Tax Planning for Tech & Creative Professionals | IR35, R&D, SEIS 2026/27 | CoreAcc

If you earn your living from technology or the creative industries — whether as an IT contractor, a freelance UX designer, a software agency founder, a SaaS startup CEO, or a video producer — the 2026/27 tax year brings a more complex set of decisions than most general accountancy guides will cover.

IR35 continues to be the dominant tax risk for contractors billing through a Personal Service Company (PSC), with the financial cost of an incorrect determination running into tens of thousands of pounds per year. The merged R&D Expenditure Credit scheme has now been in place for over two years, yet the majority of qualifying technology SMEs still do not claim. The Enterprise Investment Scheme and Seed Enterprise Investment Scheme offer some of the most generous investment tax reliefs in the developed world for founders raising capital — but relatively few use them strategically. And for agency founders extracting £100,000 or more from their businesses, the 60% tax trap at the £100,000 income threshold is a recurring and avoidable cost.

At CoreAcc Accountants, we work with technology and creative professionals across Hertfordshire and North London, including IT contractors, marketing consultants, digital agencies, and software developers. This guide covers every major planning area for 2026/27, with worked examples and plain-English answers to the questions we hear most often from clients in this sector.

Disclaimer: This article is for general information only and does not constitute tax or legal advice. Figures are illustrative. Specific advice should always be sought for your individual circumstances.

1. IR35: The Rules, the Tests, and What They Cost You

IR35 — officially the off-payroll working rules — is the legislation that determines whether a contractor working through a PSC is genuinely self-employed or, in HMRC's view, a disguised employee of their client. It is the most financially significant tax issue for the majority of technology and creative contractors in 2026.

Who is responsible for the determination?

Since April 2021, the responsibility for determining a contractor's IR35 status has sat with the end client, not the contractor, for medium and large businesses. From 6 April 2025, the company size thresholds increased: a client qualifies as small — and shifts the assessment responsibility back to the contractor's PSC — only if it meets two or more of the following criteria for two consecutive years:

• Turnover of £15 million or less (previously £10.2 million)
• Balance sheet total of £7.5 million or less (previously £5.1 million)
• 50 employees or fewer

The practical effect of the threshold increase is that a growing number of tech contractors are now working for clients who qualify as small under the new limits — returning the status determination to the contractor themselves. If you work for a client who has crossed back into "small" status, you are now responsible for assessing your own IR35 position for that engagement.

The three key status tests

HMRC and employment tribunals use three primary tests to determine whether a contractor is inside or outside IR35. No single test is decisive — it is the overall picture that matters.

Control: Does the client control what work you do, how you do it, where you do it, and when? A genuine contractor retains meaningful autonomy over their method of working. A contractor who works core hours set by the client, uses the client's systems and equipment, and follows their processes in detail looks more like an employee.

Substitution: Do you have a genuine, unfettered right to send a substitute to carry out your work if you are unavailable? If yes, and that right has genuine commercial substance — the client would accept a suitably qualified alternative — this strongly points to self-employment. If substitution is only theoretical and in practice would never occur, it carries less weight.

Mutuality of obligation (MOO): Is there an ongoing expectation that the client will offer work and you will accept it? Employment is characterised by this mutual obligation. A genuine contractor provides a specific deliverable under a time-limited contract with no assumption of renewal.

HMRC provides the Check Employment Status for Tax (CEST) tool for assessing status. HMRC has said it will stand behind CEST results where the tool is used correctly and the inputs accurately reflect the real working arrangement. However, CEST has well-documented limitations: it does not assess mutuality of obligation; it cannot handle complex or hybrid arrangements; and its underlying status logic has not been updated to reflect significant tribunal developments since 2022, including the Supreme Court's 2024 ruling in PGMOL v HMRC and the 2026 First-tier Tribunal decision on remit in the same case. For high-value or long-running engagements, a professional IR35 review by a specialist provides stronger protection than CEST alone.

What an inside determination actually costs

When a client issues a Status Determination Statement (SDS) concluding you are inside IR35, or when HMRC successfully challenges an outside determination, the financial impact is severe.

The fee-payer (typically the agency or the client directly) must deduct income tax and employee National Insurance from your gross fees before paying your company. Employer National Insurance at 15% is also payable on top of your fees — a cost borne by the fee-payer but one that reduces the day rates clients are willing to offer. You lose the ability to extract that income as dividends from your company, and the tax efficiency of the PSC structure for that engagement is eliminated.

