Jon Hickman
Partner, Corporate Tax Services
Updated on 28 October 2026
Despite the negative impact of the war in the Middle East on the economy and government finances, the new Chancellor, John Healey MP, has met the fiscal rules on stability and investment - albeit with lower ‘headroom’.
The Budget has raised some taxes, particularly on banks and gambling, but balance that seeking to protect incentives for investment in business of all sizes.
The Chancellor has also announced immediate measures to tackle the rising cost of doing business as well as long term reforms, including tax devolution, to address structural issues.
The Chancellor announced his intention to introduce a new Capital Gains Tax (CGT) Founders’ Relief as part of the Government’s support for UK start-ups and scale-ups. The Government opened a consultation into the operation of the new relief, which runs until 30 November 2026.
Under the current proposals, for qualifying disposals made on or after 6 April 2027 Founders’ Relief will provide a 10% CGT rate on qualifying gains, subject to a lifetime limit of £10m.
To qualify, an individual needs to meet ownership and residence conditions. In brief, these include having held at least 25% of the company’s ordinary share capital from the date the company began trading, for at least five years ending on the date of disposal, and to have been UK tax resident for five continuous tax years before the disposal.
The company being disposed of also needs to meet trading, UK presence and scale conditions. This includes being a UK resident trading company, having a turnover of at least £10million in the accounting period prior to the disposal, and employing at least 15 full-time employees. The company will also need to satisfy two out of the three growth and innovation conditions: a 25% increase in turnover or employee headcount, and spending at least £1.5million on qualifying research & development.
These conditions mean that the relief will be targeted at individuals who have founded scaling and growing innovative businesses in the UK.
Alongside this new relief, the lifetime limit for Business Asset Disposal Relief (BADR), will be reduced from £1m to £500,000 for disposals made on or after 6 April 2027. BADR provides an 18% CGT rate on qualifying disposals.
These proposed changes add another consideration for entrepreneurs who are considering an exit. Business owners should seek advice early on to understand whether they qualify for Founders’ Relief and the impact of the reduction in BADR.
The cash ISA limit will remain at £20,000, reversing the reduction announced in the last Budget, and retaining the existing scope for tax-free saving.
The trading allowance will increase from £1,000 to £3,000 from 6 April 2027, and the self-assessment trading income reporting threshold will also rise to £3,000.
The Chancellor announced changes to the Inheritance Tax (IHT) treatment of liabilities relating to property held in trust. These changes apply from Budget Day, 28 October 2026. The changes are intended to ensure that liabilities relating to settled property are subject to the same rules as other liabilities for IHT purposes to prevent perceived avoidance.
There is not currently legislation that specifically allows trustees’ liabilities to reduce the value of trust assets for IHT purposes, unlike the rules for calculating the value of the death estate. Instead, trustees’ liabilities can be reflected when valuing trust assets through the trustees’ right to recover those liabilities from the trust fund, known as the trustee’s lien.
The Government will introduce legislation for valuing settled property to give a statutory deduction for liabilities incurred by trustees on behalf of a settlement, for chargeable events on or after 28 October 2026.
Trustees should consider how the changes may affect the valuation of settled property for IHT purposes.
Income tax rates applying to savings and property income will now increase from 6 April 2027 by 4% - last year’s Budget had announced a 2% rise. The savings and property basic rates will rise from 20% to 24%, higher rate from 40% to 44% and the additional rate from 45% to 49%. The 0% starting rate for savings and personal savings allowance remains unchanged.
It should be confirmed at the Scottish Budget in December whether the increased property rates will apply in Scotland.
By contrast, the main rates applying to employment and pension income are unchanged for 2027/28: the basic rate remains at 20%, the higher rate at 40% and the additional rate at 45%. Dividend rates are also unchanged at 10.75%, 35.75% and 39.35% respectively, and the dividend allowance remains at £500.
These changes mean individuals receiving savings or property income could face a higher income tax charge from 6 April 2027, even if the amount of income they receive does not change.
The Government is also going to consult on expanding third-party reporting requirements for property income data.
Over the summer, the Government consulted on proposals to change when some taxpayers pay income tax through self-assessment. Following that consultation, the Chancellor has now confirmed that changes will be introduced from April 2029. Important details are still to be finalised and will be set out in 2027.
