What a corporation tax rise in 2026 would mean for advisers

General information for practice owners, written in July 2026. It describes scenarios and does not state any rate, measure or timetable as fact. It is 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 has followed the same pattern. Clients are asking advisers in meetings and on calls is it going up?, and the answer is not yet known. What an adviser can do today, without knowing the outcome, is model the effect of a change, which prepares clients and shows them what the firm's advice is worth.

Scenario planning is one of the cheapest pieces of advisory work a practice can produce, because the mechanics of a rate change are predictable even while the rate is unknown. The framework covers your clients first and then your own firm.

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 calls with the twenty or so clients who need one. Their clients have an answer the day after the announcement, because the modelling was done before it.

The direct effect on your clients' cash

Directly, a rate rise 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, so it works well in a client briefing.

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 little to produce, and it shows clients you were thinking about their business before the announcement.

The knock-on effects on client decisions

Beyond the cash effect, a rate change alters the answer to four or five questions your clients have already asked you at some point, and each of them needs advice.

• 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, allowable business costs — become relatively more attractive against non-deductible ones. The general direction is predictable, and each client's figures still need recalculating.
• Timing. If a change takes effect from a known date, the period straddling it matters. Whether to accelerate deductible expenditure, or defer it, depends on the direction of the change and on each company's accounting period . The conversation needs to happen before the year end; by the time the accounts land nine months later, it is too late to act.
• Investment decisions. Capital expenditure appraisals run on post-tax returns. A higher rate increases the value of every available deduction and allowance, which has two effects: 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 model both scenarios.
• 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 need reviewing. Some clients in this position need a full planning exercise of their own.
• Incorporation. Some clients may ask whether the limited company still makes sense. Usually it does, because incorporation brings more than a rate saving: limited liability, credibility with customers, access to funding, the ability to retain profit and the route to an eventual sale all still count. Where a client incorporated purely to capture a differential that has narrowed, go through the decision with them on the numbers.

The effect on your own firm

Many accountancy practices are limited companies. A corporation tax rise reduces your firm's profit by the same arithmetic it applies to your clients, so run the same model on your own numbers.

Three consequences follow. First, partner and director drawings. If post-tax profit falls, either drawings fall or the reinvestment budget does. Decide which in advance and plan the year around it.

Second, pricing. Practices 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 review 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 a repricing 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, understand the change in your post-tax profile before due diligence begins. Our guide to how accountancy practices are valued sets out how the numbers are read.

Advisory work and the capacity to do it

Scenario planning of this kind is advisory work. It is proactive and specific to each client's numbers, and it shows a client that their accountant is looking ahead on their behalf. It is also chargeable, either as a standalone piece of planning or as part of an advisory retainer.

The obstacle 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, 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 this kind of work. Whichever route you choose, make the decision deliberately before the next busy season.

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 using data you already hold.
• Sort your client list by exposure. 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 you fill in the rate and send it, which takes about ten minutes.
• Model your own firm. Same exercise, your numbers, and a clear view of what it does to drawings, reinvestment and pricing.
• Do not pre-empt the detail. Advise on the shape of the decision and leave the rate open until it is confirmed. Tell clients clearly what is known and what is not.

The work is straightforward, and it needs doing before the announcement to be of use.