David Ellis
Head of Strategic Reward Advisory, Partner
The Chancellor’s Budget asks for a contribution from all but demands more from the wealthier. Overall, Rachel Reeves MP has stuck to her fiscal rules, meaning that all day-to-day spending will be covered by the tax take. The Government avoided any single large revenue-raising measure, instead finding funds from a variety of sources.
Bookmark this page for ongoing updates and clear, in-depth analysis of the Budget. For a deeper dive, sign up to our post-Budget webinar from our tax experts.
Income tax thresholds and NIC thresholds will remain frozen at their current levels for a further three tax years until 5 April 2031.
This means the personal allowance for income tax will remain at £12,570, the higher rate threshold will remain at £50,270 and the additional rate threshold will remain at £125,140. The personal allowance for income tax will continue to be reduced for taxpayers with net income over £100,000, and will be lost completely for income over £125,140.
The NIC primary threshold for employment income and lower profits limit for self-employment income will remain at £12,570. The upper earnings limit and upper profits limit will remain at £50,270.
From 6 April 2026, the basic and higher rates of income tax rates applicable to dividend income will increase by 2% to 10.75% and 35.75%. The additional rate for dividend income will remain unchanged at 39.35%.
From 6 April 2027, the income tax rates on property and savings income will increase by 2% across all bands to 22%, 42% and 47%.
The property income rates apply to England, Wales and Northern Ireland only - not to Scotland. The increase in dividend and savings income tax applies UK-wide.
The Government described this increase as applying to “the taxation of income from assets”, and it effectively brings the income tax rate for these ‘passive’ forms of income in line with the combined income tax and NIC rates that apply to earnings from employment and self-employment.
Interest and dividends received from assets held within ISAs will continue to be exempt from tax.
ISA limits
The overall annual Individual Savings Account (ISA) subscription limit will remain at £20,000 per year until the end of the 2030/31 tax year. However, from April 2027 a cash subscription limit of £12,000 will be introduced for the under-65s.
The balance of £8,000 must be invested in qualifying non-cash products - for example into a stocks and shares ISA.
For the over 65s, the ISA cash subscription limit will remain at £20,000 per year.
Other ISA annual subscription limits like the £4,000 limit for Liftime ISAs and the £9,000 for Junior ISAs and Child Trust Funds will remain in place until April 2031.
In early 2026 the Government will publish a consultation on new simpler ISA products aimed at supporting first time buyers and replacing the Lifetime ISA.
Non-resident dividend tax credit
The Government will abolish the tax credit for non-UK residents who receive UK source dividend income. Currently, when a non-UK tax resident individual is calculating their UK tax liability, they are treated as having paid basic rate income tax on the dividend income and will be allocated a non-repayable tax credit equal to the basic rate tax. This will cease from 6 April 2026 onwards.
Starting Rate for Savings
The existing 0% tax rate for the first £5,000 of savings income received by individuals with less than £17,570 in employment or pension income will be retained at this level until April 2031.
Venture Capital Trust and Enterprise Investment Scheme - company investment limits
The VCT and EIS annual company investment limits and the lifetime company investment limits – i.e. the maximum permitted amounts of qualifying investment which a company can raise through the respective - will both be increased.
The annual company limit has increased to £10 million and is now £12 million for Knowledge Intensive Companies (KICs). Lifetime company limits have increased to £24 million and will increase to £40 million for KICs.
The gross asset test that applies to companies seeking investment from the EIS and VCT schemes will also increase to £30 million before share issue, and £35 million after.
The changes will be introduced from April 2026.
Venture Capital Trust Income Tax Relief
Alongside the announced extension to the qualifying company investment limits, from April 2026 the income tax relief for individuals investing in qualifying Venture Capital Trust shares will decrease from 30% to 20%. Dividends arising to individuals from VCTs will continue to be exempt from tax up to the maximum of £200,000 per tax year.
In the last Budget the Government announced that from April 2026 a new £1 million allowance will apply to the combined value of property in an estate qualifying for 100% agricultural and business property relief from Inheritance Tax. At the time, it was also announced that any unused allowance was not transferable between spouses. A consultation with professional bodies and other respondents requested that the Government reconsider the inability to transfer any unused allowance.