The aim is to bring tax payments closer to the point at which income is earned and help taxpayers manage their liabilities more regularly. This could be relevant if you are self-employed or a partner and pay income tax through self-assessment.
For affected taxpayers, the reform could therefore represent an important cash-flow change from April 2029. Individuals should consider the implications for their household or business arrangements once the detailed payment timetable and implementation rules are available.
The Chancellor announced a package of measures intended to ease some of the costs individuals and families face every day.
Mileage rates
For employees and self-employed people who use their own vehicle for work, the Government will make the higher tax-free mileage rate of 55p per mile for the first 10,000 business miles permanent. The rate above 10,000 miles will increase from 25p to 35p. The Government expects around three million people will benefit.
Parental pay
Parental leave will be extended to an additional 150,000 parents each year, including eligible self-employed fathers and partners. The announcement says eligible parents will receive two weeks of support, currently worth up to £194 a week.
Import tariffs
Following a previous tariff reduction in June 2026, the Government has now announced the removal of more import tariffs on everyday items and key products used in farming, in the hope that the savings will be passed on to consumers through lower prices. The reductions impact more than 100 products, including baked beans, chocolate and gherkins, fertiliser, and kerosene.
Gas standing charges abolished
The Government has asked Ofgem, the energy regulator for Great Britain, to arrange for the removal of gas standing charges. Instead, these fixed costs will be recouped through the unit rate for the gas. The measure is estimated to result in 60% of account-holding households saving an average of £45 off their annual bill, though higher users of gas may see their prices increase. The measure is expected to be delivered in 2027.
Energy costs
Households living in properties in council tax bands A-D will receive a £100 direct payment to help offset the higher cost of energy this winter.
The Chancellor announced that the Government will proceed with reforms to the taxation of company distributions and repayments of capital. The proposals are intended to make the rules more consistent while protecting genuine commercial transactions. The Government intends for the changes to apply from April 2028, following a technical consultation on draft legislation to be published in 2027.
All seven areas covered by the summer consultation will be taken forward, although important details are yet to be settled. These include changes affecting reductions of capital, statutory demergers, distributions and loans from non-UK companies, purchases of own shares and the Transactions in Securities rules.
The consultation response does leave some uncertainty over the impact of the ‘frozen capital’ measures on second-hand share sales and capital reduction demergers. The Government intends to limit the amount treated as a repayment of capital following a share reorganisation to the amount originally subscribed for the shares. This may mean that different shares of the same class could have a different ‘capital’ element and new employees or shareholders may prefer to subscribe for newly issued shares over buying shares from a leaver. The changes could also affect the future use of capital reduction demergers. The Government intends to make statutory demergers more accessible, which is welcome, but the detailed position for capital reduction demergers remains to be worked through as part of the technical consultation.
Employee shareholders could also be affected. The Government specifically recognises potential impacts on shares acquired through EMI, CSOP, SIP and SAYE and will consider these during technical consultation.
Although a personal tax matter, companies considering a restructuring, succession or shareholder exit should assess how the proposals may affect their commercial objectives and shareholders. Where a transaction is already under consideration for commercial reasons, these changes may be relevant to its timing, although decisions should reflect the circumstances and detailed advice.
For UK residents with interests in US LLCs or other reverse hybrids, there can be a fundamental mismatch in their tax treatment. While the US may tax members as profits arise, the UK may tax them later when those profits are distributed. The result can be double taxation for which conventional double tax relief does not provide an effective answer.
The Government has now responded to its earlier consultation on this problem. Rather than pursuing its original proposal for tax transparency, it is minded to introduce an elective domestic tax credit for individual investors in specified entities.
Under the proposed approach, distributions would remain subject to UK Income Tax, but members could elect to claim credit for eligible foreign taxes personally paid on the entity’s profits, income and gains. The credit would use the investor’s average foreign tax rate, avoiding the need to trace particular foreign taxes to individual distributions. Federal, state and local taxes could qualify.
This is a positive and commercially important announcement. A credit mechanism could provide a more practical solution than mandatory transparency, particularly where ownership structures or historic profits make tracing difficult.