Worked Example 1: Inside vs. Outside IR35 — Annual Take-Home at £500/Day

Dev is an IT contractor charging £500 per day, working 220 days per year (gross fees: £110,000). He operates through his own PSC.

Outside IR35 — salary of £12,570 + remaining as dividends:

‍Inside IR35 — deemed employment income:

At this income level the cash difference appears modest — around £1,757. But the inside determination eliminates all the strategic advantages of the company structure: pension contributions, profit retention, and flexibility over dividend timing. Over five years, those lost planning opportunities compound significantly. And for contractors at higher day rates or with longer working periods, the gap widens materially.

2. PSC, Umbrella, or Sole Trader — Choosing the Right Structure

The IR35 landscape of 2026/27 makes the structure choice more nuanced than it was a decade ago. The three main options each have a distinct profile.

Personal Service Company (PSC / limited company)

Still the most tax-efficient structure for contractors working predominantly outside IR35, particularly those with:

• Multiple clients rather than a single dominant engager
• Genuine substitution rights and documented evidence of self-employment
• Plans to retain profits in the company rather than extract everything each year
• Other income streams they can combine with the company's flexibility

The 2026/27 optimal salary for a sole-director PSC is £12,570, with remaining profits taken as dividends. The Employment Allowance is not available to companies where the sole employee is the sole director.

Umbrella company

The pragmatic choice for contractors who are inside IR35 on most or all of their engagements. Under an umbrella, you become an employee of the umbrella company, which handles payroll, PAYE, and National Insurance on your behalf. You receive holiday pay, statutory sick pay, and other employment rights. The umbrella takes a fee (typically £15–£30 per week) for its services.

The key benefit: simplicity and compliance certainty. The key drawback: you lose all the tax efficiency of the PSC structure and pay income tax and NI as if you were a permanent employee. You also remain responsible for selecting a compliant, FCSA-accredited umbrella — HMRC has increased scrutiny of non-compliant umbrella schemes that promise artificially enhanced take-home pay.

Sole trader

The least administratively demanding structure, but not the most tax-efficient for earnings above approximately £50,000. As a sole trader, all of your business profit is taxable as income — there is no ability to retain profits in a company structure, pay Corporation Tax at 19–25%, or time dividend payments to spread income across tax years. However, for freelancers just starting out, with irregular income, or whose work clearly falls outside IR35, sole trading avoids the cost and complexity of running a company before the tax saving justifies it.

Worked Example 2: Sole Trader vs. Limited Company for a Freelance Designer

Maya is a freelance UI/UX designer with annual income of £75,000, all from multiple clients she works with on a project basis outside IR35. She has no other income.

As a sole trader:

‍Through a limited company (salary £12,570, rest as dividends):

At £75,000 without pension contributions, the sole trader structure is slightly ahead after the 2026 dividend tax rise. However, if Maya makes a £10,000 employer pension contribution from her company:

With £10,000 pension contribution

The pension contribution transforms the limited company into the superior structure — producing £1,357 more net after-tax-and-pension than the sole trader approach, while also building retirement savings.

3. The 60% Tax Trap for Agency and Studio Founders

For technology and creative agency founders whose profit or salary takes them past £100,000 per year, one of the most costly — and most avoidable — tax traps in the UK system applies.

The personal allowance (£12,570) is tapered away at a rate of £1 for every £2 of income above £100,000. At £125,140, the personal allowance is eliminated entirely. Within the £100,000–£125,140 band, every additional £1 of taxable income loses 50p of personal allowance — creating an effective marginal income tax rate of 60% on income in that band (40% income tax on the additional £1, plus 40% on the 50p of allowance lost).

This is the single most impactful planning opportunity for agency founders at this income level, and it is frequently overlooked.

The solution: pension contributions

An employer pension contribution made from the company directly to the director's pension scheme:

• Reduces the company's Corporation Tax liability (the contribution is a deductible business expense)
• Does not trigger income tax or National Insurance in the hands of the director
• Does not count as personal income for the purposes of the personal allowance taper
• Brings taxable income back below £100,000, restoring the personal allowance

Worked Example 3: Escaping the 60% Trap

James is the founder and sole director of a digital marketing agency. In 2026/27 the company pays him a salary of £12,570 and he extracts £95,000 in dividends — total personal income: £107,570.

