Autumn Budget 2026 – key tax announcements

The Chancellor’s announcements today contained a number of tax measures outside of those which had been anticipated. Today’s Budget focused on creating a clear sense of direction, whilst also providing breathing space for families and businesses, against a difficult economic backdrop.

The 2024 manifesto commitment not to increase taxes on working people was maintained, with the main rates of income tax, national insurance contributions and VAT remaining the same. There was also no increase in the rate of capital gains tax, although the lifetime limit for Business Asset Disposal Relief (BADR) was cut to £500,000. However, this was accompanied by the announcement of a new founders’ relief from capital gains tax.

Tax practitioners and taxpayers alike were keenly awaiting the outcome of a significant number of technical consultations released at the last Budget and over the summer. A number of responses to these consultations were published today, key amongst them being: the taxation of the extraction of profits from companies; close company participator reporting requirements; updates to income tax Self Assessment payments; and the treatment of UK tax resident investors in LLCs.

A summary of the principal changes in today’s announcements follows.

Measures Relating to Taxes on Individuals

Further 2% increase to property income tax rates

Announcements at the Autumn Budget 2025 created separate rates of income tax for property income, which, as announced today, will rise by a further two percentage points. From 6 April 2027, the property income rates for England, Wales and Northern Ireland will be as follows:

• The property basic rate will be 24%;
• The property higher rate will be 44%;
• The property additional rate will be 49%.

For trustees, accumulated and discretionary property income will be taxed at a new property trust rate of 49%. 

The new property rates apply in England, Wales and Northern Ireland, and the devolved Governments of Scotland and Wales have been given the ability to set their own property income rates in line with their existing income tax powers. 

The Finance Bill 2026-27 will also make consequential amendments so that the rules on insurers’ reporting, deduction of tax at source, tax treated as paid on gains from certain foreign life insurance policies and the transfer of assets abroad regime operate as intended, once the new rates take effect on 6 April 2027. 

New reporting requirements for letting agents

Separately, HMRC has opened a consultation on how letting agents and tenancy deposit protection schemes report property income data to HMRC, which runs until 20 January 2027. The headline proposal is that letting agents acting for UK based landlords who let UK residential property, together with authorised tenancy deposit protection schemes, will be subject to standing reporting obligations in place of the current notice based regime. Data will be reported for all landlord types, including individuals, companies, partnerships and trusts, with no de minimis threshold. However, agents already operating the Non Resident Landlord Scheme will be excluded. Data holders will be required to collect and report tax identifiers, such as National Insurance numbers, company registration numbers and Unique Taxpayer References, for new landlords at onboarding and to make reasonable efforts to obtain them for existing landlords.

Savings income tax rates to rise by a further 2% from April 2027

Announcements at the Autumn Budget 2025 increased the rates of income tax on savings income by 2% from April 2027, to 22%, 42% and 47%. The Government has now announced a further rise of 2% from the same date, so that from 6 April 2027 the savings rates will be as follows:

• The savings basic rate will be 24%;
• The savings higher rate will be 44%;
• The savings additional rate will be 49%.

Unlike the new property income rates, these rates apply across the whole of the UK. Trustees’ accumulated and discretionary savings income will be taxed at a new savings trust rate of 49%. The 0% starting rate for savings and its £5,000 limit are unchanged, as is the Personal Savings Allowance of £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.

New founders’ relief from CGT for founders of high growth, innovative companies

One of the Chancellor’s unexpected, but positive, announcements today was the introduction of a new founders’ relief. This will provide a reduced 10% rate of CGT on qualifying disposals of shares or securities made on or after 6 April 2027, up to a lifetime limit of £10 million of gains per individual. Such relief will not be restricted to shares acquired at the time the company was started or to an individual’s original shareholding. A technical consultation on the proposed design has been published today, closing on 30 November 2026.

Founders selling their businesses can currently claim BADR at a reduced 18% rate, but the BADR lifetime limit will be halved to £500,000 from 6 April 2027 (see more detail on this measure below). Under the proposals, the £10 million limit will be reduced by amounts claimed under BADR and Investors’ Relief from 6 April 2027.