However, the detail matters. A technical consultation will now follow this announcement to consider the mechanics before law is introduced, with claims expected from early 2028. The Government is also considering options for earlier periods and ongoing disputes. Until then, the existing rules apply and affected individuals should review their position carefully and retain detailed records.
The Chancellor announced a temporary increase in the Bank Corporation Tax Surcharge from 3% to 6%. The higher rate will apply for 15 months, from 1 January 2027 to 31 March 2028. He also acknowledged in his speech that the UK’s “world-leading banks make a huge contribution to this country, in the tax they pay, in the jobs, industry and investment they support”.
This increase follows the previous reduction in the surcharge rate from 8% to 3% from April 2023. HMRC statistics show that Bank Surcharge receipts were £1.2bn in 2025-26.
For banking groups within the surcharge, the temporary increase will raise the tax charged on relevant profits during the period. Banks should assess how the temporary rate will affect their tax position, forecasts and the timing of relevant profits across accounting periods spanning 1 January 2027 and 31 March 2028. They should also consider the implications for tax provisioning and wider business planning.
Banking businesses should monitor the legislation implementing the change and consider its effect as part of their forward tax planning.
The Chancellor announced a significant package aimed at giving regional and local leaders greater control over investment and funding decisions. Over time, the changes should influence where infrastructure, regeneration and business finance are directed and give businesses new opportunities to engage with local investment programmes.
The Government is establishing the Good Growth Funds, with £285m in 2027-28, alongside a £1.5bn borrowing facility for Mayoral Strategic Authorities from April 2028.
The wider fiscal devolution programme gives Mayoral Strategic Authorities a share of business rates from 2027 and introduces income tax assignment from 2028. Nine Strategic Authorities are also set to benefit from Business Rates Retention Zones. Subject to full business case approval, this will allow relevant billing authorities to retain 100% of business rates growth above an agreed baseline for 25 years.
Alongside greater local control, national investment bodies will work more closely with local government to support local investment. The aim is to bring together organisations including the National Wealth Fund, British Business Bank, National Housing Bank and UK Export Finance to help develop investable projects, combine public and private finance and align support with local priorities.
The Government is also developing investment across UK nations. Budget measures include more than £24m for the Edinburgh-Glasgow Central Belt, £30m for Cardiff Parkway railway station and £7.5m for Belfast cyber-AI capabilities. A new £80m Local Renewal Fund will support growth projects across Scotland, Wales and Northern Ireland.
Businesses planning expansion, new sites or major investment should consider regional funding and infrastructure plans alongside their own location and financing decisions as the new investment arrangements develop.
Businesses occupying premises, particularly in the retail, hospitality and leisure (RHL) sectors, should assess how the business rates measures announced by the Chancellor will affect their property costs from 1 April 2027. The package combines targeted relief with changes designed to limit increases for qualifying RHL properties.
For qualifying RHL properties, the Government will increase the Small Business Rates Relief thresholds. Properties with a rateable value of up to £18,000 will qualify for 100% relief, with relief tapering to nil at £21,000. These thresholds will be reviewed at the 2029 revaluation. HM Treasury estimates that around 70,000 more high street businesses will be taken out of business rates.
Qualifying RHL properties will also have business rates bill increases capped at CPI inflation in 2027/28 and 2028/29. This protection does not apply to increases arising from improvements or the loss of certain other reliefs such as improvement relief or hardship relief.
The Government is also extending the Supporting Small Business scheme for a further year for businesses that received 2023 Supporting Small Business relief.
Relief for pubs, social clubs and qualifying live music venues in England will be increased from 15% to 35% for 2027/28 and 2028/ 29. Live music venues with a rateable value of £1m or more will remain at 15%.
Vape shops and Adult Gaming Centres will no longer be eligible for RHL multipliers from April 2027. Vape shops will also no longer be eligible for small business rates relief.
If you occupy business premises, now is a sensible time to review your expected 2027/28 rating position and understand which reliefs and protections may apply.
The Chancellor announced a new programme to simplify specific areas of the UK corporation tax system and published its Corporate Tax Simplification for Business Investment consultation. It is seeking views on changes that could reduce complexity, improve certainty and support business investment by 21 November 2026.
The Government intends to work with businesses, advisers and other stakeholders over the next year to refine, test and prioritise options before developing detailed proposals.
