The £1 trillion tax bill – Can businesses cope with record tax requirements?

The 2026/2027 tax year is set to be one for the history books as the amount of tax collected in the UK may cross £1 trillion for the first time.

HMRC revealed that the amount of tax taken in the 2025/2026 tax year was an incredible £938.8 billion, just shy of the £1 trillion likely to be raised this year.

For businesses bearing the brunt of rising costs, now is the time to get serious about tax planning to avoid getting overwhelmed.

Are businesses being taxed too highly?

It is no secret that both the 2024 and 2025 Autumn Budgets were viewed as overlooking the needs of small businesses.

This concern was typified in the debate around the controversial increase in employer National Insurance Contributions (NICs).

When the change came into effect in April 2025, employers expressed concern that the impact would restrict hiring and promoting potential for many businesses, given how much more would be added to the tax bill.

These fears are now shown to have been justified as the Treasury’s predicted increase of £24 billion to tax bills was eclipsed by the reality of a £28 billion additional burden.

It is little wonder then that income remains the greatest source of tax revenue, with Income Tax and NICs combining to generate £552.8 billion.

Businesses also have to handle the second biggest source of tax, VAT, which amounted to £180.7 billion for the Treasury.

Other business taxes, including Corporation Tax, amounted to £101.4 billion.

Business owners themselves may have faced a steeper burden as Capital Gains Tax (CGT) rose by 62 per cent, going from £13.68 billion to £22.18 billion.

The reality of these rising tax bills is that many business owners feel like their businesses are being used to prop up the public purse without much relief for increasing costs.

Can tax planning help businesses tackle costs?

Some tax exposure is inevitable through the general course of doing business, but there are ways to be more tax efficient.

Given that employer NICs drew the most ire when they were increased, it seems reasonable to try to get them back under control.

While the 15 per cent employer NIC on employee earnings above £5,000 a year is unlikely to be changed, you can reduce your overall employer NIC bill.

It would be a simple solution to say that you should pay your employees less if you want to lower your employer NIC bill and they would likely not appreciate the suggestion.

Instead, you could consider other ways to compensate them so that NIC exposure is reduced without sacrificing morale.

Salary sacrifice schemes can see salaries exchanged for other benefits like pension contributions or private healthcare.

Directors can do the same but have the advantage of being able to pay themselves with dividends too.

Even though the dividend tax rates have increased by two per cent for both basic and higher rate taxpayers, they are still more tax efficient than a regular salary.

Finding better ways to reward employees may help them to be more tax-efficient too.

Even the National Living Wage (NLW) has risen to the point where half a full-time worker’s average salary will be exposed to Income Tax for the first time.

There are other reliefs and tax-efficient ways of managing your obligations available, but it is vital you seek professional financial support before attempting to implement any of them.

Our team is here to help you find the best way to approach your finances in this tax year.

Rising costs will make the next tax haul monumental, but there is no reason for you to pay more than you need.

Thoroughly reviewing your processes and finances lets you take back control of your tax bill while still being fully compliant.