Key takeaways include increases in income tax rates for property, savings and dividend income, the introduction of a surcharge on properties valued at over GBP2 million, restrictions on salary sacrifice arrangements for pension contributions and increases in taxes in the gambling sector. However, many of the rumours that circulated pre-Budget did not materialise into Budget measures. In particular, there were no increases in headline rates of income tax, national insurance, VAT or the bank levy; nor were there changes to the scope or rates of SDLT. Similarly, proposals to introduce employer NICs (or an equivalent) on profit shares of partners in UK LLPs have not been taken forward.
Links to the government Budget pages and associated documents are here. The draft Finance Bill is expected to be published over the next week or so, and this will add further flesh to the proposals.
Business taxation
Corporation tax rates
A renewed government commitment to the 2024 Corporate Tax Roadmap, which stipulates a main corporation tax rate of 25%, and full expensing for plant and machinery. However, penalties for taxpayers submitting late corporation tax returns will be doubled from April 1, 2026.
Capital allowances
Changes to rates of capital allowances for main pool of plant and machinery effective April 2026:
- New first-year allowance of 40% with reduced restrictions available from January 1, 2026 available for leasing
- Writing down allowance to be reduced from 18% to 14% per annum from April 2026
Carried interest
Confirmation that from April 6, 2026 a revised tax regime for carried interest will apply, sitting wholly within the income tax framework. Under the revised regime, the amount of carried interest subject to tax will be adjusted by a multiplier of 72.5% where qualifying conditions are met, delivering an effective tax rate of approximately 34% for higher rate taxpayers.
Securitisation vehicles: new anti-avoidance rule relating to certain non-derecognition liabilities
Introduction, with immediate effect, of an anti-avoidance rule intended to apply where there has been the non-derecognition of assets transferred to a securitisation vehicle and a liability is recognised in connection with the transfer. The new rule will deny tax relief for amounts arising from such arrangements that are attributable to a main purpose of securing a tax advantage.
Share exchanges and reorganisations: capital gains tax
Amendment, with immediate effect, of the tax avoidance override to “rollover” relief for share (or debenture) exchanges and reconstructions (in section 137 Taxation of Chargeable Gains Act 1992 (TCGA), and the similar provision in section 139(4)). The amendment reverses the effect of several recent defeats suffered by HMRC in the courts. The new provision will apply to arrangements entered into in connection with an exchange or reconstruction, and will no longer be limited to persons holding more than 5% of the relevant shares or debentures. It will allow such adjustments as are just and reasonable (including by disapplying the rollover relief provisions) to counteract any reduction or avoidance of tax that is one of the main purposes of the arrangements in question.
It is intended that it should be capable of applying to particular taxpayers without affecting the tax position of other taxpayers who are parties to the exchange or reconstruction, but at first blush it is difficult to see how this can be reconciled with an ability of the companies involved in the transaction to obtain clearances under section 138 and 139 TCGA. Clearance applications submitted to HMRC before Budget day will continue to be judged on the basis of the previous legislation provided that the relevant consideration shares or debentures are issued within 60 days of announcement or, if later, within 60 days of the clearance decision.
Enterprise Investment Schemes (EIS) and Venture Capital Scheme (VCT) changes
With effect from April 6, 2026, the EIS and VCT schemes will be amended to:
- increase the gross assets test to GBP30m (from GBP15m) immediately before the issue of the shares or securities, and GBP35m (from GBP16m) immediately after the issue
- increase the annual investment limits to GBP10m (from GBP5m) and for knowledge-intensive companies to GBP20m (from GBP10m)
- increase the lifetime investment limits to GBP24m (from GBP12m) and for knowledge-intensive companies to GBP40m (from GBP20m)
- reduce the rate of income tax relief that can be claimed by an individual investing in VCT to 20% (from 30%).
Note also extensions to the scope of CSOP and EMI schemes referred to in the employment Income, share schemes and pensions section below. Budget day publications also include a call for evidence inviting input on a plan to support entrepreneurship and scaling up UK companies.
Advance tax certainty for major projects
Confirmation that the government will introduce a new service in 2026 to provide major investment projects with certainty in advance of their tax treatment.
Energy profits levy
Replacement of the temporary energy profits levy (due to expire after March 31, 2030 or earlier in certain circumstances) with a permanent oil and gas price mechanism in the event of unusually high prices for oil and gas. The government has also announced that changes will be made to existing rules to clarify that payments may not be made under an oil and gas tax decommissioning relief deed by reference to the energy profits levy.