The key conditions for the new founders’ relief are outlined below:

• The individual must have:
  • Held 25% of the company’s ordinary share capital (together with corresponding voting rights and rights to distributable profits and assets on a winding up), when its trade (or preparation for it) began. This 25% requirement can also be satisfied through the requisite ownership of a holding company of a trading group;
  • Held the shares for at least five years before their disposal; and
  • Been UK resident for at least five continuous tax years before disposal.
• The company must:
  • Be within the scope of UK corporation tax;
  • Have a substantial UK presence for the five accounting periods prior to disposal;
  • Be a UK trading company (or the holding company of a trading group) without substantial non-trading activities or excluded trading activities;
  • Continue the new trade it was established for when the founder’s shares were issued with no major change in the nature of the trade; and
  • Have generated turnover of at least £10 million, and have at least 15 qualifying full time employees, in both cases in the accounting period before disposal.

In addition, the company must meet two out of three “growth and innovation” tests: 

1. Turnover test: At least 25% average annual compound growth in turnover over three consecutive accounting periods within the ten years before disposal, with turnover of at least £10 million in the accounting period before the first of these three periods;
2. Headcount test: At least 25% average annual compound growth in qualifying full-time equivalent employees over three consecutive accounting periods within the ten years before disposal with at least 15 full-time employees in the accounting period before the first of these three periods;
3. Innovation test: Either (i) Research and development (R&D) expenditure of at least £1.5 million on which R&D tax relief was able to be claimed or (ii) have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal. 

Claims will be made through Self Assessment in the year in which the disposal takes place, with a proposed statutory right for individuals to obtain the necessary information from the company which would otherwise be difficult to obtain. The Government had considered a provision for companies or HMRC to provide a certificate confirming that the relevant conditions had been met, but this was ultimately decided to be too administratively burdensome. 

BADR lifetime limit halved

The lifetime limit on gains eligible for BADR, which provides an 18% rate of CGT, will be reduced from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. Transitional provisions will apply to contracts and certain share reorganisations not completed before 6 April 2027. 

Modernising the taxation of distributions and repayments of capital from companies

The Government will proceed with several proposals as a result of its consultation which took place earlier this year on “Modernising the taxation of distributions and repayments of capital”. The consultation notes that some changes to the proposals have been made following stakeholder feedback. 

A technical consultation, including on draft legislation, will take place in 2027, with the changes intended to apply from April 2028. The changes will not apply retrospectively.

The Government’s response in each area is summarised below:

• Reductions of capital. Following a share reorganisation, the amount treated as a repayment of capital will be limited to the capital originally subscribed. Listed companies will be out of scope of this proposal, and the change will apply only to future reorganisations;
• Demergers. Statutory demerger relief will be modernised so that companies and groups can more easily undertake commercially desirable demergers, including some demergers ahead of onward sales. The “all or substantially all” test, in relation to interests retained, will not be changed to “all”, since interests may need to be retained for commercial or company law reasons. Relaxing the 75% subsidiary condition and simplifying the chargeable payments rules remain under consideration;
• Overseas distributions. Certain distributions from companies resident outside the UK, and stock dividends, will be brought into the charge to UK income tax. Returns on asset managers’ co-investment, and genuine investment returns in fund structures, will continue to receive capital treatment in situations where that is available under the current rules. A simpler approach for smaller shareholders is being explored;
• Unlawful distributions. New rules, subject to technical consultation, will establish whether the loans to participators or the distributions regime takes priority, avoiding double taxation;
• Loans from overseas companies. A temporary charge will apply to individuals on loans from companies resident outside the UK, repayable when the loan is repaid, released or written off. It may be limited to participators with material interests and to loans not made for commercial purposes;
• Purchase of own shares rules. The rules will be reformed and the two year employment requirement relaxed. The 5% minimum shareholding and the protection of family succession and employee share schemes remain under discussion; and
• Transactions in securities. The rules will be reformed to make them clearer and more robust, with detailed proposals and technical consultation to follow.

