The Autumn Budget 2026

Rates

The Labour Party’s 2024 manifesto committed not to increase the basic, higher or additional rates of income tax. Despite this, at the Autumn Budget 2025, the Government announced a 2% increase to dividend, property and savings income tax rates, reflecting “the fact that income from those sources faces no equivalent of National Insurance that employees pay”. These rate increases have applied to dividend income since 6 April 2026, and the increases to property and savings income rates were due to take effect from 6 April 2027.

Today’s Budget stated that “the government is keeping to its commitments on tax, with no increase to the headline rates of income tax…”. However, notwithstanding this statement, it was announced that the rates of tax on property and savings income will increase by a further 2% with effect from 6 April 2027 (meaning that the top rate for such income will rise to 49%). No further rate increases were announced in respect of dividend income.

Taking this announcement into account, the income tax rates for the 2027/28 tax year, as compared to the current tax year, are set out in the table below.

Thresholds

Income tax thresholds were frozen at the Autumn Budget 2025 until April 2031. No further changes to income tax thresholds were announced today (although it should be noted that a new pension tax allowance is to be introduced to ensure that pensioners whose only source of income is the state pension have no income tax liability).

Income tax payments

At the Autumn Budget 2025, the Government announced its intention to modernise how income tax self assessment liabilities are paid, and published a consultation on this during summer 2026. Currently, individuals falling within this system must make two payments on account – the first in January of the relevant tax year and the second in July after the relevant tax year, as well as a balancing payment (or repayment) the following January. The Government has noted that this can mean that tax is paid up to 22 months after the relevant income is earned. Today, the Government published the outcome of this consultation, announcing that, from April 2029, relevant taxpayers “will make smaller, more regular contributions towards their tax bill throughout the year, bringing payment closer to when income is earned.” Full details of the new arrangements are still to be finalised, with the Government promising to work with stakeholders and to provide further information in 2027.

In our response to the Government’s consultation, we noted that administrative challenges could arise with these proposals in respect of carried interest payments (which were brought into the income tax framework from 6 April 2026), given the high fluctuations in the amount of carried interest proceeds received each year, and suggested that carried interest payments should be carved out of the proposed reforms. It remains to be seen whether the Government will take these issues into account when finalising the new framework.

Rates

In the months preceding the Budget, there was widespread speculation that capital gains tax (CGT) rates would rise, potentially to align with income tax rates. More recent media reports, however, suggested that the Chancellor had decided against any increase, and this proved to be correct.

It had also been thought that any increase in CGT rates might require the Government to try to counter the potential behavioural response to a rate rise. One option would have been the introduction of an exit tax. Broadly, an exit tax might treat individuals leaving the UK as having disposed of their assets at market value on ceasing to be UK resident, so that CGT would be charged on gains accrued during their period of UK residence, even though no actual sale had taken place. Such regimes, which operate in a number of other jurisdictions, often include thresholds and an option to defer payment until the assets are actually sold. It was generally considered that an exit tax would be introduced only alongside a CGT rate increase, rather than as a standalone measure; in the event neither measure was introduced.

Business asset disposal relief

Business asset disposal relief (BADR) has been tightened again. BADR (formerly known as entrepreneurs’ relief) reduces the rate of CGT payable on qualifying disposals of business assets, subject to a lifetime limit of £1m of qualifying gains. The relief has been steadily eroded in recent years, most recently with the rate of tax on qualifying gains rising from 14% to 18% from April 2026. Today, further tightening was announced with the lifetime limit to be reduced to £500,000.

Founders’ relief

The Government has opened a consultation on a proposed founders’ relief, separate from the changes to BADR. The relief would reduce the rate of CGT on qualifying disposals to 10%, subject to a £10m lifetime limit. The consultation closes on 30 November 2026, and the conditions may change in response. As currently proposed, they fall into three categories: conditions relating to the founder, to the company, and to growth and innovation.