Gambling duties
A number of changes were made to gambling duties. In particular:
- with effect from April 1, 2026, an increase in the rate of Remote Gaming Duty from 21% to 40%
- with effect from April 1, 2027, introduction of a 25% new rate of General Betting Duty for general bets made remotely (online), with a carve-out for UK horseracing and confirmation that bets placed via self-service betting terminals in licensed premises will not be treated as made remotely
- abolition of Bingo Duty with effect from April 1, 2026.
Incorporation relief
From April 6, 2026 a seller must claim incorporation relief for the transfer of a business to a company in their self-assessment tax return (currently the relief is applied automatically subject to an election to disapply).
Corporate interest restriction
Reforms will effect:
- technical amendments to exclude from the calculation of taxable earnings capital expenditure deducted by way of certain specific reliefs including waste disposal site preparation and restoration
- removal of the time limit to appoint a reporting company and other administrative simplifications.
Research and development tax relief advance clearance pilot
Introduction in Spring 2026 of a pilot targeted advance clearance procedure intended to reduce error and fraud in research and development (R&D) tax relief claims.
Qualified asset holding companies (QAHCS)
The government will work with industry stakeholders to explore targeted legislative changes aimed at ensuring that the QAHC regime continues to operate effectively. Provisions in the draft legislation making technical amendments to the residence-based tax regime which applies from April 2025 (see Personal taxation—non-UK residents below) are intended to ensure that the QAHC regime works as intended.
Partnerships and national insurance contributions (NICs)
To confirm, no announcements have been made about the application of NICs to LLPs or other partnerships.
Real estate
“Mansion tax”
From April 2028, owners of properties valued over GBP2m will be liable for an annual High Value Council Tax Surcharge, collected and administered by local authorities on behalf of central government. The surcharge will start at GBP2,500 per year for properties worth GBP2m, increasing to GBP7,500 per year for properties worth over GBP5m. The valuation office will conduct a targeted valuation exercise to identify properties within scope and revaluations will be conducted every five years. A public consultation relating to the surcharge will be held in 2026.
Property income tax increase
The government is creating separate tax rates for property income received by individuals. The rates comprise a 2% increase to the basic, higher and additional rates of income tax. From April 2027, the property basic rate will be 22%, the property higher rate 42% and the property additional rate 47%. Finance cost relief will be provided at the separate property basic rate which is 22%.
Non-resident capital gains
Amendments to the rules for non-resident capital gains, including the definition of a property rich entity from November 26, 2025 to provide that, in the case of protected cell companies, it is an individual cell that is to be looked at for the purposes of the property richness and substantial indirect interest tests, rather than the company itself. There will also be administrative reforms clarifying when certain individuals have to make double tax treaty claims with effect from April 6, 2026.
Removal of Annual Tax on Enveloped Dwellings (ATED) exemption time limits
The government will remove the time limit that currently applies to claiming relief from ATED. The measure will take effect from Royal Assent but will have effect as if it had always been in force. Penalties will continue to apply to late ATED returns.
Construction Industry Scheme (CIS)
Announcements include the introduction, with effect from April 6, 2026, of:
- new provisions allowing for the immediate cancellation of Gross Payment Status where businesses operating within the CIS knowingly enter into transactions connected to fraud
- new regulations (yet to be published) intended to simplify and improve the administration of the CIS.
Enhancing tax transparency on real estate
Announcement that the UK intends to participate in a new international agreement which will tackle tax evasion by providing for the automatic exchange of readily available information on real estate from 2029 or 2030.
Stamp duty land tax (SDLT): To confirm, no announcements have been made in relation to SDLT.
Stamp duty and stamp duty reserve tax (SDRT)
SDRT—new UK listing relief
Introduction from November 27, 2025 of a relief from the 0.5% SDRT charge on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market. The relief will apply to all of the company’s securities (not just shares) for a three-year period from the first listing of the company’s shares. The relief will not apply to stamp duty, nor to the 1.5% SDRT charge (which applies to transfers to depositary receipt systems or unelected clearance services), or where the transfer forms part of arrangements changing control in the company.
Modernisation of the stamp taxes on shares framework
New power to enable testing of a digital service for the new single tax on the transfer of securities (STS).
Employment income, share schemes and pensions
Employee ownership trusts—capital gains tax
From November 26, 2025, the capital gains tax exemption on qualifying disposals to Employee Ownership Trusts is reduced from 100% to 50%.
Salary sacrifice
From April 2029 only the first GBP2,000 of pension contributions made via salary sacrifice will be exempted from NICs. For more on the pensions-related announcements, see Autumn Budget 2025-the pensions angle.