Enterprise Management Incentives 2 (EMI 2) and Company Share Option Plans (CSOPs)

From 6 April 2027, the CSOP regime will be significantly enhanced and renamed Enterprise Management Incentives 2 (EMI 2), providing a stronger tax advantaged share option offer for businesses that have outgrown, or cannot use, the Enterprise Management Incentives (EMI) scheme.

The CSOP individual option limit will double from £60,000 to £120,000, the interaction with the EMI limit will be removed (raising the combined maximum from £250,000 to £370,000) and the exercise period will be extended from 10 to 15 years. 

Legislation will be included in Finance Bill 2026-27, and the changes will take effect from 6 April 2027.

Greater flexibility under the EMI scheme

A number of targeted changes will simplify the operation of EMI from 6 April 2027, to be introduced through Finance Bill 2026-27.

At present, EMI tax advantages can be lost where certain disqualifying events occur and options are not exercised within a set period. The exercise window following a disqualifying event will be extended from 90 to 180 days. Employees will retain their EMI advantages where their employer is arranging to become controlled by an Employee Ownership Trust (EOT), shares and options reserved for employees may be held for 15 years without triggering the disguised remuneration rules, and the separate notification of EMI option grants will be replaced by reporting through the end of year return.

The EOT exception in the EMI rules will now also cover companies that are arranging to come under EOT control.

Targeted improvements to the venture capital schemes 

The Government will legislate in Finance Bill 2026-27 for targeted technical changes to the Seed Enterprise Investment Scheme (SEIS), EIS and Venture Capital Trusts (VCTs), alongside further measures on fees and HMRC’s Advance Assurance service.

Exceeding an EIS investment limit will no longer automatically result in loss of all relief, SEIS and EIS or VCT investment may take place on the same day, late payment by one investor will no longer affect others, and VCT relief withdrawals will be calculated at the rate applying on issue. The VCT change applies to shares issued on or after 6 April 2026 and the remainder to share issues on or after 6 April 2027. HMRC will also strengthen guidance and compliance activity on excessive fees.

Simplifying the R&D tax relief claims process

It was announced today that the Finance Bill 2026-27 will include legislation to remove the requirement to submit a Claim Notification Form for R&D claims made on or after 1 April 2027 and also to simplify and rationalise the information required in the Additional Information Form for companies that claim R&D relief from autumn 2027. 

Tripling the trading allowance

Today it was announced that the trading allowance will increase from £1,000 to £3,000 from 6 April 2027, allowing individuals to receive up to £3,000 of trading and miscellaneous income each year free of tax. The trading income reporting threshold for Self Assessment will also increase to £3,000.

New tax credit relief for UK resident individual investors in US LLCs and other reverse hybrids

Following the summer 2026 consultation, the Government will introduce a new elective foreign tax credit to relieve the double taxation potentially suffered by UK resident individuals who invest through US limited liability companies (LLCs) and similar reverse hybrid entities. The Government has decided not to pursue a proposed transparency based approach, due to its complexity. Claims for the new credit will be possible from early 2028.

US LLCs and reverse hybrid entities are taxed as transparent abroad but as opaque in the UK, so a member can be taxed on the same profits in both countries without being able to claim credit for the foreign tax. The key features of the new credit are as follows:

• Legislation will specify the eligible entities, which will include US LLCs, US S corporations, Jersey LLCs and French sociétés civiles immobilières (SCIs);
• Eligible entities will be treated as opaque for UK purposes, with individual members taxed at dividend rates on distributions received;
• Individual members will be able to elect to receive credit for eligible foreign taxes they have paid personally on the entity’s profits, income and gains;
• The credit will be calculated by reference to the average rate of foreign tax payable by the investor, using mechanical rules rather than tracing, and federal, state and local taxes will all be eligible.

A technical consultation on the detailed rules, including timing mismatches and the interaction with dividend rates, will be published shortly, ahead of the Finance Bill 2027-28. The Government is considering practical options for earlier periods and ongoing disputes but has not yet committed to any relief for earlier years.