To qualify for the relief, the individual making the disposal must have: (i) held 25% of the company’s ordinary share capital when the company began the trade for which it was formed, or began preparing for it; (ii) held their shares for at least five years before disposal; and (iii) been UK resident for tax purposes (under the Statutory Residence Test) for five continuous years before disposal. 

The company must: (i) be within the charge to UK corporation tax and have had a substantial UK presence for the five accounting periods before disposal; (ii) be a trading company or the holding company of a trading group; (iii) continue its founding trade with no major change in the nature of that trade; (iv) have had turnover of at least £10m in the accounting period before the disposal; and (v) have employed at least 15 qualifying full-time employees in that period.

The company must also meet two of the following three growth and innovation conditions: 

1. the turnover test – average annual compound turnover growth of 25% over three consecutive accounting periods within the 10 years before the disposal, with turnover of at least £10m in the accounting period before the first of those periods;
2. the headcount test – average annual compound growth in qualifying full-time employees over three consecutive accounting periods within the 10 years before the disposal, with at least 15 such employees in the accounting period before the first of those periods; and 
3. the innovation test – qualifying R&D expenditure of at least £1.5m, for which R&D tax relief has been claimed, in one or more accounting periods ending within the three years before the disposal. 

The relief is intended to apply to all shares a qualifying individual disposes of, not only to shares acquired when the company was founded or to the individual's original holding. More than one individual may claim the relief in respect of the same company, provided each meets the conditions.

Although the rate reduction matches that once given by entrepreneurs' relief, the Government is clearly not seeking to revive that relief. The much stricter conditions are designed to target the relief at, and encourage, innovation and growth in UK companies.

CGT exit charges – temporarily migrated trusts

Under current rules, a CGT “exit charge” arises when a trust ceases to be UK resident; however, it was announced today that relief from such a charge will now apply where (i) a trust becomes UK resident because one or more of its trustees moved to the UK, and (ii) the trust ceases to be UK resident later that year or in the following year. This change (which takes effect from today) will be helpful for individuals whose migration to the UK has inadvertently resulted in a trust structure becoming UK resident.

Reforms to the CGT treatment of protected cell companies (PCCs)

As set out in the tax compliance and anti-avoidance section below, with effect from today, the Government has quietly introduced “minor technical changes” which essentially make the use of non-UK resident PCCs as a blocker for CGT ineffective.

Recent Budgets have announced significant reforms to inheritance tax (IHT), most notably the changes to agricultural property relief (APR) and business property relief (BPR) (which, from 6 April 2026, have limited 100% relief to a maximum of £2.5m of qualifying assets, with a reduced rate of 20% inheritance tax applying to value above that threshold) and the forthcoming introduction of IHT on unused pension pots on death (from 6 April 2027). 

Despite hopes of the farming and business communities, the Government did not revisit the APR and BPR reforms in today’s Budget.  

However, two minor technical amendments were announced in respect of the forthcoming changes to the IHT treatment of pensions. These relate to the categories of people who are able to direct pension scheme administrators to pay the IHT due directly to HMRC, as well as the interaction of the pension reforms with an existing IHT relief which arises when a certain proportion of an individual’s estate is left to charity on their death. Although professional bodies had lobbied for further amendments to the reforms, both of these technical amendments will go some way towards ensuring that the new regime works properly in practice.

The Government also published draft legislation (applying with effect from today, i.e. 28 October), aimed at clarifying the IHT treatment of liabilities relating to property held in trust. In the past, a number of schemes were widely adopted which sought to give an IHT advantage by arranging for residential property to be held in a trust, with the trustees then owing a significant debt to the settlor or in some cases to another trust. Although most (if not all) planning of this type has been rendered ineffective by developments in the law, HMRC are clearly concerned that there remain opportunities for abuse and have taken the opportunity to amend the relevant IHT statutory provisions. The draft legislation will need careful consideration and may have implications for trustees and their settlors, even where no sophisticated planning has been undertaken.

The IHT nil rate band (currently £325,000), residence nil rate band (currently £175,000) and the allowance for the 100% rate of APR and BPR (currently £2.5m) were frozen at the Autumn Budget 2025 until April 2031. No further changes were announced today.
 