Alluded to in the Chancellor’s speech was the good news that any unused portion of the £1 million allowance can be transferred between spouses and civil partners. This is similar to the existing rules for the Nil-Rate Band and Residence Nil-Rate Band.
We await the detail in the draft legislation to see if there are any qualifying conditions or restrictions that will apply.
The £1 million allowance will be indexed in line with CPI, and as with the NRB and RNRB thresholds, it will now be fixed at that level up to April 2031.
High Value Council Tax Surcharge
The High Value Council Tax Surcharge (HVCTS) is a new charge on residential property in England worth £2 million or more in 2026, taking effect from April 2028. A consultation will be published in due course.
Homeowners, rather than occupiers, will be liable to the surcharge and will continue to pay their existing council tax alongside the surcharge.
Properties above the £2 million threshold will be placed into bands based on their value, and the charge will increase annually in line with CPI inflation from 2029-30 onwards.
HVCTS charging structure
Value (£m) | Rate (£) |
£2.0-2.5 | £2,500 |
£2.5-3.5 | £3,500 |
£3.5-5.0 | £5,000 |
£5+ | £7,500 |
Changes to tax rates for property income
The Government is creating separate tax rates for property income From April 2027, the property income basic rate will be 22%, the higher rate will be 42% and the additional rate will be 47%.
Finance cost relief will be provided at the separate property basic rate (22%) - this is relevant only for profits from residential property, because those arising from commercial property are deducted when computing the taxable profits.
The Government has introduced changes to the anti-avoidance rules impacting 'temporary non-UK resident' individuals. These rules apply to individuals who return to the UK after being temporarily non-UK resident, typically within a six-year period. Under the new rules, certain income and gains - including company distributions - are within the scope of UK tax in the year the individual becomes UK resident again.
Previously, distributions from a 'close company' (one controlled by five or fewer shareholders/participators) were not taxed if they came from profits arising in the company after the individual left the UK. The changes remove this exemption, meaning all distributions or dividends received from a close company while an individual is temporarily non-UK resident will potentially be taxable if they return to the UK within their temporary non-UK residence period from 6 April 2026 onwards.
The Government is keeping its promise to maintain full expensing for capital expenditure on plant and machinery as well as the permanent Annual Investment Allowance (AIA), to attract new investment. This is in line with the 2024 Corporate Tax Roadmap.
However, considering the tough fiscal environment, the Government is reducing the main rate of writing down allowance from 18% to 14% per annum starting 1 April 2026 for Corporation tax and 6 April 2026 for Income tax. The reduction aims to fund a fresh first-year allowance and boost revenue. This change will affect those with substantial main pool balances that have not been claimed as first-year allowances or offset against the AIA.
A permanent 40% first year allowance will be introduced for expenditure on main rate plant and machinery from 1 January 2026. This applies to capital expenditure on assets for leasing and for unincorporated businesses, previously excluded from the more generous full expensing allowances. It continues to exclude cars, second hand assets and assets acquired for overseas leasing.
The 100% first year allowance for zero emission vehicles and electric vehicle charge points will be extended for a further year until 31 March 2027 for Corporation tax purposes and 5 April 2027 for Income tax purposes.
The changes are designed to encourage investment with the new first year allowance partially extending full expensing to some leased assets and unincorporated businesses. However, this comes at a cost to businesses with existing main pool balances, who will bear the cost of the reduced main pool rate starting next April.
The government will launch the Advance Tax Certainty Service in July 2026, to support inward investment into the UK. The service will provide binding decisions on HMRCs view of the tax law as applied to major UK investment projects before significant expenditure is committed. The clearance will apply based on fully disclosed facts.
The Advance Tax Certainty service will be targeted at the largest investment projects with the largest impact on economic growth, and will ensure that HMRC has capacity to deal with the clearance requests submitted. Eligible projects will be those investing at least £1 billion in new UK projects over the lifetime of the project. The quantum of the investment includes all project expenditure incurred in the UK less financing costs and expenditure on the acquisition of shares or ownership interests in other businesses or entities.