The areas under consideration are wide-ranging. For financing and international activity, these include withholding tax on interest, the Controlled Foreign Companies and anti-hybrid mismatch rules, as well as domestic financing rules including unallowable purpose and the Corporate Interest Restriction.
The Government is also considering how the tax system could better support investment and innovation. Areas identified include R&D reliefs, Patent Box, capital allowances for pre-development costs and intangible fixed assets. A further theme is creating a simpler, more modern corporation tax system while tackling non-compliance.
Businesses affected by these proposals may wish to consider engaging with the consultation process to influence future proposals that address the practical complexities they currently face.
Measures announced ahead of the Budget to “give businesses the breathing space to grow” aim to save UK businesses almost £800m a year by reducing administration and import costs.
The Chancellor today announced that 10,000 energy intensive manufacturing firms will receive up to 25% discount on electricity costs from April 2027. In addition, following the consultation over the summer, a proposed new reporting requirement for company payments to participators will now not go ahead at this time.
Measures to cut red tape included streamlined company reporting requirements, which the Government says could save businesses operating as part of a wider national group up to £20,000 annually. This could be worth £290m per year to businesses. Reducing duplicate reporting requirements for asset managers is expected to save a further £105m. Businesses in the home buying and selling transaction chain could also benefit from streamlining changes.
Importers could see lower costs through the extension of tariff suspensions on more than 250 products favoured by businesses. Suspensions already announced and due to expire on 31 December 2026 will generally be extended to December 2028. Those due to expire on June 2027 will be extended to 31 December 2027. The Government estimates these extensions will maintain reduced import costs of up to £155m annually across sectors including chemicals, plastics, hydrogen, automotive and food and drink industries.
Small businesses will see additional measures intended to simplify the data required for public procurement and by Government. The Government has also paused the requirement for small companies and micro-entities to file profit and loss accounts with Companies House from April 2028.
Businesses should review the detailed measures to understand whether changes to reporting requirements or tariff suspensions could affect their operations and costs.
Business taxes round-up
Alongside the headline business tax announcements, there were a number of less significant measures affecting businesses. These include changes to the administration of R&D tax relief, capital allowances and the future treatment of Advance Corporation Tax.
R&D tax relief administration
The R&D Claim Notification Form will be removed from 1 April 2027, while the Additional Information Form will be simplified from Autumn 2027. These changes should reduce some of the administrative requirements associated with making R&D tax relief claims.
Capital allowances
The main rate of writing-down allowances will be reduced from 14% to 12% from April 2027, while the main-rate first-year allowance will increase from 40% to 50% from 1 January 2027. Full expensing will be maintained.
Advance Tax Certainty Scheme
The investment threshold for HMRC's Advance Tax Certainty scheme has been reduced from £1bn investment to £300m to ensure that many more projects qualify for a clearance opinion from HMRC.
Advance Corporation Tax
The Government has announced that Advance Corporation Tax will be abolished from 1 April 2031.
Pillar Two
The Government has confirmed that Finance Bill 2026-27 will amend the UK's Multinational Top-up Tax and Domestic Top-up Tax rules to implement the OECD Side-by-Side package, alongside further technical amendments intended to ensure the UK Pillar Two rules operate effectively.
The Side-by-Side measures will be effective for accounting periods beginning on or after 1 January 2026 and the other technical amendments will either be retrospective or effective for accounting periods beginning on or after 31 December 2026 with the option for taxpayers to elect for earlier application.
Alongside these amendments the Government is considering potential simplification of several UK corporation tax regimes that overlap with Pillar Two. The most significant areas are:
CFC rules
The Government intends to retain the regime but will explore simplification for Pillar Two groups, including whether existing CFC exemptions could be aligned with Pillar Two adoption.
Anti-hybrid rules
The Government will consider whether all existing hybrid counteractions remain appropriate for groups within Pillar Two and whether the rules can operate more proportionately alongside Pillar Two.
Simplification to other corporate tax measures such as R&D, capital allowances, Patent Box and intangibles can also be relevant to in-scope groups if the reforms ultimately impact the timing and amount of UK corporation tax recognised.
Mandatory foreign branch exemption
The Government confirmed that legislation will be included in Finance Bill 2026-27 to make the UK foreign permanent establishment exemption mandatory, applying for Corporation Tax accounting periods beginning on or after 1 January 2027.