Additional 2% tax on property income

As set out in the income tax section above, the Government will increase the rate of income tax applied to property income across England, Wales and Northern Ireland by 2% from 6 April 2027.  The following reflects the increased rates:

•    property basic rate: 24%;
•    property higher rate: 44%; and
•    property additional rate: 49%.

This increase will impact landlords, many of whom have already had to adapt to increasing costs associated with regulatory and statutory changes relating to matters such as building safety and tenant rights (e.g. under the Renters’ Rights Act 2025). There are concerns that some private landlords may exit the market as a result of these combined factors, which would place greater pressure on the supply of rental property in the market. The Treasury considers that the measure raises revenue in a "progressive" way with 84% of taxpayers being unaffected.

Annual tax on enveloped dwellings (ATED) 

The Government has confirmed that it will increase the annual charges of ATED by 3.5%. This is in line with the September Consumer Prices Index (CPI) and will be dealt with by way of Treasury Order rather than through inclusion in the Finance Bill. 

Group relief from stamp duty land tax (SDLT)

The Government is proposing changes to the current group relief rules applicable to SDLT. The changes will ensure that the winding up of a seller does not prevent group relief from being clawed back within the usual three-year period if the buying company subsequently leaves the group. The legislation will be introduced in Finance Bill 2026-27 with effect from 29 October 2026.

Mansion tax

As announced at the 2025 Budget, the Government will legislate to introduce the high value council tax surcharge (or mansion tax) from April 2028, an additional charge on residential properties worth £2m or more. As widely trailed before the Budget, the Chancellor has not taken the opportunity to lower the £2m threshold for payment of the surcharge. The outcome of the consultation on these measures, which closed earlier this year, was published today. The Government has confirmed that measures will be implemented to provide discounts and exemptions from the surcharge for certain types of property (i.e. purpose-built student halls of residence, new build property owned by a developer, and some social housing) and will include a deferral scheme for payment where individuals do not have sufficient funds.

Sovereign immunity: reform back on the table

HM Treasury published a consultation on modernising the taxation of foreign sovereign investments, putting reform of sovereign immunity back on the agenda. From 1 January 2029, the current regime, which has never been set out in statute, will be replaced by a new “sovereign tax status” that puts the UK's taxation of sovereigns on a statutory footing for the first time. The Government says the change will make the regime more transparent and more sustainable over the long term. In practice, sovereign investors' UK tax exposure will mainly be limited to certain types of UK real estate income and gains. 

The Government has included several exemptions and mitigations to limit this exposure. The most notable is a bespoke real estate investment trust (REIT) route, which can allow sovereign investors to hold a controlling interest in a REIT through a UK company while paying a 15% rate on property income in that REIT, rather than the standard 25%. There is also a new status for state-operated overseas pension funds, giving them treatment comparable to overseas pension schemes, including an exemption for gains. In addition, the proposals include an exemption for qualifying investment management activities carried on by sovereign investment offices in the UK, transitional arrangements to support restructuring (including a temporary SDLT relief), and continued exemptions for interest and dividend income. 

The existing regime will continue to apply until 1 January 2029. The consultation closes on 20 January 2027, and a technical consultation on draft legislation will follow before the measures are introduced in Finance Bill 2027-28.

Distributions

The Government has confirmed that it will go ahead with planned reforms to the distributions framework, including: 

• changing how distributions on capital reductions are measured; 
• restricting demergers; 
• applying the distribution rules to non-UK companies; 
• a temporary charge on overseas loans; 
• tighter rules for companies buying back their own shares; and 
• updated transactions in securities (TIS) anti-avoidance rules.

However, the Government has recognised the need for a nuanced approach in places, committing to carve out the “genuine investments” of asset managers in order to protect the UK’s international competitiveness.

The Government has committed to publishing draft legislation for technical consultation in 2027, ahead of the changes taking effect from April 2028.