The Advance Tax Certainty clearance will cover Corporation Tax, VAT, Stamp Taxes, PAYE, and the Construction Industry Scheme. It will exclude transfer pricing, valuation of assets, hypothetical scenarios or purpose tests. Although not binding, HMRC will offer a view as to whether there is a low risk of a future compliance intervention under the Unallowable Purpose test, which would restrict the deductibility of interest for Corporation Tax purposes. HMRC will issue guidance in relation to this.
Clearances issued by the new Advance Tax Certainty service will not be published. Clearances will bind the government to its interpretation of the law, but not if there is a a change in case law and/ or a change in legislation. The clearances will typically be issued for an initial period of up to five years.
The service will be reviewed after one year to assess improvements and consider possible threshold changes.
Targeted R&D Advance Assurance Service
The Government has committed to significantly increase its investment in innovation. The Budget confirmed the launch of a Targeted Advance Assurance Service: a pilot of a pre-clearance mechanism will allow Small and Medium Enterprises to obtain upfront confirmation from HMRC on key aspects of their R&D tax relief claims before submission.
The service should reduce the risk of disputes, accelerate claim processing and help businesses plan with confidence. This follows a consultation that HMRC opened earlier this year.
The pilot will launch in spring 2026, with a summary of consultation responses also due to be published. The Government may use this pilot to refine the service before considering a full-scale implementation.
The service is specifically designed for SMEs seeking R&D tax relief. Detailed eligibility criteria have not yet been announced. However, the current thresholds for companies to meet the standard SME definition for R&D purposes are companies with fewer than 500 employees and either turnover under €100 million or balance sheet assets under €86 million.
Participation is entirely voluntary. Companies can continue to submit claims without advance assurance, but those opting in may benefit from reduced compliance risk and faster processing.
Business Rates Reform
As previously announced, from April 2026, business rates will be taxed at different multipliers depending on the use of the property, size of the business and the rateable value. Properties used for Retail, Hospitality and Leisure (RHL) such as pubs and restaurants will benefit from lower rates, set at 5p below the national multipliers. Properties such as warehouses will incur higher rates as summarised below:
| RHL | Other |
£0 - £50,999 | 38.2p | 43.2p |
£51,000 - £499,999 | 43p | 48p |
Over £499,999 | 50.8p | 50.8p |
The Government will also consult on future reform to the business rates system. It has proposed that rate bands will move from the current ‘slab’ system, where the multipliers are applied to the whole of the rateable value once the band threshold is reached, to a ‘slice’ system similar to income tax. Here the multipliers will be applied to the rateable value to the extent that it falls within each rate band.
Several reliefs operate under the current slab system including small business rates relief for certain properties with rateable values below £15,000, improvement relief where certain improvements to property lead to increased business rates, and empty property relief where properties become vacant. These have given rise to complexity and cases where they do not achieve their intended objective.
The consultation will include discussion of whether these reliefs should be retained and, if so, how they can be incorporated into a slice system and improved to ensure that they achieve the purpose for which they were intended.
Overnight Visitor Levy
The Government will consult on whether to introduce powers for mayors, and possibly local authorities, in England to introduce a visitor levy on overnight stays by visitors. This would be with the aim of providing additional funding for local infrastructure and transport, and facilitating events that might attract visitors to the local area.
It is proposed that all types of commercially let short-term accommodation would be within the scope of the levy subject to local decisions. This would include, among other venues, hotels, campsites, bed and breakfast, self-catered accommodation and guesthouses.
The potentially wide scope of the levy could mean that there are circumstances for which it is not appropriate. These might include small businesses for which the administration of the levy would be a significant burden, venues that operate on a charitable basis and short-term stays by individuals experiencing homelessness or domestic abuse. The consultation will, therefore, include consideration of thresholds, rates and possible exemptions that can be implemented without undue complexity.
Most businesses will choose to pass on the cost to customers by way of price increases although they will not be required to do so. Passing on the cost in this way would mean that VAT will be charged to the customer on the additional amount as well as causing potential issues around refunds in the case of cancellations
The consultation on the Overnight Stay Levy is due to close on 18 February 2026.