For groups within scope of Pillar Two, making the exemption mandatory means the UK tax treatment of foreign PE profits will need to be considered alongside the jurisdictional allocation of GloBE income and covered taxes under the Pillar Two rules. In particular, groups with loss-making or low-taxed foreign PEs should assess whether moving into mandatory exemption changes their UK tax profile along with changes to deferred tax position and consequential Pillar Two position.
Machine Gaming Duty
“Machine Gaming Duty will increase from 20% to 25% of profits on machines with maximum stakes over £1 (or maximum prizes over £100) from 1 April 2027. There is also a parallel consultation on who bears the liability to pay Machine Gaming Duty where the machine supplier takes an active role in operating the machine (potentially moving liability from the landlord to the machine supplier).
Remote Gaming Duty
The Finance Bill is also to contain significant changes to Remote Gaming Duty, amending the legislation to tighten the circumstances in which offers that waive the need to pay to play can be excluded from the liability calculation following the litigation in Jumpman. The Government is also using the opportunity to clarify other terms within the legislation that have generated differing interpretations and could well result in a change to an operator’s liability calculation. The changes are to take effect from 1 April 2027.”
Fuel Duty
The Government has extended the temporary 5 pence per litre (ppl) cut in the main rates of fuel duty from 1 January 2027 until 30 June 2027. It has also extended the further 3.7ppl cut to the rebated rates for gas oil (red diesel), biodiesel, bioblend and kerosene for excepted machines other than for heating until 30 June 2027.
From 1 July 2027 onwards, the government will legislate to increase fuel duty rates in line with Retail Prices Index (RPI) inflation.
Therefore, unless any further extensions are announced, on 1 July 2027, fuel duty rates will return to the levels that applied before the 5 ppl temporary cut was introduced in March 2022, and will be uprated in line with the Retail Prices Index (RPI) – creating significant increase at that time.
Air Passenger Duty (APD) - From, 1 April 2028, the government will increase APD rates for 2028 to 2029 in line with the Retail Prices Index (RPI). From 1 April 2027, the higher rate of APD will be extended to include all private jets of 5.7 tonnes or more.
E-invoicing
Further to previous announcements, the Government will legislate to require VAT invoices to be issued and received in a prescribed electronic format, from 1 April 2029. VAT registered suppliers must do this, unless exempted due to digital exclusion, whenever their customer is also VAT-registered.
E-invoices will not be required for cross-border transactions, but businesses can issue them by agreement with their overseas customers. E-invoices will not be mandated for exempt, zero-rated or out of scope transactions between entities either, but a commercial e-invoice could be sent voluntarily. Non-established taxable persons who make UK sales to other businesses will be subject to the same e-invoicing requirements as UK-based entities.
The Government has published an implementation roadmap, which sets out the further details about e-invoicing and a timeline of further information and guidance. It will continue developing the detailed design of the regime and consult on technical standards up to April 2028, when its communications campaign will start.
The Government will also publish the key requirements for organisations to prepare, including scope, exclusions, standards, guidance, business identifiers and service-provider requirements.
Making E-invoicing a mandatory requirement for all VAT registered businesses represents a significant change and will require investment in software by many businesses. Preparing well in advance will be essential.
Digital reporting
Digital reporting occurs in other jurisdictions alongside the VAT return reporting and can consist of additional information that is collected by businesses and passed to the tax authorities in digital format. It can aid tax collection and reduce avoidance. The Government has committed to exploring this alongside the e-invoicing changes by launching a consultation to gather evidence from businesses and software providers.
What else was announced?
Zero rating of Social Housing land
The Government will allow land to be zero rated where it is sold to a registered provider of social housing as defined in existing VAT legislation from 1 April 2027. This should make housing developments easier to deliver. The relief is not conditional on the use of the land, so land acquired for mixed social and private housing would still be relieved. The arrangements will avoid the use of complex development structures that can add costs and impact cashflows.
Deeming of Private Hire Vehicle Operators (PHVOs)
The Government plans to change the VAT treatment of supplies of passenger transport services by taxi or private hire vehicle when supplied through an agent. From 2 January 2028, such services will be deemed to be made by the agent and not the driver.