Without planning:

With a £10,000 employer pension contribution from the company:

Wait — the pension contribution does not reduce James's personal income because it is paid by the company, not by James personally. To reduce his personal income below £100,000, James needs to reduce his dividend or take the pension contribution as an individual (rather than employer) contribution against his personal income.

The cleaner solution: reduce dividends by £10,000 (take £85,000 instead of £95,000) and leave the £10,000 in the company as a pension contribution. Personal income falls to £97,570 — below the taper threshold. The personal allowance is fully restored. The £10,000 pension contribution attracts CT relief at 25%, costing the company only £7,500 net while building £10,000 in James's pension. The tax saving from restoring the full personal allowance (approximately £5,028 at 40%) exceeds the net cost of the pension contribution.

4. R&D Tax Credits: What Technology SMEs Are Missing

The average UK SME R&D claim is £54,000, yet an estimated £2.4 billion in R&D tax relief goes unclaimed annually. Technology and creative businesses are among the most likely to qualify — and among the least likely to have claimed.

The merged RDEC scheme (from April 2024)

From 1 April 2024, HMRC merged the previous SME and large-company RDEC schemes into a single merged RDEC-style scheme for all companies. The key rates under the merged scheme are:

The merged RDEC credit is an above-the-line credit — it appears as income in the company's profit and loss account, improving reported profitability before Corporation Tax is calculated. For a profitable company paying 25% Corporation Tax, the net benefit is approximately 15p for every £1 of qualifying R&D spend.

What qualifies as R&D in the technology sector?

HMRC's definition of qualifying R&D is often misunderstood. The key test is whether the work seeks to resolve a scientific or technological uncertainty — a problem where the answer is not readily available or deducible by a competent professional in the field. Routine software engineering, standard website development, and off-the-shelf system implementation do not qualify. But a significant amount of technology development does.

Activities that commonly qualify for technology businesses include:

• Developing novel algorithms where existing approaches are insufficient
• Building software that processes data in a new or significantly improved way
• Creating machine learning or AI models that extend beyond existing techniques
• Resolving technical integration challenges between systems with no documented solution
• Developing new security protocols or encryption approaches
• Building scalable architectures that require solving genuine technical uncertainties

The creative application of technology — an animation studio building a proprietary rendering engine, a games developer solving physics simulation problems, a music tech company developing new audio processing algorithms — can equally qualify, even when the end output is a creative work.

What matters is the technical problem, not the commercial product.

What costs can you include?

Qualifying expenditure under the merged RDEC scheme includes:

• Staff costs: Salaries, employer NI, and pension contributions for staff directly engaged in qualifying R&D (apportioned for staff splitting time between R&D and other work)
• Subcontractor costs: A proportion of payments to UK-based subcontractors carrying out qualifying R&D on your behalf
• Software: Software licences used directly in the R&D process (not general business software)
• Consumables: Materials used and consumed in the R&D process

Important: Overhead costs such as rent, general IT infrastructure, and management time are not allowable under the merged scheme. Only direct costs are eligible.

The pre-notification deadline

For new or returning claimants, the pre-notification deadline is six months from the accounting period end. Miss this and the claim is disallowed permanently. This is a non-negotiable deadline that has caught out many companies who assumed they had until their Corporation Tax return deadline to claim. For a company with a 31 March 2026 year end, the pre-notification deadline was 30 September 2026. If you have not pre-notified and believe you have qualifying R&D expenditure, speak to your accountant immediately.

Worked Example 4: R&D Tax Credit for a SaaS Business

Luminary Software Ltd develops a B2B project management platform. In the year ending 31 March 2026, the company employs eight developers. Three of them spend approximately 60% of their time on qualifying R&D — resolving specific technical uncertainties around real-time collaboration architecture and proprietary data synchronisation protocols.

Qualifying R&D expenditure:

‍Merged RDEC claim (profitable company, CT at 25%):

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Worked Example 5: ERIS for a Loss-Making Tech Startup

Nexus AI Ltd is a pre-revenue AI startup with total expenditure of £280,000 in its year to 31 March 2026, of which £195,000 (70% of total spend) relates to qualifying R&D. The company is loss-making.