The Government has announced significant changes to the structure and rates of UK gambling duties. While the changes are clearly not good news for the sector, it is not as bad as some had feared. These changes were not the ones originally considered as part of the government’s original consultation and there is no longer a move to harmonisation.
The key changes are:
A 40% RGD rate is high and may push some operators to consider walking away from the UK market, especially when combined with increasing regulatory requirements and costs. The experiences in Portugal, India and the Netherlands mean that there will be questions about how the increased RGD might affect the illegal market.
HMRC’s expected update to guidance on freeplays will be interesting – a higher tax rate creates a greater incentive for tax-efficient products. We know this is an area HMRC are looking at closely given the litigation in the L&L Europe and Jumpman cases.
We expect the new 25% Remote Betting Duty to be largely accepted as it is in line other markets internationally. An April 2027 start does at least allow time for operators to prepare.
Finally, the Remote Betting Duty will have knock on effects for B2B providers through their revenue share agreements. They should double-check the wording of those agreements to make sure it covers the possibility of a new duty being charged.
The Corporate Interest Restriction (CIR) rules operate at a ‘Group’ level to restrict UK deductions for interest expenses under a range of metrics.
HMRC caused consternation in 2024/25 by taking a strict view on the administration of reporting requirements, potentially giving significant tax costs to companies that would have been denied the benefit of various reliefs and elections under the CIR rules. HMRC revised its policy and the CIR rules are now being amended for periods ending on or after 31 March 2026 so that groups will appoint a reporting company without notification to HMRC, in line with rules for administering group loss relief.
Groups, including single company ‘groups’, seeking to comply with the CIR rules no longer risk significant loss for making an error in notifying HMRC about a reporting company appointment.
There is also a retrospective amendment to correct the operation of the CIR where certain land reliefs have been claimed.
Two transfer pricing consultations ran in June 2025, one on legislative updates and another discussing future changes to documentation. Both have resulted in budget announcements.
There will be a new ‘International Controlled Transactions Summary’ (ICTS) form that will need to be completed by UK taxpayers, within the scope of the transfer pricing rules, to show transactions with overseas related parties. This has been expected since the consultation launched, with the Budget announcement making this a certainty and providing a launch date. The new ICTS requirement will apply to periods commending on or after 1 January 2027. This should give long enough for taxpayers to prepare and to introduce the systems and processes to handle ICTS filings.
A consultation in Spring 2026 will focus on the content and form of the ICTS. Interestingly, an increased tax collection is expected from the ICTS. This will come from better targeted enquiries, the main aim of the legislation, and from changing behaviours. It is expected to raise an extra £105m in 2027/28 up to an extra £350m from 2030/31.
The Summer 2025 consultation covered the prospect of the current exemption for SMEs being restricted to only cover small businesses. This change has been ruled out removing a potential compliance headache for some smaller international groups. The Government has accepted that the exemption remains a helpful administrative benefit for start-ups, worth the potential tax at stake.
Transfer pricing legislation is being updated with effect from 1 January 2026, with changes expected in all areas covered in the previous consultations:
Various tweaks and adjustments have been made to the legislation from the consultation draft, but no wholesale changes. A point we remain concerned with is the potential complexity of changes relating to foreign exchange movements on related party loans.
Currently, Low Value imports (LVIs), goods with a value of £135 or less being imported into the UK, can claim a customs duty relief. Following reforms in 2021, VAT is due on these goods.
The rapid rise in cross-border e-commerce means some online retailers are being placed at an unfair advantage due to the UK’s customs duty relief for low-value imports of, largely, Chinese goods. The Government has decided to reform existing customs arrangements for LVIs and issued a consultation document. The aim is to remove relief for LVIs by March 2029.
UK businesses have been calling for this change for some time. A similar approach has already been adopted in the USA and the EU.