Securities transfer tax

On timings for the introduction of the new securities transfer tax (STT), which is to replace stamp duty and stamp duty reserve tax, it was announced at the Budget that legislation will be introduced to take effect from late 2027.

Close company reporting

Earlier this year, the Government consulted on proposals for reporting company payments to participators in close companies (broadly, a company controlled by five or fewer participators). The proposals could have required close companies to provide HMRC with details of individual transactions between the company and its participators, including loans, debts, cash withdrawals, dividends, and asset transfers, which would have represented a significant increase in potentially onerous reporting requirements and associated compliance costs. In a welcome announcement, the Government has published the outcome of this consultation and confirmed that it will not go ahead at this time with implementing these new reporting requirements.

Corporate tax simplification for business investment 

As part of its ongoing commitment to simplification of the corporation tax system, the Government has committed to reviewing a number of legislative regimes with a view to simplifying the rules and otherwise addressing stakeholder concerns. 

In addition to reviewing treaty relief on withholding taxes and the controlled foreign company (CFC) rules (which we discuss further below), the Government is requesting feedback on potential changes to the anti-hybrid mismatch rules, the unallowable purpose rule which limits deductions claimed for interest losses or expenses incurred on certain loan relationships and derivative contracts and the corporate interest restriction. 

The request for feedback does not include firm proposals on any of these measures but instead highlights areas of stakeholder concern and invites further input on potential reforms. We will seek to engage with the Government on these reviews. 

Reviewing CFC rules 

Concerns have been raised around whether the CFC rules are still needed in light of the introduction of Pillar Two and around the complexity of the rules. 

With regard to Pillar Two, the Government sets out that it is committed to maintaining both the Pillar Two and CFC rules as they each have a different target and scope. However, the Government is keen to look at simplification of the CFC rules in light of the Pillar Two legislation and other changes since the rules were introduced, for example changes to legislation around transfer pricing. 

Withholding taxes 

The Government has confirmed that it will continue to explore options to reform the Double Taxation Treaty Passport (DTTP) system and move towards borrowers self-assessing treaty relief.

Ahead of a new approach being finalised, HMRC is publishing updated guidance to support businesses to apply the existing rules, acknowledging current administrative difficulties.
 

The “FIG” regime

From 6 April 2025, the UK's “non-dom” regime was abolished and replaced with a new four-year, residence-based foreign income and gains (FIG) regime. At the Autumn Budget 2025, the Government confirmed that it would explore how to develop its tax offer for high-talent new arrivals further, “to build on the success of the existing regime”. Today, the Government confirmed that it “will continue to assess whether the residence-based regime is striking the right balance between international competitiveness, fairness and support for the public finances…”; however, no amendments to the FIG regime were announced.

Visa options 

We have written recently about the fact that there is currently no dedicated immigration route for wealthy individuals who wish to come to the UK as investors. As expected, a new investor visa did not feature in today’s Budget (although, as noted in our recent article, we remain hopeful that a relaunch may follow in the future). However, the Government did announce its intention to expand other immigration routes, including making changes to the Skilled Worker visa route to enable high skilled workers to move from one job to another and expanding the High Potential Individual visa, with the aim of making “the UK’s migration system the most pro-business in Europe for high-skill workers”.

UK resident individual members of LLCs

Following a short consultation this summer (about which we have previously commented), the Government has confirmed that it will take forward changes to deal with double tax issues which can arise where UK resident individuals hold interests in US limited liability companies (LLCs). This is a significant and welcome step towards resolving a problem that has caused genuine difficulties for affected taxpayers and has been damaging to the UK's attractiveness as a place to live and do business.

Despite the majority of consultation responses favouring a model which automatically treats LLCs as transparent, the Government is opting to introduce a credit-based relief mechanism, which it considers to be both more legislatively straightforward, and more flexible to suit a range of business structures. Individuals will be able to elect into the credit mechanism at member-level.

The new credit mechanism will be available from early 2028. A further technical consultation is expected to follow shortly, with legislation anticipated to be included in Finance Bill 2027-28.
 