Because R&D expenditure exceeds 30% of total spend, Nexus qualifies for the Enhanced R&D Intensive Support (ERIS) scheme.

Nexus receives approximately £24,317 as a cash payment from HMRC — effectively a government co-investment in its R&D costs, equivalent to about 12.5% of its total qualifying R&D expenditure — even though the company has no tax liability to offset. For an early-stage startup burning cash on product development, this is a significant funding source that requires no dilution.

5. SEIS and EIS: The Most Underused Funding Tools in UK Tech

For founders raising external investment into a technology or creative business, the Seed Enterprise Investment Scheme (SEIS) and the Enterprise Investment Scheme (EIS) transform the economics of raising capital. In 2024/25, companies from the Information and Communication sector accounted for £550 million of EIS investment — 35% of all EIS investment raised. Yet many founders outside London and the South East do not use these schemes at all.

SEIS: For the earliest stage raises (up to £250,000)

SEIS is designed for very early-stage companies. The company must:

• Be UK-incorporated and trading for less than three years from first commercial sale
• Have fewer than 25 full-time equivalent employees
• Have gross assets of no more than £350,000 immediately before the share issue

Investors who subscribe for SEIS shares receive:

• 50% income tax relief on investments up to £200,000 per tax year — a higher-rate taxpayer investing £100,000 gets £50,000 back through their tax return
• Full CGT exemption on gains from SEIS shares held for three or more years
• 50% CGT reinvestment relief — SEIS investment reduces the CGT liability on a gain crystallised in the same year
• Loss relief — if the company fails, investors can offset the net loss (after income tax relief) against other income

Directors can invest in their own company and claim SEIS relief, provided they hold no more than 30% of shares. This makes SEIS a genuine option for founder-led raises where founders are putting in personal capital alongside external investors.

EIS: For growth-stage raises (up to £10 million per year)

EIS picks up where SEIS ends. From 6 April 2026, EIS limits doubled significantly:

Investors receive 30% income tax relief on investments up to £1 million per year (or £2 million if at least £1 million is invested in Knowledge Intensive Companies). EIS shares held for three or more years are free of CGT on disposal, and losses are eligible for loss relief.

Companies qualify for EIS if they are within seven years of their first commercial sale (ten years for Knowledge Intensive Companies), have fewer than 250 employees (500 for KICs), and carry on a qualifying trade. Technology, software, media, design, engineering, and most creative activities qualify readily.

Knowledge Intensive Companies (KICs) — a category that benefits from the highest EIS limits — are companies where at least 20% of employees are engaged in R&D or innovation activities, or where qualifying R&D expenditure equals at least 15% of operating costs in one of the three preceding years. Many tech and AI-focused businesses qualify as KICs, unlocking the higher annual and lifetime limits from the April 2026 changes.

The critical sequencing rule: SEIS shares must be issued before EIS shares. You cannot issue EIS shares in the same accounting period before the SEIS raise is complete. Getting this wrong can disqualify investors from claiming relief for the entire round.

Worked Example 6: SEIS — The Investor Economics

Charlotte is a higher-rate taxpayer considering a £50,000 investment in a SEIS-qualifying software startup.

Charlotte's maximum downside on a £50,000 investment is £15,000 — her actual exposure is less than a third of the headline investment. The risk-adjusted return profile of a SEIS investment is fundamentally different from an unrelieved private investment.

For founders: this risk mitigation is the reason angel investors say yes to SEIS-backed rounds at valuations they would otherwise decline. SEIS does not just save tax — it changes the fundraising conversation entirely.

Advance Assurance

Both SEIS and EIS require an application to HMRC. Most sophisticated investors expect an Advance Assurance to be in place before committing — a letter from HMRC confirming that the proposed share issue is likely to qualify. HMRC typically responds to Advance Assurance applications within four to six weeks. Apply at least eight weeks before your target investment date to avoid delays.

6. Patent Box: The Overlooked Relief for IP-Owning Tech Companies

For technology businesses that own patented intellectual property, the Patent Box regime offers a Corporation Tax rate of just 10% on qualifying profits derived from patented inventions. This compares with the standard 19–25% rate that applies to non-Patent-Box profits.

Qualifying IP includes UK and European patents, as well as certain other granted rights. The relief applies to profits from the sale of patented products, the licensing of patents, and income derived from processes that use patented inventions.

