, your numbers, and an honest look at what it does to drawings, reinvestment and pricing.
• Do not pre-empt the detail. Advise on the shape of the decision, not on a rate nobody has confirmed. Clients remember advisers who were clear about what was known and what wasn't.

None of this is difficult work. It is simply work that has to happen before the news rather than after it — which, for most firms, is the only real barrier.

Frequently asked questions

How would a corporation tax rise affect my clients?

Directly, it reduces post-tax profit and therefore the cash available to reinvest or extract. The arithmetic is simple: each percentage point on the rate costs a company 1% of its taxable profit. Indirectly it changes the answers to extraction, timing, investment and structure questions, because those decisions all turn on the gap between the rate a company pays on retained profit and the rate an owner pays on money taken out.

What should accountancy firms do before any rate change is confirmed?

Model it rather than wait for it. Run a sensitivity across your client base showing the cash effect at several possible rates, identify the clients with material taxable profit or a big capital decision in the next eighteen months, and prepare a standard briefing so the conversation is proactive rather than reactive. None of that requires knowing the outcome.

Does a corporation tax rise change the salary versus dividend answer?

It can, because the comparison depends on the combined effect of corporation tax and the personal tax on each route. A higher corporation tax rate increases the relative value of deductible extraction such as salary, employer pension contributions and genuine business expenses. But the answer is client-specific and also depends on National Insurance, personal allowances and the owner's wider circumstances, so it should be recalculated rather than assumed.

How does a corporation tax rise affect my own accountancy practice?

Most practices are companies too, so the firm's own post-tax profit falls by the same arithmetic as any client's. That matters for partner drawings, for reinvestment in staff and systems, and for valuation conversations where profitability is part of the picture. It also creates demand for advice at exactly the moment the firm has less spare cash to fund extra capacity, which is why planning the capacity question early matters.

Will a corporation tax rise make incorporation less attractive for clients?

It narrows the gap in some cases, but incorporation is rarely decided on tax rates alone. Limited liability, credibility, funding, succession and the ability to retain profit in the business all remain relevant. Where a client incorporated purely for a tax differential that has since shrunk, it is worth revisiting the decision on its merits rather than disincorporating reflexively.