As has been seen before, the Chancellor intends to raise additional revenue - £12bn by the end of this Parliament - through closing the tax gap (the difference between the tax due and tax paid). We describe some of the key announcements in detail below. 

Other measures to achieve this include further investment in HMRC’s debt management capabilities, including expanding HMRC’s compliance workforce. Additionally, the Government intends to increase pressure on certain taxpayers, including “shortly” publishing a consultation on a package of measures to tackle tax avoidance, plus introducing enhanced powers to publish the details of deliberate defaulters (from 2027). Finally, as referenced in the Autumn Budget 2025, the Government has confirmed its intention to participate in a new international exchange agreement aimed at tackling tax evasion by providing for the automatic exchange of readily available information on real estate from 2029/30 (no further details have been given but this aligns more broadly with the UK’s ever-increasing focus on transparency over UK land ownership).

Wealthy compliance report 

HMRC has published a plan to modernise its approach “to ensuring the wealthy meet their tax obligations”, building on HMRC’s Transformation Roadmap. HMRC defines the wealthy taxpayer population as those with income over £200,000 or assets over £2m in any of the last three years.

The key areas covered by the 26-page report include HMRC’s:

• intention to connect internal (including from Government registers such as the Trust Registration Service and Register of Overseas Entities) and third-party data to seek a more joined-up view of wealthy taxpayers and their affairs (this follows a gradual move in this direction by HMRC in recent years). Linked with this, HMRC intends to have regular dialogue with academics and independent experts to identify data sources and research which may be useful in further enhancing their understanding of the wealthy population;
• greater use of technology, including AI, to target compliance activities and the modernisation of digital tax administration for wealthy customers; 
• identification, in summer 2026, of over 200 billionaires with a UK tax footprint, who have each been allocated a Customer Compliance Manager and offered a voluntary discussion. This approach will be kept under review; and
• plan to publish a separate “offshore tax gap”, to “improve HMRC’s understanding of the scale and nature of offshore non-compliance, [and] support more targeted compliance activity”.

The report makes it clear that the wealthy population is a continued area of focus for HMRC, with more data-driven activity in this area a future goal.

Personal tax offshore anti-avoidance legislation

In the Autumn Budget 2024, the Government published a “call for evidence”, seeking views on possible reforms to the UK’s offshore anti-avoidance legislation (including in particular the rules dealing with non-UK trust and corporate structures) in order to “modernise the rules and ensure they are fit for purpose”. 

Since then, it was confirmed at the Autumn Budget 2025 that the Government remains committed to “ambitious reform and substantial simplification” of personal tax offshore anti-avoidance legislation, and that they were intending to collaborate with representative bodies to design a potential new policy and modernised legislation in this area. It was also confirmed that any changes would not take effect before 6 April 2027.

It was hoped that the Autumn Budget 2026 might bring a further update in this area. However, no major announcements were made in today’s Budget, although a new consultation is to be launched later this year on reforming the offshore penalties framework, which may overlap with these reforms. In the absence of any further information in today's Budget, it does not seem possible that any changes can take effect from April 2027 and so further delays seem likely.

Modernising the correction of errors in tax returns

We wrote previously about the Government’s plans, including the publication of draft legislation, to introduce two new mechanisms to put the onus on taxpayers to correct errors in tax returns. Namely, (i) a general taxpayer obligation to take corrective action whenever a taxpayer becomes aware of an inaccuracy in a return or document submitted to HMRC; and (ii) a new Customer Correction Notice (CCN): this gives HMRC the power to write to a taxpayer and require them to review a specific position, then either correct it or explain why no correction is needed. 

Alongside these reforms, changes to how penalties will be assessed within this new framework were also proposed (for example, a taxpayer who becomes aware of an inaccuracy and fails to take reasonable steps to correct it will have that error re-characterised as deliberate).

The proposals are framed from a policy-perspective as a way to free up HMRC’s resources for tackling more complex non-compliance, rather than spending time chasing straightforward mistakes. 