Patent Box and R&D Tax Credits can be used simultaneously — they are not mutually exclusive. A technology company that develops patented technology, claims R&D credits during the development phase, and then routes the resulting IP profits through the Patent Box can access relief at both ends of the innovation cycle.

The Patent Box is particularly relevant for software companies where specific technical components or methods have been patented, hardware manufacturers, and technology businesses that license their IP to third parties.

7. EMI Share Options: Retaining Tech Talent Without Cash

For technology and creative businesses struggling to compete with larger companies on cash salaries, the Enterprise Management Incentive (EMI) share option scheme is one of the most powerful tools available.

EMI allows qualifying companies to grant share options to employees at a fixed exercise price. When the employee later exercises their options and sells the shares, the gain (between the exercise price and the sale price) is subject to CGT at 18% (following the increase from 14% in April 2026) rather than income tax — a very significant saving for employees in high-growth businesses where the eventual share value may be multiples of today's price.

The employer also benefits: there is no employer NI on the option grant or exercise (unlike unapproved share options or bonuses), and the company receives a Corporation Tax deduction equal to the intrinsic value of the option at exercise.

Qualifying conditions include: the company must have gross assets of no more than £30 million; the employee must work for the company for at least 25 hours per week or, if less, at least 75% of their working time; and the company must be carrying on a qualifying trade. Options must be over ordinary shares and must be granted at or above market value at the date of grant (or the agreed market value if a HMRC valuation has been obtained).

For a growing software agency or technology startup trying to retain a senior developer or creative director without raising their salary, an EMI grant of options over 1–2% of the company's equity can be a compelling offer that costs the company nothing today but creates genuine alignment over the long term.

8. Profit Extraction for Tech Agency and Studio Founders

For the owner-director of a profitable technology or creative agency, 2026/27 profit extraction decisions are dominated by two overlapping challenges: the dividend tax rise and the 60% effective rate trap at £100,000.

The optimal extraction framework

For most agency founders in 2026/27, the most tax-efficient extraction approach follows this sequence:

1. Salary to £12,570 — no income tax, minimal employer NI, fully CT deductible
2. Employer pension contributions — CT deductible, no personal tax, does not affect personal allowance taper
3. Dividends up to £100,000 total income — ensuring personal income stays below the personal allowance taper threshold
4. Retain remaining profits in the company — available for reinvestment, team salaries, or future extraction in lower-income years

Worked Example 7: Full Extraction vs. Strategic Retention

Priya is the sole director of a digital content agency. The company made a profit of £180,000 in 2026/27. She is considering how to extract it.

Option A — extract everything:

‍Option B — salary + pension + dividends to £87,430 (keeping total income at £100,000):

Option B produces approximately £30,800 less total tax, routes £20,000 into pension, and leaves £52,430 in the company for reinvestment or future extraction in a lower-income year. The retained profits are not "lost" — they are a deferred extraction.

Frequently Asked Questions

What is IR35 and how do I know if it applies to me?

IR35 (the off-payroll working rules) is the legislation that determines whether a contractor working through their own limited company should be taxed as an employee of their client rather than as a self-employed business. It applies if your working arrangement closely resembles employment — in particular if the client controls how and when you work, there is no genuine right to send a substitute, and there is a mutual expectation of ongoing work. If you work for a medium or large business (turnover above £15 million or balance sheet above £7.5 million), your IR35 status is determined by the client, not you. If your client is small, you assess your own status. The financial cost of an incorrect inside determination can easily exceed £10,000 per year in additional tax.

Can I challenge my client's IR35 determination?

Yes. If your client issues a Status Determination Statement placing you inside IR35 and you believe this is incorrect, you have the right to formally challenge it within 45 calendar days of receiving the SDS. You must provide specific evidence and reasoning — not simply a general disagreement. The client has 45 days to respond, either upholding or revising the determination. If the client fails to respond within 45 days, the liability for any unpaid tax may transfer to them. A specialist IR35 review of your contract and actual working practices, carried out by a qualified adviser, gives you the strongest evidence base for a challenge.

What are the key differences between CEST and a professional IR35 review?