Various ISA announcements

It was announced today that the cash ISA limit of £20,000 will be retained for all adult savers from April 2027. 

The Government will work with industry to explore designing a new ISA incentive for people investing in a Stocks and Shares ISA for the first time. 

A new First Time Buyer ISA will be introduced, to replace the Lifetime ISA for new savers. It will provide a 25% Government bonus on the final account balance up to a maximum of £20,000, paid on withdrawal, towards a purchase of a first home worth up to £450,000. 

Tax regime for surplus payments from defined benefit pension schemes

As announced at Autumn Budget 2025, Finance Bill 2026-27 will enable defined benefit occupational pension schemes to make direct payments of surplus assets to members, where scheme rules permit and subject to trustee discretion. These authorised member surplus payments will be taxed as pension income where specified conditions are met.

Those conditions include requirements relating to the scheme’s funding position, and the member must have reached Normal Minimum Pension Age or, where applicable, their protected pension age. The legislation will also include safeguards to prevent avoidance. The changes will take effect from 6 April 2027.

Two year rule for pension death benefits removed from today

Pension and lump sum death benefits that would otherwise be tax free can currently become taxable solely because they are paid more than two years after the scheme administrator first knew, or could reasonably have been expected to know, of the member’s death. 

Finance Bill 2026-27 will remove this rule, with effect for payments made from today, meaning that beneficiaries will no longer face a tax charge simply because a payment has been delayed beyond two years. The change applies both where a payment would otherwise be taxable as pension income of the recipient and where it would otherwise fall within the special lump sum death benefits charge. 

Easier access to pension savings for the terminally ill

The Government will change the definition of terminal illness used for accessing pension savings, making it easier for terminally ill individuals to draw on their pensions. 

Measures Relating to Taxes on Businesses and Certain Business Sectors

Advance Tax Certainty Service updates

Legislation will be introduced in the Finance Bill 2026-27  to reduce the minimum expenditure threshold for HMRC’s Advance Tax Certainty Service from £1 billion to £300 million, expanding access to the service from 4 November 2026. 

Banking surcharge 

It was announced today that the rate of the corporation tax surcharge on baking companies will be increased temporarily to 6%, for the 15 month period from 1 January 2027 to 31 March 2028.

Corporation tax: the foreign permanent establishment exemption 

As previously announced, the Finance Bill 2026-27 will include legislation to make the foreign permanent establishment exemption mandatory.  This will take effect for accounting periods beginning on or after 1 January 2027.   

Modernising the taxation of foreign sovereign investments

In a surprise announcement, the Chancellor has announced the reform of foreign sovereign investments. A new statutory “sovereign tax status” regime will replace the current uncodified sovereign immunity from UK direct tax from 1 January 2029. Sovereign tax status will be available to foreign states (including federal states), heads of state acting in their sovereign capacity, Governments, central banks, wholly state owned entities incorporated and resident in the home state, sovereign wealth funds, wholly state owned export credit agencies and certain other Governmental organisations, as well as a new category of State operated Overseas Pension Funds (SOPFs).

The main effect of the announcements is that returns from directly held UK real estate (rents and gains), and in limited cases UK trading income, will become taxable for the first time. However, interest, dividends, and investment office profits will remain exempt, and SOPFs will maintain capital gains exemption. In addition, a bespoke REIT route will allow sovereigns to control or wholly own a UK REIT with a 15% tax rate on property income distributions. Outside the specific exemptions, sovereigns will be taxed in the same way as other non-resident investors. Sovereign entities will be treated as non-UK resident companies within Corporation tax, while individuals (such as heads of state) will be subject to income tax and capital gains tax at standard rates. The Government has also confirmed it will remove jurisdictional immunity in respect of the resulting tax liabilities.

Transitional reliefs, including a time-limited SDLT relief from 2028, are intended to support restructuring. The consultation on the proposals, which sets out the proposed design of the legislation, closes on 20 January 2027. A technical consultation on draft legislation will follow, and final legislation will be in the Finance Bill 2027-28.