Today’s Budget confirms that the Government will be going ahead with these proposals, with the implementing legislation to be included in the Finance Bill 2026-27, to take effect from 1 April 2028.

Reforms to the capital gains tax treatment of PCCs

With effect from today, the Government has quietly introduced “minor technical changes” which essentially make the use of non-UK resident PCCs as a blocker for capital gains tax ineffective. Whilst the enabling legislation will be included in the Finance Bill 2026-27, the draft legislation is expressed to “have effect in relation to gains accruing on or after 28 October 2026”, meaning the changes will bite as of today, assuming the legislation is enacted.

Under current rules, UK anti-avoidance legislation attributes capital gains made by a non-UK resident company that has five or fewer participators (a “close company”) to the shareholders. 

A PCC is a limited liability company with different classes of shares. At its simplest, participators are issued with all the shares in a particular class in exchange for cash, which is then invested by the company in a separate “cell” which is (crucially) insulated from the assets and liabilities of other cells within the company. However, because for tax purposes the company as a whole is treated as a single company, it is not treated as close and so the attribution rule discussed above does not apply. 

This feature has meant that PCCs have provided an opportunity for UK residents to invest assets in a vehicle enabling gains to be rolled up tax free. However, from today, each cell will effectively be treated as an individual (close) company, so that the attribution rules are able to bite.

Advance tax certainty service: broadening access

The Government has committed to reducing the minimum expenditure threshold for HMRC’s advance tax certainty service from £1bn to £300m, expanding access to the service from 4 November 2026. Cutting the threshold by 70% will bring many more mid-sized businesses within reach of the service so is a welcome development. An overview of the regime can be found in this article.   
 

Improving the benefits of enterprise management incentive (EMI) schemes and company share option plans (CSOPs)

EMI schemes and CSOPs enable qualifying companies to provide tax-advantaged direct employee share ownership to their employees. The tax benefits for employees under these schemes will be significantly extended by measures announced in the Budget. 

From 28 October 2026, the CSOP will be known as EMI2. The scheme will retain the CSOP name in legislation.

From 6 April 2027, the following key changes will come into effect.

• The maximum value of shares over which an individual may be granted share options under EMI2 (measured at grant) will double from £60,000 to £120,000.
• Employees who hold EMI options up to the individual limit of £250,000 will be able to additionally receive options over up to £120,000 of shares under EMI2. This is a relaxation of current rules under which the maximum value of shares under option which an individual can hold under the EMI scheme and CSOP/EMI2 is capped at £250,000.
• The maximum period for exercising EMI2 options in a tax-advantaged manner will increase from 10 years to 15 years aligning it with the EMI scheme, for which the same change took effect on 6 April 2026.
• The maximum period within which an EMI option will be exercisable in a fully tax-advantaged manner following a disqualifying event will be extended from 90 days to 180 days. This will be relevant to leavers who are allowed to exercise EMI options and will also provide a greater easement to companies which cease to be eligible companies, for example where they fail the trading requirement.
• Companies eligible for EMI that are arranging to become controlled by Employee Ownership Trusts (EOTs) will be able to continue to grant qualifying EMI options during the period of transition without failing the EMI independence test.

These changes are a big boost for employee share schemes following changes made in recent Budgets including the increase to the EMI company limits with effect from 6 April 2026. They are a welcome measure that should help businesses recruit and retain employees.
 

The Government has announced that the VAT reverse charge is to be restricted for supplies of services from overseas so that it only applies if the receiving UK business is VAT registered. This change means that where a UK business is not VAT registered, the overseas supplier will be required to charge and account for UK VAT. This measure should reduce the compliance burden for UK businesses that trade below the VAT registration threshold, including those which make VAT-exempt sales which do not require them to register for VAT. However, businesses supplying services into the UK will need to implement controls to determine whether their customers are VAT-registered, which will likely involve obtaining VAT registration numbers and checking (using publicly available resources) that they are valid. Some non-UK service providers that have not previously registered for UK VAT may find that they are now required to do so.