Enterprise management incentives (EMI) options
An expansion of EMI scheme eligibility limits to provide, for options granted on or after April 6, 2026:
- an increase in the overall company limit on the grant of options from GBP3m to GBP6m
- an increase in the gross assets limit from GBP30m to GBP120m
- an increase in the limit on the number of employees from 250 to 500
- an extension to the maximum holding period from ten to 15 years.
See also announcements relating to EIS and VCT schemes under Business taxation above as well as the call for evidence inviting input on a plan to support entrepreneurship and scaling up UK companies.
Private Intermittent Securities and Capital Exchange System (PISCES)
Confirmation that amendments to existing legislation will allow company share option plan (CSOP) and EMI options to permit exercise on a PISCES trading event.
Deduction for additional household expenses
From April 6, 2026, employees working from home will no longer be entitled to obtain a deduction for additional household costs.
Voluntary National Insurance contributions (VNICs) rules
From April 6, 2026, individuals abroad will no longer be able to pay voluntary Class 2 NICs. This closes the “cheapest” route to build UK State Pension entitlement while overseas. The initial residency or contribution requirements for VNICs will also be increased to ten years. The government also intends to publish a call for evidence in 2026.
Umbrella companies and PAYE
From April 2026, employment agencies and end users of workers employed by umbrella companies may be made jointly and severally liable for any unpaid PAYE or NIC obligations. This measure is aimed at reducing the harm caused by non-compliant and/or fraudulent umbrella companies which fail to account for PAYE and disappear leaving workers with large tax bills, and is the result of a consultation process initially started by the previous government in 2023.
Car ownership
- Introduction of a new mileage charge for electric and plug-in hybrid cars (Electric Vehicle Excise Duty (eVED)) to take effect from April 2028.
- Implementation of reforms to bring certain employee car ownership schemes within the scope of the benefit in kind rules to be delayed from October 6, 2025 until April 6, 2026.
- 100% first year capital allowances for zero-emission cars and electric vehicle chargepoints to be extended by one year to March 31, 2027.
- Introduction of a temporary easement to mitigate the increased benefit in kind charge on plug-in hybrid electric company cars arising from the application of new emissions standards easement to apply from January 1, 2025 (retrospectively) until April 5, 2028.
Cross-border measures
Transfer pricing, permanent establishments and Diverted Profits Tax
Confirmation that the government will reform rules relating to transfer pricing, permanent establishments and diverted profits tax for chargeable periods beginning on or after January 1, 2026, simplifying the taxation of related party transactions, non-resident companies trading in the UK, and profits diverted from the UK (existing draft legislation to be subject to certain further refinements).
HMRC will also be empowered to require in-scope multinationals to submit an International Controlled Transaction Schedule (ICTS) which will report information annually on cross-border related party transactions (expected to take effect for accounting periods beginning on or after January 1, 2027).
Multinational top-up tax and domestic top-up tax
Further technical amendments will incorporate the latest published international updates and following stakeholder consultation.
Digital services tax review
The government has published its Digital Services Tax Review on the performance and administration of digital services tax, as required by statute. No further detail is given on implementation of Pillar One proposals.
See also:
Personal taxation
Income tax rates, thresholds and bands
Extension of the existing freeze on income tax thresholds, the income tax personal allowance and certain NICs thresholds for a further three years from 2028 to 2031.
Dividend income
- From April 6, 2026, rates of income tax for dividends to be increased to 10.75% for the ordinary rate (increased from 8.75%) and 35.75% at the upper rate (increased from 33.75). The dividend additional rate will remain unchanged at 39.35%.
- Abolition of the dividend tax credit for non-UK residents with UK income (aligning their treatment with UK residents) with effect from April 6, 2026.
Property income
See Real estate—property income tax increase below.
Savings taxation
A 2% increase to the basic, higher and additional rates of income tax on savings. From April 2027, the savings basic rate will be 22%, the savings higher rate 42% and the savings additional rate 47%.
Non-UK residents
A number of changes are proposed to the taxation of non-UK resident individuals, including:
- Taxation of temporary non-UK residents returning to the UK: reforms to provide that all dividends received by temporary non-UK residents from close companies will be chargeable to income tax (currently there is no charge to income tax if the distribution is made from post-departure trade profits). The changes will have effect for individuals returning to the UK on and after April 6, 2026.
- PAYE for internationally mobile employees: With effect from April 6, 2026 the proportion of earnings an employer can exclude from PAYE through a PAYE notification will be limited to a maximum of 30% where the individual is a qualifying new resident and eligible for overseas workday relief.