This consultation covers the design of the new arrangements, including:
Mileage charge for EVs and PHEVs
The Government has announced it will implement “eVED”, a mileage-based add-on to existing vehicle exercise duty (VED) for fully EV and PHEV cars from 6th April 2028, at a rates of 3 and 1.5 pence per mile respectively. This measure will address the reduction in taxes on fuel as a result of increased take up of electric vehicles.
The intention is that the charge will be paid either upfront annually or monthly to the DVLA based on estimated mileage and then actual mileage will be required to be submitted at the end of the year to trigger a reconciliation.
The eVED charge will place a record keeping requirement on drivers including businesses, and their employees, albeit mileage records are often already common for other types of company cars. Employers will need to ensure that they have appropriate mileage recording systems in place to comply and are likely opt for the monthly recording to avoid the need for reconciliations. A consultation has been launched (see here).
Carbon Border Adjustment Mechanism (CBAM)
From 1 January 2027, a business that imports over £50,000 of aluminium, cement, fertiliser, hydrogen and iron/steel over a 12-month period will be subject to a new CBAM charge. This is a 'green tax' to ensure that carbon intensive goods which are imported into the UK face a comparable carbon price to that paid by UK manufacturers producing the same goods. An importer will have the option to pay a default rate by imported goods type or a rate based on their actual emissions.
Fuel Duty
The government has extended the 5p fuel duty cut until the end of August 2026 with rates then gradually returning to March 2022 levels by March 2027. The planned increase in line with inflation for 2026-27 has also been cancelled.
Tobacco and vaping
Tobacco rates will be increase going forward in line with inflation at retail price index plus 2%. These changes will take effect from 6pm on 26 November 2025with an additional a one-off increase of £2.20 per 100 cigarettes or 50g of rolling tobacco products from 1 October 2026.
As previously announced, the Government will legislate for the new Vaping Products Duty to be introduced from 1 October 2026 at a flat rate of £2.20 per 10ml applied to all vaping liquid, alongside the Vaping Duty Stamps scheme to support compliance.
Alcohol
Alcohol duty will increase with RPI inflation from 1 February 2026. Small producer relief will also be uprated, so eligible producers apply a reduced rate of duty.
Soft Drinks Industry Levy (SDIL)
The Government announced its response to an earlier consultation on proposed changes to the SDIL including the “milkshake tax”. The Government has announced the following changes to SDIL;
The Government plans a technical consultation on the draft legislation intended to be implemented from 1 January 2028.
VAT and Deposit Return Schemes (DRS)
The DRS is planned to start on 1 October 2027. Consumers will pay a refundable deposit for certain single-use drink containers. Although the deposits are not subject to VAT, in effect VAT is due on the unredeemed deposits. It had been planned that producers and importers would be liable as the deposit is not seen as VAT-able through the supply chain. The Government has now announced it will simplify administration of the DRS by removing the requirement for individual producers to account for VAT on unredeemed deposits. Instead, this will be done by the Deposit Management Organisation (DRO) who will administer the scheme.
As anticipated, the Government has restricted the ability for employees and employers to reduce their National Insurance Contributions (NIC) through “pension salary sacrifice” arrangements. Under these arrangements, employees agree to a reduction in their salary in return for an increased employer pension contribution. Employee contributions are made after accounting for NIC whereas employer contributions are not liable to NIC.
With effect from April 2029, pension contributions that are made using a salary sacrifice arrangement will be liable to NIC above £2,000.
For employees and employers contributing only at the statutory levels under pensions auto enrolment, the impact will be very much limited as contributions are calculated with reference to qualifying earnings, meaning that only those employees earning between £46,240 and £50,270 being impacted.
Employees contributing in excess of the statutory amounts will see savings reduced as they, and their employer, will pay NIC on any amount in excess of £2,000. The employee rate will be 8% or 2% for earnings below and above £50,270 respectively, and an employer rate of 15% of the amount sacrificed in excess of £2,000
There will be no impact on the existing employer contribution that is not subsequent to a salary sacrifice, nor will there be any tax impact on the amount sacrificed.
The measure has been delayed allowing businesses time to review their arrangements and make the necessary adjustments to payroll as well as consult and communicate with employees. This also gives employers time to plan effectively to mitigate the impact on individuals and the business.
