by Darren O'Connor
Partner
17 April 2026
Articleby Darren O'Connor
Partner
As the new tax year begins, business owners are facing one of the most challenging operating environments in recent years. Rising costs, tax changes and global and economic challenges are placing sustained pressure on margins, cash flow and long-term planning.
Increases to the National Minimum and Living Wage, higher fuel and transport costs, elevated borrowing rates and ongoing supply-chain pressures are all contributing to a more demanding financial landscape. For many businesses, these cost increases are difficult to pass on in full, particularly in competitive markets where customers remain price-sensitive.
In light of these challenges, many business owners are feeling the impact of frozen tax thresholds, increased dividend rates and reduced tax reliefs – adding further strain during a period when resilience is already being stretched. Yet, despite the tougher climate, there remain valuable opportunities to take a forward-looking and strategic approach to your financial and tax planning, helping to ease pressures and protect your long-term ambitions.
From survival to strategy: why planning matters more than ever
When cost pressures intensify, the instinct is often to focus solely on short-term cash management. While this is essential, it can also mean that valuable planning opportunities are missed.
The tax changes announced over the last year – including those taking effect from April 2026 – mean that historic approaches to remuneration, investment and succession may no longer deliver the best outcomes. Regular review is no longer a ‘nice to have’; it is a necessity.
Effective planning now goes beyond compliance. It involves:
Managing rising employment and operating costs
Rising wage costs and increased National Insurance contributions, coupled with the ongoing need to remain competitive in recruitment and retention, many employers are reconsidering how they reward and incentivise their teams.
While higher salaries increase National Insurance and PAYE costs, alternative reward structures may offer a more balanced solution. For eligible businesses, share-based incentives such as Enterprise Management Incentive (EMI) schemes can provide long-term alignment with employees without an immediate cash outlay, while still delivering tax-efficient outcomes when structured correctly.
At the same time, reviewing benefit structures, pension contributions and salary sacrifice arrangements can help ensure that total reward packages remain cost-effective for both the employer and employee.
Reviewing profit extraction and director remuneration
For owner-managed businesses, rising operating costs often coincide with increased pressure on personal income. Recent increases in dividend tax rates mean that profit extraction strategies that once felt straightforward may now be significantly more expensive.
This is an opportune time for business owners to:
Even relatively small changes can have a meaningful impact on net income, particularly where fiscal drag is pushing individuals into higher tax bands.
Cash flow, investment and funding decisions
Higher fuel costs, energy prices and financing expenses have sharpened the focus on cash flow management. However, this should not deter investment where it supports long-term growth or efficiency.
Carefully planned capital expenditure may still qualify for valuable capital allowances, helping to offset tax liabilities while supporting productivity improvements or cost reduction initiatives. The key is ensuring that investment decisions are aligned with both commercial objectives and tax efficiency.
In some cases, restructuring group arrangements, reviewing loss utilisation or reassessing funding models can also help improve resilience during periods of cost pressure.
Longer-term planning in an uncertain environment
Although headline tax rates can feel punitive, there remains a clear difference between income tax rates and capital gains tax rates. This gap can make well-structured exit planning more attractive, bringing the timing and structure of a future sale, management buy-out or succession plan into sharper focus.
Changes to inheritance tax reliefs, together with evolving rules around how businesses are owned, structured and transferred, mean that leaving succession or exit planning too late can significantly increase costs, tax liabilities and limit options.
Similarly, internationally mobile business owners need to be aware that changes to non-residence rules mean historic planning assumptions may no longer hold. Decisions around dividends, exits and relocations should be taken with a full understanding of both the tax and commercial implications.
Darren O’Connor, Accounts and Advisory Partner, says: “The current climate is challenging, but it is not without opportunity. With the right advice and a proactive approach, business owners can still reduce pressure, improve resilience and put themselves in a stronger position for the years ahead.”
How we can help
We work with business owners to help them understand their options, manage pressure points and plan confidently for the future. We can help by:
Our Strategic Business Health Check offers a practical way to identify compliance risks and tax efficiency opportunities - complete our short questionnaire, to receive a tailored summary highlighting areas for consideration to support your business’s resilience and financial health, by clicking here.
Our approach is practical, forward-looking and tailored to your circumstances – helping you move beyond simply absorbing rising costs, and towards making informed decisions that protect value and support long-term success.
If you would like to discuss how the current financial climate and the new tax year may affect your business, please speak to your usual James Cowper Kreston contact, or get in touch with our team here to find out how we can help you maximise your potential.