This means that the private hire vehicle operator will have to charge VAT on the full value of the fare. The deeming will only apply to businesses whose annual fare turnover exceeds a specified threshold, which the Government will consult on but has £50m annual fare turnover in mind.
The change arises as a result of a Supreme Court decision impacting Uber, which resulted in operators outside London being able to reduce the VAT paid by operating as agents.
Energy-Saving Materials (ESM) VAT relief
From 1 April 2027, heat batteries will be included within the VAT relief for energy-saving materials when installed in residential accommodation or charity buildings in the UK.
The Government has declined the opportunity to make permanent or extend the temporary zero rate for energy saving materials. The rate of VAT relief for energy-saving materials will revert to 5 per cent from 1 April 2027.
EV cars (VAT and climate change levy)
A VAT Tribunal decided recently that the rate of VAT for some EV charging should be at the reduced 5% rate (now zero rate). This is contrary to Government policy, and the Government is appealing that decision. To put the position beyond doubt, it will introduce legislation to clarify that electricity supplied through publicly accessible electric vehicle charging points is standard rated for VAT.
The law will also specify that publicly accessible electric vehicle charging points are not considered a domestic use for the purpose of Climate Change Levy. The changes will take effect from 1 November 2026.
Travel services consultation
The Government has launched a call for evidence on the Tour Operators’ Margin Scheme (TOMS) to seek views on whether the TOMS remains fit for purpose, as the current arrangements do not work or lead to potential abuse.
A new zero rate for Donated medicines
From 23 June 2026, there will be a new VAT zero rate for medicines provided free of charge for a qualifying purpose. This was announced through a Parliamentary answer. This will apply to medicines supplied for NHS treatment, including through the Early Access to Medicines Scheme and other early access arrangements, and in connection with clinical trials or receiving continued treatment following a clinical trial.
Cross-border reverse charge services
From 1 April 2027, the reverse charge on services supplied from overseas will be restricted to supplies to VAT-registered businesses. Overseas suppliers making such supplies to non-VAT-registered UK businesses will need to register for UK VAT and account for UK VAT in the normal way.
Locum doctors
Following a recent VAT Tribunal loss on the VAT liability of medical deputies, the Government plans to change the law to apply this relief in the way intended. From 1 May 2027, the Government will remove the VAT exemption for a supply of a deputy for a person registered in the register of medical practitioners. The supply of a deputy for a medical practitioner will be subject to the standard rate of VAT, in most cases. However, VAT exemption can apply to deputising services where they are primarily providing medical care which unlikely to apply to supplies by labour agencies.
Deposit Return Scheme
The Government will introduce legislation to simplify the administration of the Deposit Return Scheme, which will introduce refundable deposits on single-use drinks containers. The requirement for individual producers to account for VAT on unreturned deposits will be removed, instead this will be done by the Deposit Management Organisation (DMO). This will take effect when the scheme launches in October 2027.
VAT direct debits
Further to a previous consultation, the Government has announced that from 1 April 2029, businesses must set up a direct debit instruction for VAT return liabilities. Other payment methods remain available before a specified cut-off, with direct debit collecting any unpaid balance.
Online marketplaces have been obliged to declare VAT in respect of sales by certain overseas sellers since 2021. However, the Government believes that VAT is not being collected in respect of some domestic sales including businesses using food delivery apps. It had consulted on extending the VAT regime.
The Government plans to introduce legislation to extend VAT online marketplace liability rules to UK businesses from October 2027. The rules will mean that online marketplaces will be responsible for collecting VAT on sales by UK VAT registered businesses and any other UK business that has a minimum annual sales threshold, per platform, of £90,000, ie the VAT registration threshold.
This means that small businesses, genuinely operating under the VAT threshold will still be able to trade without VAT applying. The new rules do not impact on the VAT registration rules. So, a seller operating through multiple online marketplaces, with sales under £90,000 on each, would still be liable to register if their total sales exceed the VAT registration threshold.
Second-hand goods and business-to-business transactions will not be included in the change.