Removing income tax relief for additional homeworking expenses
From 6 April 2026, the Government intends to remove the income tax deduction currently available to employees for non-reimbursed home working expenses. However, employers will still be able to reimburse employees for these costs free of income tax and NIC (where relevant qualifying criteria are met and evidenced). Therefore, this should not impact the employer position where these costs are provided, but will reduce the tax deductions employees can otherwise claim personally.
Workplace benefits relief for reimbursed expenses
The exemptions from income tax and NIC available for eye tests, home office equipment, and flu vaccinations currently only apply when an employer organises and pays for the benefit directly for employees. The exemption will now be extended to also include scenarios where the employer reimburses these costs. This is expected to apply from 6 April 2026 and is intended to reflect modern working practices and should assist employers when deciding how to apply exemptions, in particular on their PAYE Settlement Agreement (PSA).
Payrolling benefits
Draft legislation and guidance has now been published in relation to the mandatory payrolling of benefits from April 2027. It confirms that HMRC expects all benefits in kind to be payrolled, with the exception of loan and accommodation benefits, where payrolling will be voluntary. Similarly, employers will not be required to register to payroll benefits, unless they are looking to do so early (from April 2026) or if they are volunteering to payroll loan or accommodation benefits.
HMRC will not seek to charge penalties for inaccuracies in the first year of mandatory payrolling (2027/28), unless deemed deliberate. However, late filing and late payment penalties for RTI returns may still be applied, as well as late payment interest.
The guidance also provides updates on corrections and uncollected tax; there will be an updated process for corrections to be made by 22 July. Additional tax due from employees will then be collected via the existing P800 reconciliation process, Simple, or Self-Assessment. This process is envisaged to apply equally to overpayments of tax - for example, if a payment to make good a benefit is made by the employee after the end of the tax year, but within statutory limits.
There is some welcome clarity to the approach to be taken, but the detail provided indicates that there are still areas that need further consideration. Employers should review their systems imminently to be fully compliant by April 2027.
Fraud in the Construction Industry Scheme
HMRC will be given new powers from 6 April 2026 to tackle fraud within the Construction Industry Scheme, in a move that is estimated to generate over £680m over the next 5 tax years. The Government is also looking at ways to simplify and improve the administration of the Construction Industry Scheme, and will be consulting on proposed measures in due course.
Any simplification measures will undoubtably be welcomed by businesses operating in the construction sector, but any additional administrative burden arising from new compliance requirements are likely to be less so; monitoring over coming months to assess any new requirements will be necessary.
Loan charge review
The Disguised Remuneration Loan Charge was announced at the 2016 Budget, and was intended to apply to loans made under disguised remuneration arrangements that were outstanding at 5 April 2019.
The loan charge has proven to be controversial and there have been various reviews, recommendations and changesfor the operation and impact of the charge. Following the change of Government in 2024, a further independent review of the loan charge has been carried out (the McCann review).
The Government has now agreed with the main recommendations in this latest report, and will establish a new settlement opportunity for those with outstanding loan charge liabilities. Details of the new settlement opportunity will be announced in due course but those who still have loans outstanding should consult an employment tax adviser.
The Government has announced that the statutory capital gains tax relief available to UK shareholders on disposals to Employee Ownership Trusts (EOTs) will be reduced to 50%, with immediate effect.
An EOT is a form of employee benefit trust introduced to encourage more shareholders to set up a corporate structure similar to the John Lewis model, with the aim being to facilitate wider employee-ownership. Formerly, shareholders were able to sell their shares in a business to an EOT without paying any capital gains tax, benefiting from 100% relief. With effect from 26 November 2025, however, business owners will only be able to claim relief from capital gains tax on 50% of the gain that they make when disposing of their shares to an EOT.
The EOT ownership model has proved popular in recent years, providing effective succession and exit planning for founders and supporting greater employee engagement, retention and productivity. We anticipate that this should continue largely unaffected by this change to the tax relief, primarily because for many business owners the tax relief is not the key factor in their decision to transition to employee ownership.