HMRC's CEST tool provides a quick online assessment of IR35 status based on a series of multiple-choice questions. HMRC has said it will stand behind CEST results where the inputs are accurate. However, CEST does not assess mutuality of obligation — a core element of employment status law — and its underlying logic has not been updated to reflect recent tribunal decisions. A professional IR35 review by a specialist examines your written contract, your actual working practices (which HMRC will scrutinise if challenged), and the full range of status tests including MOO. For high-value or long-running engagements, a professional review provides materially stronger protection than CEST alone.

My client says all contractors are inside IR35. Is this a blanket determination and is it legal?

A blanket IR35 determination — one applied to all contractors in a category without individual assessment — is not compliant with the off-payroll working rules. HMRC's guidance makes clear that each engagement must be individually assessed based on its specific facts. If your client has applied a blanket inside determination, you are entitled to challenge it individually, providing evidence specific to your own working arrangements. Many blanket determinations have been successfully challenged where the contractor can demonstrate genuine substitution rights, autonomy over working method, and the absence of mutuality of obligation in their specific engagement.

Does my limited company still make sense if I'm inside IR35?

For contractors whose income comes predominantly from inside IR35 engagements, a limited company offers little ongoing tax advantage for that income — the fee-payer deducts tax before paying your company, leaving the company with no profit to shelter. Many such contractors use an umbrella company for inside IR35 work while keeping their PSC for outside IR35 engagements. If all your work is consistently inside IR35, the administrative cost of running a company (accounting fees, Companies House filings, corporation tax returns) may outweigh the benefits, and you should consider whether the umbrella route is simpler.

What qualifies as R&D for a software or technology company?

HMRC's R&D definition centres on work that seeks to resolve a genuine scientific or technological uncertainty — a problem where the answer cannot be readily found or deduced by a competent professional in the field. Qualifying activities for technology businesses include developing novel algorithms, building proprietary machine learning models, solving scalable architecture problems with no existing solution, creating new data processing or security approaches, and integrating complex systems where no documented solution exists. Routine software engineering — implementing well-understood frameworks, building standard e-commerce sites, or configuring off-the-shelf software — does not qualify. The distinction is between resolving genuine technical uncertainty and applying existing technical knowledge.

What is the six-month pre-notification deadline for R&D claims?

From April 2023, new and returning R&D claimants must submit a pre-notification to HMRC within six months of the end of the accounting period in which the qualifying R&D took place. This deadline is strict — miss it and the claim is permanently disallowed for that period, regardless of how clear-cut the qualifying expenditure is. For a company with a 31 March year end, the pre-notification deadline is 30 September. The pre-notification does not need to include a full claim — it simply puts HMRC on notice that a claim is coming. Your accountant can submit this on your behalf. If you believe you have qualifying R&D expenditure and have not pre-notified, contact us immediately.

What is the ERIS scheme and who qualifies?

The Enhanced R&D Intensive Support (ERIS) scheme provides more generous R&D relief for loss-making SMEs whose qualifying R&D expenditure represents at least 30% of their total expenditure for the accounting period. Under ERIS, the company deducts an additional 86% of qualifying costs (on top of the normal 100% deduction, making a total 186% deduction against trading losses), and can claim a payable credit of up to 14.5% of the surrenderable loss as a cash payment from HMRC. This is particularly valuable for early-stage tech and AI startups that are pre-revenue and spending the majority of their budget on product development. The ERIS rate makes the effective cash benefit approximately 27% of qualifying R&D spend for an eligible company.

What is SEIS and how does it help me raise investment?

SEIS — the Seed Enterprise Investment Scheme — allows qualifying early-stage companies (under three years old, fewer than 25 employees, gross assets under £350,000) to raise up to £250,000 from investors who receive 50% income tax relief on their investment. For a higher-rate taxpayer investing £100,000, SEIS returns £50,000 immediately through their tax return, reducing their net downside to £50,000 before any loss relief. Gains on SEIS shares held for three or more years are entirely free of CGT. For founders, SEIS dramatically changes the investor conversation — it reduces the effective risk to an investor, enabling you to close rounds at valuations that might otherwise be unacceptable to angels. Directors can invest their own money and claim SEIS relief, provided they hold no more than 30% of the company.

What is a Knowledge Intensive Company for EIS purposes?

