Autumn Budget 2026: takeaways for businesses

The Chancellor recently set out the Government’s financial plans in this year’s Budget. In the first of two Keynotes, our tax consultant solicitor Michael Fluss provides an overview of the key takeaways for businesses.

Finance

• Withholding tax from payments by companies of yearly interest (previously announced): The rate will increase from 20% to 22% from April 2027, potentially increasing UK borrowers’ costs under cross-border financing arrangements with gross-up clauses.
• Banking surcharge: The Bank Corporation Tax Surcharge will increase from 3% to 6% for 15 months from 1 January 2027, before reverting to 3% from 1 April 2028, increasing the tax burden on affected banks.

Corporate

• Founders’ Relief: From 6 April 2027, there will be a new 10% CGT rate for qualifying gains on shares in eligible high-growth UK trading companies, subject to a £10 million lifetime limit interacting with BADR and Investors’ Relief. Conditions include an initial shareholding of at least 25%, five-year ownership and UK residence requirements, and company eligibility tests, with certain sectors excluded. The relief could affect founder exits and investment planning. Consultation closes on 30 November 2026, with legislation to follow in Finance Bill 2026–27.
• Business Asset Disposal Relief (BADR): From 6 April 2027, the lifetime limit on qualifying gains will halve from £1 million to £500,000, with qualifying gains taxed at 18% from 6 April 2026. Anti-forestalling rules will apply to certain unconditional contracts entered into before, but not completed by, 6 April 2027, subject to exceptions for genuine commercial transactions. Separately, where shareholders elect to disapply the share reorganisation rules that would otherwise treat an exchange as involving no disposal, the disposal will be treated as occurring when the election is made, bringing it within the new £500,000 lifetime limit if the election is made on or after 6 April 2027.
• Stamp Taxes on Shares and Securities: Following earlier announcements and consultation, from late 2027, the Government plans to replace Stamp Duty (SD) and Stamp Duty Reserve Tax (SDRT) with a single, self-assessed Securities Transfer Tax (STT), supported by digital reporting and payment. The reform aims to simplify the administration of tax on securities transfers while retaining the basic principles of the existing regime. Four-year transitional provisions will preserve the existing SD and SDRT rules to allow taxpayers time to complete transactions to which SD or SDRT applies.
• Pillar Two – Side-by-Side package and MTT/DTT amendments: The Government will amend the UK’s Multinational Top-up Tax (MTT) and Domestic Top-up Tax (DTT), which provide for a minimum 15% effective tax rate for large multinational groups with consolidated annual revenues of at least €750 million in at least two of the previous four accounting periods and a UK presence. These introduce exemptions for qualifying groups, simplify calculations and reporting, and recognise certain business tax incentives. The Side-by-Side measures apply to accounting periods beginning from 1 January 2026, with other technical amendments generally applying from 31 December 2026, subject to options for earlier application.
• Permanent Establishment (PE) Exemption: The exemption from UK Corporation Tax for overseas branch profits and losses will become mandatory from 1 January 2027, or 1 September 2026 for affected oil and gas companies. Companies will no longer be able to choose whether it applies, preventing overseas losses from reducing UK taxable profits. Transitional and anti-avoidance rules will also restrict relief for historic overseas branch losses and arrangements designed to circumvent the changes.

Venture Capital/Employment/Investment Reliefs

• EIS/VCT: EIS/SEIS/VCT – technical amendments: Changes taking effect from 6 April 2027 should help reduce the risk of tax relief being lost and provide greater flexibility in venture capital fundraisings. These include preserving EIS relief for the portion of a share issue within the applicable limits where annual or lifetime investment limits are exceeded; allowing HMRC discretion to preserve relief where subscription monies are received late due to exceptional and unavoidable circumstances outside the control of the company and investor; and protecting relief for other investors where one investor fails to pay in full.
• EMI2 (formerly CSOP): From 6 April 2027, the limit on the value of CSOP/EMI2 options eligible for tax advantages will double from £60k to £120k per employee. The interaction between EMI and EMI2 option limits will be removed so that the schemes operate independently of each other, and the maximum period for exercising EMI2 options whilst retaining tax advantages will increase from 10 to 15 years. These reforms should make EMI2 more attractive for companies outside the scope of EMI and offer greater flexibility in structuring employee incentives.
• EMI – removal of the requirement to submit notification of grant of options: From 6 April 2027, the requirement to notify HMRC separately of each EMI option grant will be removed, with grant details instead reported through the annual Employment Related Securities (ERS) return. Late filing will no longer automatically result in loss of tax-advantaged status, provided the return is submitted within one year of the original deadline. HMRC may still require declarations or further information to verify compliance with the EMI qualifying conditions. This complements the separate reforms to CSOP/EMI2 outlined above.

VAT

• VAT reverse charge on services received from overseas: From 1 April 2027, the reverse charge (under which the UK recipient accounts to HMRC for UK VAT on services supplied by overseas businesses) will apply only where the UK recipient is registered for UK VAT. Otherwise, the overseas supplier will generally need to charge and account for UK VAT, potentially requiring UK VAT registration and additional compliance, including UK VAT returns. The measure aims to level the playing field between UK and overseas suppliers, with overseas suppliers able to determine whether the reverse charge applies by checking for their UK customer’s VAT number.
• VAT einvoicing: From 1 April 2029, VAT-registered businesses (including public sector bodies) will generally be required to issue and receive VAT invoices electronically. The Budget includes an implementation roadmap for the new regime, with further details on scope, technical requirements, and exemptions expected by April 2028.
• VAT – online marketplaces: From 1 October 2027, online marketplaces will become liable to collect and account for VAT on qualifying sales of goods by UK-established businesses through their platforms, where the goods are located in the UK at the time of sale and either the seller is VAT-registered or its annual sales on the relevant platform exceed £90,000. Further details will be set out in secondary legislation.

Other corporation tax (and related) developments

• Modernising the distributions framework: Following consultation, the Government has announced that it will proceed with reforms to the taxation of distributions made by companies to individual (non-corporate) shareholders. Further technical consultation is expected in 2027, ahead of the reforms taking effect from April 2028. The changes may affect the tax treatment of returns of capital and certain company distributions, with potential implications for corporate restructurings and transaction structuring.
• Foreign sovereign tax regime: From 1 January 2029, a statutory regime will replace sovereign tax immunity, bringing certain UK income and gains of foreign sovereigns within UK tax, subject to specified exemptions. Sovereigns will retain access to key investment regimes, including a bespoke REIT structure with a 15% tax rate on property income distributions. Transitional measures include time-limited SDLT relief for property restructurings. The consultation closes on 20 January 2027.
• Corporate tax simplification: The Government is consulting on Corporation Tax reforms covering withholding tax relief, international tax rules, interest deductibility, capital allowances, R&D and intellectual property reliefs, and cross-border capital movements. The aim is to simplify the regime, improve certainty, and support investment and competitiveness, with reforms to be developed and prioritised alongside stakeholders over the next year.
• Tax avoidance enforcement: The Government will consult on further measures to tackle the promotion and use of tax avoidance schemes. Separately, legislation will strengthen the existing rules targeting promoters of tax avoidance schemes, extend them fully to VAT and other indirect taxes, and allow earlier publication of promoters’ names.
• Advance Tax Certainty Service: From 4 November 2026, the minimum qualifying expenditure threshold for HMRC’s service providing binding advance tax clearances for major investment projects will fall from £1 billion to £300 million, widening access to advance certainty on the tax treatment of qualifying projects.

If you have any questions or would like to discuss any aspects of this year’s Budget, please contact Michael Fluss.