Under the new arrangements, the actual supplier, for example a supplier of delivered food, will make a deemed supply to the online marketplace that is zero rated. Businesses will need to consider their level of online marketplace sales as well as how these rules will affect their cashflow. For example, to improve their cashflow, businesses could consider applying for monthly VAT returns if the level of sales via online marketplaces, where the VAT is declared by the marketplace, is sufficient for them to receive regular repayments of VAT on costs.
The National Living Wage (NLW) and National Minimum Wage (NMW) rates will increase by 3.9% from 1 April 2027. The NLW for workers aged 21 and over will rise to £13.21 an hour. The NMW will increase to £11.27 for 18 to 20-year-olds and £8.31 for 16 to 17-year-olds and eligible apprentices.
Before 1 April 2027 employers should identify workers paid at, or close to, the new rates and review their pay, deductions and working-time arrangements.
The increases will increase direct employment costs for UK employers. They may also put pressure on existing pay structures where employers want to maintain differentials between roles or grades.
Employers that do not increase wider pay rates in line with the 3.9% increase should pay particular attention to NMW compliance. Where pay increases by less than 3.9%, the buffer between a worker’s hourly rate and the statutory minimum will narrow. This could expose existing NMW risks that were previously absorbed by that buffer.
For example, deductions from pay or additional working time can affect whether a worker receives the NMW for the relevant pay reference period. A smaller buffer means these issues are more likely to result in an underpayment.
NMW underpayments can lead to financial penalties and employers may be publicly named by the Government for breaches, adding potential reputational consequences to any arrears due to workers.
This comes as responsibility for NMW enforcement fully transfers to the Fair Work Agency from April 2027.
Mileage rate
For employees driving their own cars on business, the allowable mileage rate at which fuel and other related costs can be reimbursed will be increased FROM 25p to 35p per mile from April 2027 when the employee drives over 10,000 business miles in a tax year. It was also confirmed that the rate for the first 10,000 annual business miles will remain at 55p per mile.
Company cars
It was confirmed that the appropriate percentage used to calculate the benefit in kind value for zero emission cars will increase to 10% from 6 April 2030. For other vehicles there will be a 1% increase in the percentage (to a maximum 40%) from that date. It was also confirmed that the relevant multiplier for company car fuel will be £30,200 from 6 April 2027.
For company vans the relevant benefit charge and fuel benefit charge will be £4,310 and £825 respectively from 6 April 2027.
Travel expenses
The Government will reform and simplify the applicable rates used by employers to reimburse employees for domestic and overseas business travel and subsistence expenses without requiring receipts to be checked. In particular, Benchmark Scale Rates will be updated to £20 for periods of travel over 5-hours, £60 for over 10-hours and £75 for over 24-hours from April 2028. Overseas Scale Rates will be simplified, replacing the current destination-specific framework with a tiered approach with the aim of reducing employers’ administration from April 2028. More details are to follow.
On expenses more generally, it was announced that non-reimbursed employment expenses over £2,500 can be claimed through PAYE rather than requiring a claim through Income Tax Self-Assessment, again from April 2028.
Termination payments
There will also be clarification on legislation relating to the tax treatment of termination payments. In particular, the definition of serious ill health lump sums and medical evidence requirements, are to be published in the Finance Bill but are effective immediately.
Image rights payments
Finally, it was confirmed that changes to image rights payments related to an employment becoming taxable as employment income and taxed in the same way as wages will now take effect from 6 April 2028. This is to provide affected sectors with additional time to adjust to this change.
In addition, the Government has responded to the consultation on the proposal to require businesses to pay PAYE liabilities by Direct Debit, with the aim of supporting the timely and accurate payment of tax collected by businesses. Following feedback received, it has been announced that businesses will still be able to pay a return liability using the current payment methods available. From April 2029, the Government will introduce automated payment by Direct Debit as a safeguard to collect any return liability which remains unpaid at the due date.
The Chancellor announced changes to Enterprise Management Incentives (EMI) and Company Share Option Plans (CSOP, now to be known as EMI2) that should give employers greater flexibility when using shares to attract, retain and incentivise employees.
The Government intends to legislate for the changes in Finance Bill 2026-27, to have effect from 6 April 2027.
Under the proposals, the individual EMI2 option limit will double from £60,000 to £120,000. The exercise period will also increase to 15 years. Importantly, the Government will remove the interaction between the CSOP and EMI individual option limits.