Oil and Gas Revenue Levy (OGRL)

The Finance Bill 2026-27  will include legislation to establish the OGRL, a new permanent additional 35% levy on exceptional oil and gas revenues arising during periods of unusually high prices. It will apply to such revenues arising on or after the day immediately following the cessation of the Energy Profits Levy, which will be 1 April 2030 or an earlier date if the Energy Security Investment Mechanism is triggered.   

Extending online marketplace liability for VAT to UK sellers

The Chancellor has announced that, from October 2027, online marketplaces will be responsible for accounting for VAT on all sales made through their platforms by all UK VAT registered businesses and on sales by any other UK business whose annual individual platform sales exceed £90,000 (the “minimum platform threshold”). The rules will only apply where the goods are in the UK at the point of sale. 

The threshold does not change existing VAT registration obligations and does not apply to overseas sellers. The rules will not apply to business-to-business sales, personal (non business) sales or sales of second hand goods, in order to preserve access to the VAT margin scheme for second-hand and refurbished goods sellers.

Other key details include:

• Confirmation that the no VAT rate relief for small sellers will be introduced, since the £90,000 threshold already removes businesses legitimately trading below the VAT registration threshold from scope;
• The ability for businesses within scope to be able to apply to move to monthly VAT returns to help mitigate cashflow impacts;
• That the Government will take more time to consider how the VAT Flat Rate Scheme will operate alongside the new rules.

Further guidance will be published before the rules take effect, including on the operation of the threshold and the effect on VAT accounting and reporting. 

Corporation tax simplification for business investment

It was announced today that a consultation will seek to identify areas of the corporation tax system which would benefit from targeted simplification, in order to improve certainty and support investment, growth and competitiveness.  The Government will work alongside stakeholders over the next year, in order to develop and prioritise reforms. 

VAT treatment of travel services and the Tour Operators’ Margin Scheme

HMRC has launched a Call for Evidence reviewing the VAT Tour Operators’ Margin Scheme (TOMS), seeking views more widely from businesses and consumers regarding the VAT treatment of travel services. The consultation also extends to travel services supplied outside the TOMS and to services enjoyed in the UK but supplied by tour operators based overseas. 

The Government is seeking views on the following:

• The withdrawal or partial withdrawal of the TOMS (with transitional arrangements provided in the event of withdrawal);
• Reform of the TOMS as an alternative to withdrawal;
• Concessions, with HMRC particularly expressing concern regarding the “transport company scheme”, and the concession provided in Revenue and Customs Brief 21/10 “Hotel Billback”.
• The VAT treatment of packaged supplies which are currently outside the TOMS;
• The VAT treatment of overseas tour operators providing travel services used and enjoyed in the UK. 

VAT reform of the business to business reverse charge for supplies of services from overseas

From 1 April 2027, the VAT reverse charge on services supplied by overseas businesses to UK business customers will apply only where the customer is VAT registered. This will mean that where the UK purchasing business is not VAT registered, the overseas supplier will be required to charge and account for UK VAT.

Machine Games Duty (MGD) rate increase and liability 

The Chancellor has announced that the MGD rate will rise from 20% to 25% from 1 April 2027 for machine games with stakes over £1 or prizes over £100, with the existing rate retained for lower stake machines in pubs and seaside arcades.

In addition, liability for MGD will move to the machine supplier for supplier owned machines operated under profit share arrangements from 1 April 2028. HMRC has also published a 12 week consultation on implementation, closing on 20 January 2027. Premises licence holders, permit holders and pub tenants will remain liable where they own the machine outright, or use it under a fixed rental or lease arrangement and control the takings. Legislation will follow in a future Finance Bill.

The revised liability position for each of the main business models identified by HMRC is as follows:

• Direct ownership: The premises operator remains liable;
• Profit share arrangements: Liability moves to the supplier;
• Fixed rental or lease arrangements: The premises operator remains liable where it controls the takings.