- Technical changes to the residence-based tax regime: A number of technical amendments will be made to the residence-based tax regime which applies from April 2025 and replaces the tax regime which applied to non-UK domiciled individuals prior to that date.
Inheritance tax
Confirmation that the inheritance tax (IHT) nil-rate band, residence nil-rate band and residence nil-rate band taper will be fixed at current levels for the tax years up to and including 2030 to 2031. The combined GBP1m allowance for 100% Agricultural Property Relief and Business Property Relief will be fixed for the tax years up to and including 2030 to 2031.
Further inheritance tax measures relating to unused pension funds and death benefits, infected blood compensation payments and the introduction of anti-avoidance measures for non-long term UK residents and trusts.
VAT
Private hire vehicle operators
New legislation will prevent private hire vehicle operators benefiting from the VAT tour operators margin scheme, which has been at issue in high value litigation involving Uber and Bolt. That litigation is ongoing, but the proposed legislation is to put the position beyond doubt. In future, those operators who act as principal or as an undisclosed agent for their drivers will be required to charge VAT on the full taxi fare, rather than solely on their profit margin.
Cross-border VAT grouping
Clarification of the rules relating to operating cross-border VAT grouping from November 26, 2025. This measure, which is made by way of a Revenue and Customs Brief on the basis that it reflects a revised interpretation of existing UK VAT law that does not require legislative amendment, effectively reverses the impact of the CJEU’s Skandia decision and restores the "whole establishment" principle, thereby reverting to the UK’s previous position.
The consequence of this change is that an overseas branch of a business that is VAT grouped in the UK will be treated as part of that UK VAT group, even if the branch is located in an EU member state that does not operate whole entity VAT grouping and belongs to a VAT group in that other jurisdiction. Businesses with cross-border structures should review their VAT grouping arrangements in the light of this revised brief which also provides details on how businesses that may have accounted for UK VAT in line with the previous HMRC guidance, can reclaim any VAT that was overpaid as a result of that previous treatment.
Tax industry, regulation, tax administration and exchange of information
Regulation of tax advisers and counteracting avoidance
A group of measures was included in the draft Finance Bill in the summer, addressing perceived failings in the tax advisory market. These have been subject to extensive discussion between the representative bodies and HMRC in which we have been closely involved. Discussions remain ongoing, but an update on the individual measures was given in the Budget. More detail is expected when the Finance Bill is published.
- Mandatory registration of tax advisers
From the budget materials, the status of the proposals for mandatory registration of tax advisers is slightly unclear. The Red Book suggests that proposals for government regulation of tax advisers have been dropped, but a Budget policy paper was published suggesting that these proposals will be going ahead from May 2026.
- Powers to counteract promoters of tax avoidance
The proposal to introduce a criminal offence for failure to comply with the “Disclosure of Tax Avoidance” (or DOTAS) rules is not being taken forward in its published form. Instead HMRC are intending to introduce an expanded form of the proposal for Universal Stop Regulations (USR), which will prohibit promotion of avoidance arrangements that have no realistic prospect of success and a power to allow HMRC to specify further arrangements in regulations which may not be promoted. Breach of these measures would carry various sanctions including publication, financial penalties and criminal prosecution.
The proposals in the draft Finance Bill to introduce “Promoter Action Notices” (PANs) are being taken forward. These would require businesses to stop providing goods or services to promoters of tax avoidance where those goods or services are used in promotion of avoidance and the promoter is in breach of a USR or stop notice. They are expected to be issued primarily to financial institutions, insurance companies, and social media companies.
Further measures are being introduced to strengthen HMRC’s information gathering powers and widen the circumstances in which the details of those facilitating the promotion of tax avoidance schemes can be published by HMRC.
- Penalties for tax advisers who facilitate non-compliance
Proposals are being taken forward to impose enhanced penalties on advisers who deliberately facilitate clients to pay less tax or claim more relief than due under the law, to expand HMRC’s information gathering powers and to permit publication of details of advisers. We await an update in the Finance Bill on the intended scope of these rules and the level of penalties.
Future consultation proposals in relation to tax administration
The government will publish consultations in 2026 on:
- a new “recklessness” based criminal offence for direct tax to mirror the existing offence for the purposes of VAT
- additional powers to require taxpayers to correct inaccuracies in returns
- proposals to enhance the existing notification system for uncertain tax treatments
- requirements for close companies to report transactions with their shareholders
- various reporting and systems changes.
OECD crypto-asset reporting framework
Consultation response document confirming a new requirement for UK reporting crypto-asset service providers to collect information about UK resident customers and report to HMRC under the crypto-asset reporting framework.