The Government is reforming Enterprise Management Incentive (EMI) share option schemes by significantly expanding eligibility and reducing administrative complexity. From April 2026, key thresholds will increase:
In addition, the EMI notification requirement will be removed from April 2027, reducing compliance risk and administrative burden. These reforms are expected to make EMI schemes more accessible and attractive, offering substantial tax advantages and supporting talent retention in UK companies. EMI options will continue to benefit from favourable capital gains tax treatment potentially with Business Asset Disposal Relief, reinforcing their position as a competitive incentive tool.
Changes impacting internationally mobile individuals and their employers
Voluntary Class 2 NIC for employees working abroad will be abolished from 6 April 2026, removing the ability to maintain their complete NIC record for UK state pension/benefit entitlement. To pay the alternative voluntary Class 3 contributions (currently at a significantly higher rate of £17.75 per week versus a Class 2 rate of £3.50 per week), individuals will need to meet a residency or contributions requirement of 10 years.
Voluntary NIC changes are most likely to impact employees who have left the UK for a country with which the UK does not have any reciprocal social security agreement (including UAE, Brazil, Hong Kong and many others). Those impacted may wish to consider making retrospective contributions prior to 6 April 2026 in order to protect their coverage at lower rates, or assess if they will continue to make Class 3 contributions after 6 April 2026.
HMRC are also making further updates to the new section 690 application process to limit the proportion of earnings that an employer can exclude from PAYE via payroll to a maximum of 30% where the individual is a qualifying new resident and eligible for Overseas Workday Relief (OWR). This brings the payroll withholding position in line with the new financial limits for OWR introduced by Finance Act 2025. The change will be implemented from 6 April 2026, so it is not expected to impact existing 2025/26 directions, or future applications for non-resident individuals.
Employers will need to assess their employee population for those who will require section 690 applications for the 2026/27 tax year in April 2026 and where they may be affected by these new restrictions on claims.
From 27 November 2025 there will be a three-year exemption from 0.5% Stamp Duty Reserve Tax (SDRT) on transfers of shares and other securities of companies whose shares are newly listed on a UK regulated market like the London Stock Exchange. The exemption will also apply to newly listed depositary interests over a company’s shares. However, it will not apply to any 1.5% SDRT charge on the transfer to a depositary system, or to the SDRT on transfers which are part of a merger or takeover resulting in a change of control.
The measure is designed to incentivise companies to list in the UK and improve the attractiveness of the UK as a dual listing location for international companies.
The government is dramatically increasing financial incentives for informants of high-value tax fraud, offering rewards of up to 30% of tax recovered in cases exceeding £1.5 million. This applies with immediate effect and represents a fundamental shift in HMRC's intelligence-gathering strategy. The scheme is modelled on the US Internal Revenue Service's whistleblower programme, which has been controversial but highly effective at uncovering high-value tax fraud.
The £1.5 million threshold indicates HMRC's focus on high-value cases like complex corporate structures, high-net-worth individuals, offshore arrangements, and marketed avoidance schemes. However, high-value rewards also create risks of malicious or inaccurate allegations, and the Budget documents provide no detail on safeguards to protect taxpayers from unfounded allegations.
The Budget set out the Government’s intention to further reduce the tax gap by raising an additional £2.4 billion in 2029-30, bringing total additional revenue from compliance measures to £10 billion by the end of this Parliament.
The Government is deploying 350 newly recruited HMRC criminal investigators from its Fraud Investigation Service to tackle small business tax evasion on high streets, marking a shift from civil penalties toward criminal prosecution, particularly targeting cash-intensive businesses.
The Government will strengthen powers to tackle fraud within the Construction Industry Scheme from April 2026, and it also plans increased director disqualifications for those abusing insolvency to evade tax.
Debt collection will intensify, with a £64 million investment in partnerships with private sector debt collection over the next five years and a new tax debt strategy setting explicit reduction targets. While this demonstrates accountability, it raises concerns about flexibility for taxpayers experiencing genuine hardship. Self-Assessment taxpayers will also be required to pay liabilities in-year via PAYE from April 2029.
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