Currently, an employee's EMI individual limit takes account of any CSOP options granted by the employing company or another member of the same group. Removing that interaction should allow employers to use EMI and CSOP (EMI2) alongside each other more effectively. This could potentially deliver up to £370,000 of shares (valued at the date of grant over the prescribed timeframes) that are subject to favourable tax treatment on exercise. This could be particularly relevant for employees who already hold substantial EMI and/or CSOP options, and could widen the scope for employers to provide further equity incentives as their businesses scale up.
The Chancellor also announced several supporting changes, which include extending the EMI exercise window following a disqualifying event from 90 days to 180 days, and extending the EMI Employee Ownership Trust exception to companies arranging to become EOT-controlled.
Employers using, or considering, employee share options should review their incentive arrangements ahead of 6 April 2027 to understand how the increased limits and greater flexibility could support their recruitment, retention and employee engagement objectives.
The Government’s Budget 2026 includes a number of significant immigration announcements, with a clear focus on making the UK more attractive to highly skilled international talent while continuing a more restrictive approach for lower- and medium-skilled migration.
For employers, the key announcements include:
Taken together, the announcements signal an intention to make the immigration system more attractive to high-skilled workers, graduates, researchers and internationally-mobile talent.
The Government confirmed the introduction of a new statutory obligation on taxpayers to notify HMRC if they become aware of any errors in previous returns or documents submitted to HMRC that may have caused an underpayment of tax. It will apply from 1 April 2028, and it is assumed the legislation will confirm whether this will cover all uncorrected errors existing at that date, or just errors occurring after that date.
These changes have been widely trailed in advance and have been welcomed by the industry as a useful clarification for taxpayers who become aware that their tax affairs may need to be regularised. For example, historic issues can be identified during due diligence exercises for the sale of a business, or on refinancing.
Under the new rules, failure to put right an identified error will be deemed to be ‘deliberate’ behaviour, leading to larger tax penalties when it is finally resolved. In some cases, directors could become personally liable for uncorrected inaccuracies in business returns.
It will be important for all taxpayers to take prompt action on past tax errors or risk punitive penalty proceedings if HMRC discover the error at a later date and issue a ‘correction notice’. Where a failure to correct is deemed to be deliberate, HMRC will have up to 20 years to issue a correction notice and will have the power publish the details of taxpayers penalised.
The Government confirmed that HMRC will be given a new power to recover lower-value tax debts directly from taxpayers who can afford to pay but repeatedly fail to do so. This will supplement HMRC’s existing powers for Debt Management, including starting personal bankruptcy and corporate insolvency.
The original consultation proposed allowing HMRC to instruct banks and building societies to make monthly deductions directly from bank accounts once existing debt collection processes had been exhausted and a taxpayer had repeatedly failed to engage. HMRC estimated that the proposals could apply to debts of up to £5,000 for individuals and £10,000 for businesses. The consultation stated up to 4.8 million individuals and businesses, owing around £4 billion, could potentially fall within scope and recommended a pilot given the large number in scope.
Such a significant new power for HMRC needs strong safeguards and proper taxpayer protections. This should include looking at affordability and support for vulnerable individuals and businesses experiencing short-term cash-flow difficulties. Taxpayers should have a meaningful opportunity to challenge a deduction via an Appeal Right before money is removed from their account. They will also need adequate warning and clear information about their rights before a deduction.
For advisers and taxpayers, the detail of the legislation will be important. In particular, the balance between HMRC’s objective of recovering established debts efficiently and ensuring that taxpayers can challenge incorrect liabilities and demonstrate genuine inability to pay.
The Government continues its focus on closing the tax gap and modernising tax administration. Measures announced bring the total expected yield from closing the tax gap during this Parliament to over £12 billion in 2029-30. The wider Treasury objective is to make it easier for taxpayers to pay the right tax at the right time while reducing error and unnecessary administrative burdens.
The most striking measures include:
Taken together, these measures show a continued shift towards increased compliance resource, earlier identification of non-compliance and greater use of data and technology, with changes designed to make tax payment and administration more effective. The Government says it will continue to identify opportunities to simplify and modernise the tax and customs system, with further changes promised in a Tax Update in 2027.
All the questions answered on the Autumn Budget 2026.
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