For arrangements that feature more than one model, liability may be decided by reference to its substance, including who owns the machine, controls the takings and holds the records. The consultation seeks views on these concepts, the information newly liable businesses would need and any transitional issues.

Corporation tax spreading for gas network operators

Changes to accounting standards mean that certain revenues of gas distribution companies, which were previously deferred, are now recognised and so brought into account for Corporation tax. These are qualifying revenues from qualifying gas distribution activities which would be passed on to consumers. The Government will legislate in Finance Bill 2027-28 to spread these Corporation tax impacts evenly over five years, so that the transitional amount which would otherwise be taxable in 2026 to 2027 will instead be spread over five years from 2026-2027.

The aim is to smooth out any resulting financial impacts rather than reduce the overall Corporation tax due. Although the legislation is due in next year’s Finance Bill 2027-28, the spread is to start from 2026 to 2027. Precise tax outcomes and the qualifying transitional amount will be set out in due course.

Clearer guidance on the tax treatment of predevelopment costs

The Government has published a summary of responses on the tax treatment of predevelopment costs, stating that it will work with stakeholders to explore what improvements can be made to HMRC guidance to give greater clarity on how the existing capital allowances rules apply. 

Pillar Two 

It was announced today that the Finance Bill 2026-27 will include a number of technical amendments, including amendments to implement the Side-by-Side package.

Measures Relating to the Taxation of Real Estate

Capital allowances: Reduction in the main rate writing-down allowance and increase in the main rate first year allowance

It was announced today that the Finance Bill 2026-27 will include legislation to increase the main rate first-year allowance to 50% for expenditure incurred on or after 1 January 2027 and to reduce the main rate writing down allowance to 12%, to take effect from 1 April 2027 for corporation tax and 6 April 2027 for income tax.

High Value Council Tax Surcharge (“HVCTS”): Deferral scheme, discounts, exemptions and empty homes premium confirmed

The Government today updated its guidance on the HVCTS, announced at Autumn Budget 2025 as a new annual charge on owners of residential property in England worth £2 million or more, payable in addition to existing council tax from April 2028. Following the conclusion of the public consultation, the Government confirmed it will introduce a deferral scheme, a series of discounts and exemptions, and a 100% premium on properties left empty and unoccupied for 12 months or more. Additional information on the approach to valuation has also been provided. The HVCTS will apply in England only and will be legislated for in Finance Bill 2026-27.

VAT zero rating for land sold to registered providers of social housing

Following consultation, the Government has confirmed that it will introduce a new zero rate of VAT on the sale of land to registered providers of social housing (referred to in the VAT legislation as “relevant housing associations”). The measure is intended to remove reliance on so called golden brick arrangements, under which the transfer of land is currently delayed until the sale can be zero rated under a different VAT relief, and which respondents described as complex, costly and a cause of delay to social housing delivery. 

The zero rate will be targeted to apply to any land sold to a registered provider, as defined in existing VAT legislation, rather than being conditional on the intended use of the land. This will allow providers to acquire land before the golden brick stage and take earlier transfer of title.

Secondary legislation will be laid before Parliament in early 2027, with the new zero rate taking effect from 1 April 2027.  

Reporting, Compliance, Disputes and Investigations

Modernising HMRC’s approach to wealthy compliance

HMRC has published a multi-year plan to modernise tax compliance for wealthy individuals (defined as those with income over £200,000 or assets over £2 million in any of the last three years). 

The key headlines of the plan include:

• Enhanced wealth identification (bringing together customer, entity, third-party and open-source data and information) will be implemented to better identify the wealthy population;
• Confirmation that, further to recent press reports, HMRC has allocated a Customer Compliance Manager (CCM) to every identified billionaire “with a UK tax footprint”, and offered them a voluntary early discussion;
• Ensuring that collected data, including that gathered by the Trust Registration Service and the Register of Overseas Entities, is connected, and analysed using automated triggers and AI;
• Using data HMRC receives under various reporting regimes, such as for financial account and card sales data, the CARF, automatic exchange of information, and the upcoming OECD property information exchange regime, to prepopulate digital services and issue targeted prompts;
• Recruiting, or allocating via redeployment, 400 offshore specialists by 2030 (244 are already in post);
• Increasing annual charging decisions for the most harmful fraud by 20% on 2023 to 2024 levels by 2029 to 2030. Those able to pay will be expected to settle promptly;
• The use of the recently introduced Mandatory Tax Adviser Registration regime, as well as HMRC’s new sanctionable conduct powers against advisers who facilitate non-compliance.

