Most small-business owners have two main tax concerns: (1) paying more tax than necessary and (2) receiving a letter from the CRA stating that a filing was incorrect.

Good tax planning for small businesses falls in the space between these two concerns.

Tax planning should not be done as an afterthought just before the end of the year. Rather, it is the consistent execution of tax rules coupled with good bookkeeping and records.

For small-business owners in 2026, tax planning is something that needs to be done on a year-round basis.

Here at Anchor Up CPA Corp. we provide tax services to our clients in British Columbia with the goal of helping them plan taxes on a year-round basis rather than on an after-the-fact annual basis.

The Importance of Good Records

This tax strategy is not the most exciting, but might just be the most important.

If you do not have good records, then you do not know what you can claim.

According to the CRA, supporting records must be kept for each expense and income claim. Relevant records may be invoices, receipts, contracts, or other supporting documents.

Good bookkeeping promotes the remembrance of expense claims.

It also provides easier compliance when the CRA asks for support during an audit.

A shoebox of receipts at the end of the year is not a tax plan.

Claim Legitimate Business Expenses

In accordance with the Canadian tax laws, most businesses are able to write off their reasonable current business expenses. However, there are certain restrictions that apply.

Depending on the specific type of business, reasonable current expenses may include:

• advertising
• accounting/legal fees
• insurance
• office supplies
• office rent
• employee wages and certain employer contributions
• supplies
• phone expenses
• utilities
• some travel
• some use of a motor vehicle

There are important limitations:

• personal expenses cannot be business expenses paid through the business.
• Capital purchases could also be treated differently.

This is an area where small business taxation planning would be beneficial, as it helps to prevent either missed deductions or overly aggressive claims.

mix personal and business expenditures.

Even in a small business, bookkeeping is made more difficult. by mixing personal and business expenditures.

• Preparing business expense claims become complicated.
• It is important to claim only the business portion of a purchase that has both personal and business use.

Clarity in bookkeeping from the start saves potential frustration from the backlog of sorting later.

The last-minute accounting for a large purchase for tax purposes is often unnecessary.

Often it is a bad business decision to buy a large item and recover some expense by using it for services when it is not necessary.

Growing businesses may find the GST/HST rules complicated and costly to their operations if they do not consider their sales.

The Canada Revenue Agency (CRA) defines the small supplier threshold for most businesses to be $30,000. The threshold is specific to whether the sales amount is exceeded for one quarter of a calendar year or for two or more consecutive quarters.

Businesses below the small supplier threshold anticipating that they may make taxable supplies may choose to register for GST/HST on a voluntary basis.

However, once a business registers, it is required to charge the GST/HST, file returns, and remit the GST/HST collected.

GST/HST collected should not be considered part of business revenue.

Carefully Consider How You Pay Yourself

Incorporated businesses should consider how they compensate themselves.

The tax implications and the financial implications of drawing a salary versus receiving dividends are different for each owner and may not be the same.

You should consider the implications of your choice on your income and corporations and any personal and business financial concerns.

A salary and dividend compensation structure used by another business owner is not wise to follow.

Your CPA should evaluate your business and personal circumstances before recommending a compensation structure.

strong>Pay Taxes First When Possible

When possible, keep cash reserves to pay taxes first.

It is a drag on business operations to have a profitable year but no cash on hand to pay the taxes when due.

The issue is usually the lack of planning and no cash set aside to pay the taxes.

Simple cash flow systems to anticipate cash outflows will make the business better equipped to Meet tax obligations when due.

Depending on the business and the tax history, there may be installment obligations that also need to be considered when doing cash flow planning.

Tax planning and cash flow planning are complementary to one another.

Look at your business structure as the company changes.

The structure that worked when you made your first $20,000 may not be the structure you want when the company becomes much larger.

Sole proprietorship and incorporation are different at a legal, administrative, and tax level.

Incorporating is not a tax-saving tool for every small business.

A CPA will look at various factors such as

current profit

personal needs

• whether profits will be kept in the business* future business plans

ownership plans a business's administrative costs

These are the factors that determine whether you should change your business structure.

Before you make any changes, this is the time to have this conversation.

Don't Confuse Tax Planning With Tax Avoidance Schemes.

There is nothing wrong with arranging business affairs in an efficient tax manner.

You should be careful when someone claims that they have a strategy the CRA “doesn’t want you to know about.”

Legitimate planning works within the Canadian tax system.

If a strategy sounds too good to be true, ask questions.

Traditional tax planning is an annual event.

However, consider your historical perspective on this. As a tax strategy gets you to year end or tax filing date, what happens afterwards? Often, those strategies Create larger problems further down the road.

You should consider reviewing your tax plan projections prior to year end this year. This gives you the opportunity to address some of the items which have not yet occurred so that you are not faced with the aftermath once the year has come to a close.

Consider the following as well prior to year end.

• Calculated profitability for the fiscal year.
• Outstanding year end expenses.
• Potential year end purchases.
• Year end payroll.
• Cash position for the business.
• Estimated tax obligations.
• Plans for the coming fiscal year.

Year end planning can help bring closure to your prior year activity and can also prepare you for the coming fiscal year. You must recognize that the planning will not happen unless you create the opportunity for it to.

We take a practical approach to tax planning for our clients at Anchor Up CPA Corp.

You do not need a tax strategy that is overly complicated. You need to understand why you owe and what you owe. Additionally, you need to know what approaches you have to address the tax obligations.

Expect tax planning to be part of the daily activities of your business. You have to think about your year end tax obligations prior to closing the books for the year. Plan while you have the ability to make changes. A tax strategy for a consultant may not be the appropriate tax strategy for a medical professional, IT consultant, retailer or an e-commerce business.

Managing the tax needs of a small business is much more than calculating the smallest tax amount.

Managing taxes responsibly and intelligently with the health of the business in mind is the primary focus.

If you own a business in British Columbia, and want a tax and accounting firm with the ability to tailor their services to your business in 2026, give Anchor Up CPA Corp. a call.

Fill out the Get a Proposal Form so we can learn about your business and your tax and financial needs.