UK tax landscape
Key changes for 2026

Business taxes

Amendments to the UK’s transfer pricing, permanent establishment, and Diverted Profits Tax (DPT) legislation aim to streamline UK’s international tax rules and align them with the OECD principles. Key changes, in most cases effective for accounting periods commencing on or after 1 January 2026, include a general exemption from UK-UK transfer pricing requirements, updated permanent establishment definitions and profit attribution rules, and the repeal of DPT, with new rules for unassessed transfer pricing profits integrated into corporation tax.

The Pillar Two global minimum tax rules are already in force, with in-scope December year end groups making their first UK filings and payments by 30 June 2026. Measures to implement the new side-by-side agreement with the US in UK legislation will be subject to technical consultation and then brought forward in the next Finance Bill, to be applied retrospectively for accounting periods beginning on or after 1 January 2026.

Capital allowances are seeing notable shifts. Effectively raising tax, the main rate of writing-down allowance for plant or machinery will be cut from 18% to 14% from April 2026. However, a new 40% first-year allowance for main rate assets will be introduced from 1 January 2026, benefiting businesses unable to claim full expensing such as unincorporated businesses or leasing and hire businesses. The 100% first-year allowance for zero-emission cars and EV charge points is also extended until March/April 2027.

A limited pilot for a new, targeted advance assurance service for R&D tax relief will launch in spring 2026, aiming to boost SME take-up and reduce errors.

Reflecting the government’s aim to encourage investment, annual limits applicable to Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) companies based in Great Britain (not Northern Ireland) will increase. The gross assets test before investment into non-Northern Irish companies will double from £15million to £30million, and the gross assets test immediately following investment will slightly more than double from £16million to £35million. Notably, increased limits apply to the investee company’s gross assets and the amount of investment companies can raise through these schemes. Investment limits for individual investors are unchanged.

Business rates are facing a shake-up. Following the Autumn Budget 2025, permanently lower business rate multipliers will apply from 1 April 2026 for retail, hospitality, and leisure properties with rateable values below £500,000, while larger properties will see increases in business rate multipliers. The amount of business rates payable in respect of many business properties increases in 2026 due to the revaluation of properties for business rate purposes. A re-designed Transitional Relief scheme aims to mitigate some of the impact. In addition, a new targeted support package provides a 15% business rates relief for pubs and live music venues in England in 2026/27. A separate call for evidence explores the impact of business rates on investment.

Indirect taxes

Following consultation, the government decided not to proceed with plans to introduce a single tax regime for remote betting and gaming, but rather is raising duties on online gambling and gaming. Remote gaming duty will increase from 21% to 40% from 1 April 2026, though UK horse-racing bets remain subject to a 15% rate. Bingo duty will be abolished from the same date.

The fuel duty rates have not been uprated for 16 years. At the Budget 2025 the government extended the temporary 5p fuel duty cut until September 2026 and cancelled the inflation-linked rise in fuel duty rates. However, it has committed to a phased reversal of the 5p cut, with a 1p increase on 1 September 2026, a 2p increase on 1 December 2026 and a 2p increase on 1 March 2027, and uprating fuel duty rates by Retail Prices Index from April 2027. 

Suppliers of private hire vehicle and taxi services are excluded from the scope of the Tour Operators’ Margin Scheme from 2 January 2026, except where these are supplied in conjunction with certain other travel services. 

Under the Motability scheme, new leases starting from 1 July 2026, will have 20% VAT applied to top-up payments for more expensive vehicles and new insurance for vehicles leased through the scheme will be subject to a 12% standard rate insurance premium tax.

Finally, a new VAT relief will be introduced from 1 April 2026 for business donations of goods to charity for distribution to those in need or use in the delivery of their charitable services.

Trade 

Further tariff changes will be introduced this year as the UK’s network of free trade agreements (FTAs) expands. The UK-India FTA is expected to enter into force during 2026, bringing tariff reductions and eliminations for importers and exporters for certain goods. In addition, the upgraded UK-South Korea FTA, announced in December 2025, may enter into force this year, while FTA negotiations continue with the Gulf Cooperation Council and Turkey.

Personal Taxes

Inheritance Tax (IHT) is undergoing key changes from 6 April 2026. New restrictions will apply to Agricultural Property Relief (APR) and Business Property Relief (BPR), with a combined 100% relief limit of £2.5 million per person, and 50% relief for values above this. Shares listed on AIM will only qualify for 50% relief. The effective inheritance tax rate on an individual’s death where 50% BPR or APR is available is 20%, where 40% inheritance tax would otherwise be due. For relevant property trusts, the maximum 6% ten year inheritance tax charge reduces to a maximum 3% where 50% relief is available. IHT will also extend to certain foreign interests deriving value from UK agricultural property.

Making Tax Digital (MTD) for Income Tax will enter its first phase, requiring sole traders and landlords with business receipts over £50,000 to maintain digital records from 6 April 2026.  They will have to provide HMRC with digital quarterly updates and submit a digital equivalent of the self-assessment tax return.

Personal taxes will rise in a range of ways. Basic and higher dividend tax rates will climb by 2% from April 2026. Capital Gains Tax (CGT) rate for those claiming Business Asset Disposal Relief (BADR) or Investors’ Relief (IR) will also jump from 14% to 18%. Carried interest will be brought within Income Tax and National Insurance Contributions (NICs), resulting in an effective 34.075% tax rate for additional rate taxpayers. The income tax relief on VCT subscriptions will be cut from 30% to 20%.

From April 2026, the ability to pay voluntary Class 2 NICs for those working abroad will cease, with more expensive Class 3 contributions potentially available under strict conditions.

Employment taxes

New rules for umbrella companies, effective 6 April 2026, will impose 'joint and several' liability on parties in the labour supply chain for PAYE and NIC debts. This is a critical development for recruitment agencies, umbrella companies, and even end-users of temporary labour.

The Enterprise Management Incentive (EMI) scheme will expand from April 2026, allowing more medium-sized companies to offer EMI options by increasing gross asset limits, employee headcount, and holding periods.

Employment law reforms are also phasing in, with April 2026 seeing the removal of the Lower Earnings Limit for statutory sick pay, 'Day 1' paternity and unpaid parental leave, and enhanced whistleblowing protections. The Fair Work Agency will also be established, taking over national minimum wage enforcement.

Tax certainty

From July 2026, a new advance tax certainty service will offer binding clarity on tax rules for major UK investment projects. This service, covering corporation tax, VAT, stamp taxes, PAYE, and the Construction Industry Scheme, targets new UK investments exceeding £1 billion, providing predictability for significant ventures.

Tax administration

This year will see the government intensify its drive to close the tax gap. Expect new measures, including increased late filing penalties and, in some cases, an expansion of HMRC’s powers, signalling a tougher stance on compliance. The Strengthened Reward Scheme (a.k.a the whistleblower scheme), launched at Budget 2025, offers individuals a potential reward of 15% to 30% of the tax collected (excluding penalties and interest) if their information leads HMRC to collect at least £1.5 million in tax. Finally, as part of the government’s initiative to raise standards in the tax advice market, tax advisers who interact with HMRC on behalf of clients will be legally required to register, starting in May.

There are more developments on the tax horizon, including numerous consultations in various stages of progress – visit Deloitte's UK Tax Policy Map for an overview.

Tax changes coming into force in 2026