Close company reporting of payments to participators

The Government has confirmed that it will not, at this time, implement the previously proposed requirements for close companies to report their transactions with participators in greater detail. The proposals were intended to give HMRC better data for targeted compliance work and to encourage small businesses to track the legal separation between a company and its owners. The summary of responses published at the Autumn Budget today notes that companies are already struggling to meet their existing administrative obligations, and that “more consideration” needs to be given to embedding fundamental tax obligations in the smallest companies before any increase in reporting is pursued further.

Mandatory VAT e-invoicing 

From 1 April 2029, as previously announced, VAT registered persons must issue and receive VAT invoices as e-invoices, unless an exemption applies. As part of the announcements today, HMRC and the Department for Business and Trade have published an implementation roadmap, as well as a consultation on the future using of e-invoicing.

The published implementation roadmap sets out the key decisions, products and activity needed to enable businesses and other organisations to prepare for e-invoicing, including standards, interoperability, governance, legislation, guidance, testing and support, and a timeline for technical consultations, publication of full requirements and guidance, and readiness testing.

The consultation asks taxpayers whether the introduction of e-invoicing for VAT creates an opportunity to explore whether and how digital reporting could deliver additional benefits for businesses, HMRC and wider Government.

Modernising the administration of corporation tax

HMRC has published a call for evidence on the future of corporation tax administration. The consultation seeks views on how to better support companies to report and pay the right amount of tax first time, exploring more integrated information flows, more proportionate administrative requirements, and better use of data. It is also considering how advances in automation and AI could support a modernised system. The call for evidence closes on 20 January 2027.

VAT and PAYE return liabilities to be collected by Direct Debit from April 2029

Further to the consultation announced at the Autumn Budget 2025, from April 2029, businesses will be required to set up a Direct Debit instruction with HMRC for their VAT and PAYE return liabilities, subject to defined exceptions. It is confirmed that businesses will remain free to pay using their preferred method, but HMRC will use the Direct Debit instruction to collect any balance left unpaid. 

HMRC has confirmed it will work with stakeholders to determine which exemptions are needed, how to encourage early uptake of automated payments and what the consequences will be of continuing to fail to pay accurately and on time.

Changes to payment dates under of Income Tax Self Assessment (ITSA) from April 2029

Further to consultation earlier in the year, the Government has confirmed that, from April 2029, ITSA taxpayers who make payments on account will be required to make more regular payments towards their tax bill during the tax year. Payments will be automated by default, for example by Direct Debit, and taxpayers with sufficient PAYE income will be able to choose to pay through PAYE instead. This is a welcome clarification on previous proposals, under which payment through PAYE would have been mandatory for that group. 

Under the current rules, a taxpayer whose liability exceeds £1,000, and who has not already had 80% of that liability deducted at source, makes two payments on account (in January during the tax year and in July after it), followed by a balancing payment the following January. As a result, tax can be paid up to 22 months after the income is earned. 

The key features and next steps are as follows:

• Automated payments during the tax year will be the default approach, with an option for eligible taxpayers to opt in to paying through PAYE;
• Payments will continue to be based on the previous year’s tax, which taxpayers will be able to update online if their circumstances change. The 31 January filing deadline is unchanged.
• From 2028, HMRC will introduce new web and app functionality allowing taxpayers to estimate their liability, track their payments against it and make voluntary payments ahead of the transition;
• The 2029 to 2030 tax year will be a transition year, in which taxpayers make their final payment for the previous year while starting payments under the new arrangements;
• The Government will work with stakeholders and set out further detail in 2027 on the frequency and timing of payments, safeguards and flexibilities for taxpayers in financial difficulty, the approach to compliance (including penalties and interest), communications and support, and how the transition will work.

