A soft landing for Making Tax Digital (MTD) for income tax, no changes to corporation tax rates, e-invoicing from 2029, more timely payments of VAT and PAYE, and frozen employer NICs thresholds were the main features with some minor changes to capital allowances and a new consultation on entrepreneurship. More details on these and other relevant changes is set out below.
Making Tax Digital (MTD) for income tax
As lobbied for by the Institute, the Government announced a soft landing for MTD for income tax. Late submission penalties for quarterly updates will not apply during the 2026/27 tax year. However, from 6 April 2027 the new penalty regime will apply for late submission and late payments for all taxpayers. The penalties due for late payment of income tax self-assessment and VAT will also increase from April 2027. More details on these announcements were provided in a subsequent email received from HMRC.
It was also confirmed that HMRC will update its guidance to clarify that childminders within qualifying sole trade income above the mandation threshold must follow the MTD rules. For other childminders, HMRC will clarify how existing arrangements apply to those working from non-domestic premises.
In addition, taxpayers who have a power of attorney and those under a deputyship (as appointed by the Court of Protection) are now permanently exempt from MTD. The MTD start date has also been deferred to 6 April 2027 for some others (recipients of trust and estates income, individuals who use averaging adjustments, those eligible for qualifying care relief and non-UK resident foreign entertainers or sportspeople).
E-invoicing from 2029
From April 2029, all VAT invoices will need to be issued in a specified electronic format. The Government will work with stakeholders to develop an implementation roadmap to be published at Budget 2026.
The decision to mandate from April 2029 follows the announcement on e-invoicing in Ireland’s most recent Budget subsequent to which the Revenue Commissioners published “Implementation of eInvoicing in Ireland”.
Employers
The £5,000 per-employee secondary NICs threshold for employers is frozen until 5 April 2031 after dropping from £9,100 from 6 April 2025. As the NICs upper earnings limit and upper profits limits will both remain at £50,270 until April 2031, the other employer NICs reliefs thresholds are also frozen to that date.
The employer NICs relief for employers hiring veterans in their first civilian role is being extended to April 2028, from which point support for veterans into employment will be covered through spending review settlements rather than through this tax relief.
And finally, the income tax and NICs exemption for employer-provided benefits is to be extended to cover reimbursements for eye tests, home working equipment, and flu vaccinations. This will take effect from 6 April 2026.
VAT and PAYE liabilities
A consultation will be published in early 2026 to consider ways that VAT and PAYE liabilities can be paid promptly without the taxpayer falling behind on payments, including requiring more tax payments by direct debit.
Capital allowances
From April 2026 (1 April for companies and 6 April for unincorporated businesses), the rate of writing down allowances in the main pool will be reduced from 18 percent to 14 percent. However, from 1 January 2026 a new first-year allowance (FYA) of 40 percent will be available for main‑rate assets. Cars, second-hand assets and assets for leasing overseas will not be eligible.
The benefit this new FYA remains to be seen given that 100 relief is already available for all main pool expenditure via the £1 million annual investment allowance limit with companies also having unlimited 100 percent relief for new main pool expenditure under full expensing.
Capital Gains Tax (CGT) anti-avoidance: share exchanges and reorganisations
The anti-avoidance provisions that apply to share exchanges and company reorganisations were amended from 26 November 2025 to ensure ‘that they apply to those persons who have entered into arrangements where the main purpose, or one of the main purposes, of the arrangement is to secure a tax advantage that they would not ordinarily have been entitled to’.
CGT: non-resident capital gains for UK land and property
This legislation was amended from 26 November 2025 to close what the Government refers to as loopholes for protected cell companies. Further administrative reforms are expected from 6 April 2026.
Stamp duty reserve tax new UK listing relief
A new UK listing relief, a three-year exemption from stamp duty reserve tax (SDRT) for companies listing in the UK has been introduced. The measure provides for an exemption from the 0.5 percent SDRT charge on agreements to transfer securities of a company whose shares are newly listed on a UK regulated market.
The exemption applies from the listing of the company’s shares. Once in the post-listing period the exemption will apply to all of the company’s securities (not just shares).
The new relief took effect for agreements to transfer made on or after 27 November 2025 and applies if the shares of the relevant company are newly listed on or after that date.
Customs system reporting and low value imports
Reforms are expected to be made to simplify reporting requirements and improve HMRC services. Further reforms to streamline processes and improve the taxpayer experience are expected to be announced in Spring 2026.
The customs duty relief for low value imports (£135 or less) is being removed from March 2029 at the latest. How these goods are declared into the UK is also being changed from the same date meaning new import arrangements will apply.
The Government will consult on the technical detail of these new arrangements and is stressing that it is not alone in taking this approach to low value imports, with its international partners, taking similar steps, including the US and the EU.
Corporation tax
The new service to provide major investment projects with advance tax certainty which was committed to in the Corporate Tax Roadmap published in October 2024 will be launched in July 2026.
The penalties for taxpayers submitting a corporation tax return late will be doubled from 1 April 2026 and £59 million is also to be invested in new technology over the next five years to provide taxpayers with real-time digital prompts for VAT filing software from April 2027, and Corporation Tax filing software from April 2028.
The Government will also consult in early 2026 on delivery timescales and enforcement
for prescribing the content and tagging of the corporation tax computation. A consultation will also be published in early 2026 to explore introducing new requirements to report transactions between close companies and their shareholders to HMRC.
The Government will also pilot a targeted R&D tax relief advance assurance service from Spring 2026 to enable small and medium-sized enterprises to gain clarity on key aspects
of their R&D tax relief claims before submission to HMRC. A summary of responses to the advance clearance consultation was also published.
The following was also announced:
- The shadow advanced corporation tax rules will be repealed from 1 April 2026,
- The Government will legislate in Finance Bill 2025/26 to simplify administration in relation to reporting companies under the corporate interest restriction with most of the changes expected to take effect for periods ending on or after 31 March 2026,
- Finance Bill 2025/26 will contain legislation setting out the treatment for corporation tax purposes of intra-group payments made in return for surrendered various tax credits for research and development, audio-visual expenditure, and video games expenditure. This is effective for payments made on or after 26 November 2025,
- For Pillar Two, technical amendments to the multinational top-up tax and the domestic top-up tax will feature in Finance Bill 2025/26 to incorporate the latest published international updates and stakeholder feedback,
- Legislation in the Bill will provide for the payment of interest on amounts collected from taxpayers and now repayable following a successful challenge of a European Commission Decision on controlled foreign companies and the reversal of State aid recovery, and
- The Government will also work with industry stakeholders over the coming months to explore targeted legislative changes aimed at ensuring that the qualifying asset holding companies regime continues to operate effectively. Any legislative changes will be introduced in a future Finance Bill.
Transfer pricing, permanent establishment and the diverted profits tax
In-scope multinationals will be required to submit an international controlled transaction schedule which will report information annually on cross-border related party transactions. This measure is expected to take effect for accounting periods beginning on or after 1 January 2027. Technical consultation on its design will take place in Spring 2026.
Finance Bill 2025-26 will also include legislation to simplify the taxation of related party transactions, non-resident companies trading in the UK, and profits diverted from the UK, for chargeable periods beginning on or after 1 January 2026.
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