A Knowledge Intensive Company (KIC) is a company where at least 20% of employees are engaged in research, development, or innovation activities, or where qualifying R&D expenditure equals at least 15% of operating costs in one of the three preceding years. KIC status unlocks higher EIS fundraising limits — from 6 April 2026, KICs can raise up to £20 million per year and £40 million over their lifetime (compared to £10 million and £24 million for standard EIS companies). The maximum trading age for a KIC is ten years rather than seven. Many London-based tech, AI, life science, and engineering-led businesses qualify as KICs and benefit from significantly greater fundraising headroom under the April 2026 EIS expansion.

What is the Patent Box and which technology companies benefit?

The Patent Box allows companies that own qualifying patents to pay Corporation Tax at 10% on the profits derived from those patents, instead of the standard 19–25% rate. Qualifying IP includes UK and European patents, as well as certain other granted rights. The relief applies to profits from selling patented products, licensing patents, and using patented processes. Patent Box can be used alongside R&D Tax Credits — they cover different points in the innovation lifecycle (development phase for R&D, commercial phase for Patent Box). For software companies that have patented specific technical methods or algorithms, and for hardware technology businesses, the Patent Box can represent a very significant ongoing reduction in the effective tax rate on IP-derived profits.

What is an EMI share option scheme and can my tech company use it?

Enterprise Management Incentive (EMI) is a HMRC-approved employee share option scheme specifically designed for smaller, growth-focused companies. EMI allows you to grant options to employees at today's share price — when they eventually sell the shares, any gain between the grant price and the sale price is taxed at CGT rates (18% from April 2026) rather than income tax rates (up to 45%). There is no employer NI on EMI option grants or exercises, and the company receives a Corporation Tax deduction at exercise. To qualify, your company must have gross assets of no more than £30 million and carry on a qualifying trade. EMI is particularly powerful for technology and creative businesses looking to retain key staff with meaningful equity participation without the cash cost of higher salaries.

How should I think about profit extraction if my agency generates over £100,000 in profit?

The £100,000 income threshold is the most important extraction planning boundary for agency founders. Above this level, the personal allowance is tapered away at a rate of £1 for every £2 of income above £100,000, creating an effective 60% marginal tax rate on income between £100,000 and £125,140. The most effective strategy is to combine: a director's salary of £12,570; employer pension contributions from the company (which reduce company profits without adding to your personal income); dividends sized to bring total personal income to no more than £100,000; and retention of remaining profits in the company for future extraction in a year when your income is lower. A formal remuneration plan modelling the optimal combination for your specific situation is worth doing at the start of each tax year.

What CoreAcc Accountants Can Help You With

Technology and creative professionals face a tax position that rewards proactive planning and penalises inaction. IR35, R&D credits, SEIS/EIS, Patent Box, EMI, and profit extraction interact in ways that are rarely addressed by a general-purpose accountant without sector experience.

At CoreAcc Accountants, we provide:

• IR35 contract reviews: Assessing each engagement against the key status tests and advising on how to structure contracts and working practices to support an outside determination where appropriate
• PSC structure reviews: Modelling the optimal structure — limited company, umbrella, or sole trader — for your specific income mix and client profile
• R&D Tax Credit claims: Identifying qualifying expenditure, preparing the technical narrative for the Additional Information Form, pre-notifying HMRC, and managing the claim through your CT600
• SEIS/EIS Advance Assurance: Preparing and submitting Advance Assurance applications and managing the compliance statements and HMRC3/HMRC5 certificates after investment
• Patent Box elections: Assessing eligibility and computing the streamed profits subject to the 10% Patent Box rate
• EMI scheme setup: Valuing shares for HMRC purposes, structuring option agreements, and managing the HMRC notification process
• Annual remuneration planning: Calculating the optimal salary, dividend, and pension combination to stay below the £100,000 taper threshold and avoid the 60% effective rate band
• MTD compliance: Ensuring your digital record-keeping meets HMRC's requirements if you operate as a sole trader or landlord above the MTD threshold

Get in Touch

Whether you are a contractor assessing your IR35 position, a founder preparing your first SEIS raise, or an agency director trying to extract profits efficiently from a growing business, CoreAcc Accountants is here to help.

We work with technology and creative professionals across Hertfordshire and North London, and we understand the full picture — not just the basics.

CoreAcc Accountants is an ACCA-accredited firm of Chartered Certified Accountants based in Borehamwood, Hertfordshire. This article was last reviewed in July 2026 and reflects legislation in force for the 2026/27 tax year. It does not constitute tax or legal advice. Always seek advice tailored to your individual circumstances.

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