Budget 2026

All in a pickle?

In the lead-up to the 2026 Budget, the Government announced five “everyday fixes”, among them the removal of import tariffs on products such as baked beans, chocolate and, yes, gherkins. So is today’s package of measures a necessary staple, a sweet treat, or are we in fact all in a pickle?

Tax rates

No changes were announced to the headline rates of corporation tax, income tax on employment earnings, CGT, VAT or stamp duty land tax. But the cumulative impact of the freezing of applicable thresholds across several years means that higher rates apply to more income.

Banks are to pay an increased rate of bank surcharge on top of the normal corporation tax rate: 6% instead of 3% for a limited period from 1 January 2027 to 31 March 2028.
Individuals will have to pay an increased rate of income tax on earnings from property and savings: 4% above the normal rates of income tax, so 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers. These rates will start in April 2027.

CGT Changes

There was much pre-Budget speculation that there would be an increase in the rate of CGT, and then it appeared that there would be no changes at all. In the end there were two quite significant changes, each taking effect in April 2027:

The amount of lifetime gains qualifying for Business Asset Disposal Relief, which are generally taxed at 18% rather than 24% is to be reduced to £500,000 from £1 million. Many business or company owners contemplating a sale from which they would earn proceeds in excess of £500,000 would be well-advised to implement that sale before April 2027.
A new CGT relief will be available for “founders” of “high-growth, innovative companies” which will tax gains of up to £10 million at 10%. Clearly, it is intended to keep the UK attractive to internationally mobile entrepreneurs, but attention will focus on who counts as a founder and to what gains it applies. Overall, it feels like a return to the days of taper relief but on a much more restricted basis. It remains to be seen whether over time there will be pressure to relax any conditions for its application.

“EMI2 will double the value of taxadvantaged options employees can
hold from £60,000 to £120,000 from 6 April 2027,
giving scaling businesses a more generous and flexible way
to attract and retain talented employees”

— Budget 2026

Business taxes

The rates of capital allowances are to become less generous, with the main rate of writing down allowances on plant and machinery being reduced to 12% from 14% from 1 April 2027. Against that, the rate of first-year allowances will increase to 50% from 40% with effect from 1 January 2027.

Businesses with foreign permanent establishments are to be required to treat those foreign PEs as exempt from corporation tax. This will prevent losses arising in those foreign PEs from being used to offset UK profits.
Some minor changes are to be made to the VAT treatment of cross-border services, to which a reverse charge system generally applies.
The Company Share Option Plan, under which employees can receive share options in a tax-efficient fashion subject to certain monetary limits is to be extended and renamed as “EMI2”. It will be designed to be used by companies who have exceeded the financial limits for the main EMI share option scheme or which do not meet its qualifying conditions.
Relief is to be available from double taxation for UK investors in US LLCs, with effect from April 2028.

Property taxes

Business rates: small businesses may qualify for new relief and a freeze in rates will apply for retail, hospitality and leisure properties.

A VAT zero rate will apply for property sales to registered social housing providers from 1 April 2027. This will remove an acknowledged problem for this sector.
HMRC will also consult on new obligations on third parties such as tenants and letting agents to report property income paid to landlords, especially those outside the UK, to ensure proper tax compliance.

And finally…

HMRC is to consult on ways to streamline corporation tax compliance obligations, including measures to make it easier to claim R&D reliefs.

All VAT invoicing will be required to be by e-invoicing by April 2029.
A new Securities Transfer Tax will be implemented in “late 2027” replacing stamp duty and SDRT. While the broad principles of the tax rate and liability will not change from the current system, we expect there to be many points of detail which will change, especially around the current complex method of payment and process.