New process for collecting tax on excess lump sum death benefits

Where a member dies before age 75 and the lump sums paid exceed their available lump sum and death benefit allowance, the excess is currently treated as pension income of the individual beneficiaries. Finance Bill 2026-27 will replace this with a standalone process for HMRC to assess and collect the tax due. 

Targeted Measures Taking Effect from Budget Day (28 October 2026), The Day Following Budget Date, or with Retrospective Effect

A number of Budget 2026 measures take effect immediately, from today, 28 October 2026, with further changes following tomorrow and several others applying from an earlier date. Particular measures taking effect today are as follows:

• Employer payments of Certificate of Sponsorship fees and the Immigration Skills Charge, which are required when sponsoring a Skilled Worker, are exempt from income tax and are not treated as a taxable benefit in kind for payments made on or after today;
• Pension and lump sum death benefits will no longer become taxable solely because they are paid more than two years after the scheme administrator knew, or should have known, of the member’s death, for payments made on or after today;
• Interest paid on Scottish Government bonds can be paid without deduction of income tax from today;
• New inheritance tax rules set out when liabilities incurred by trustees reduce the value of trust property, aligning their treatment with personal liabilities and preventing liabilities funded from a beneficiary’s own estate from reducing charges. The rules apply to deaths and other chargeable events from today;
• A trust that becomes UK resident because one of its trustees moves to the UK, and ceases to be resident later that year or the following year, will no longer face a capital gains tax exit charge;
• The rules attributing gains of non resident close companies to UK participators are extended to protected cell companies, building on the Budget 2025 change that applied the property richness test to individual cells;
• A capital sum received under a contract for the loss of a right under that contract is brought within the capital gains legislation, which is described as a clarification;
• Late filing penalties for a UK property disposal return on a residential property will stop accruing once the disposal is reported on the person’s Self Assessment return;
• Acquisitions of land and property by Local Government Pension Scheme asset pool companies from member funds benefit from SDLT relief for transactions from today and before 1 April 2032, supporting the scheme’s pooling reforms in England and Northern Ireland;
• The definition of a finance lease is expanded for lease and leaseback arrangements under section 228G of the Capital Allowances Act 2001, restoring the anti avoidance rule for lessees with either a finance lease or a relevant right of use lease.

Further changes take effect tomorrow, 29 October 2026:

• SDLT group relief will be clawed back as intended where the purchasing company leaves the group within the usual three year period, even if the vendor company has been wound up. This applies to transactions in England and Northern Ireland from tomorrow;
• The Lifetime ISA withdrawal charge for purchases of homes above the property price cap falls from 25% to 20% from midnight on 29 October 2026, with secondary legislation laid today. The charge for other unauthorised withdrawals remains at 25%.

Several further measures announce at the Budget apply with effect from an earlier date:

• New standalone process for assessing and collecting tax on excess lump sum death benefits, charging beneficiaries at their marginal rate, applies to payments made on or after 6 April 2024, with transitional provisions for the 2023 to 2024 tax year;
• An amendment to the VCT relief withdrawal rules applies to relevant disposals of shares issued on or after 6 April 2026;
• The OECD’s Side by Side package for the Pillar 2 global minimum tax rules applies to accounting periods beginning on or after 1 January 2026, and certain technical amendments apply to periods beginning on or after 31 December 2023 or 31 December 2024;
• Exploration and exploitation rights for activities in the UK or on the UK Continental Shelf are treated as immovable property for corporation tax accounting periods beginning on or after 13 July 2026 (and for income tax profits from 6 April 2027);
• A VAT zero rate applies to medicines donated free of charge for NHS treatment, early access schemes and clinical trials, from 23 June 2026;
• SDLT is no longer charged on the rent element of assured tenancies in England, and no return is needed solely because rent is payable, with effect from 1 May 2026.