UK Tax Snapshot
Autumn 2026

The first Budget under Burnham’s new Government lands on 28 October 2026, and will be the first real test to turn his vision into concrete plans, with the promise of a “Budget for every postcode” reflecting the Government’s focus on regional empowerment.

Before then, though, comes party conference season. The speeches from the Chancellor and Prime Minister should offer the clearest signals yet of the Government’s fiscal direction ahead of Budget day.

Burnham has made clear he wants more than just a change of leadership - he has set his sights on a whole new political and economic model (the full detail of what that means is likely to emerge in a 10-year plan expected later in the year). But ambition has to be squared with reality, with borrowing levels, inflation and sluggish growth working against the public finances. Against this tight backdrop, we can expect to see Labour’s third tax-raising Budget in as many years.

On the day, devolution looks set to feature prominently. The Chancellor, John Healey, wants to move “money and power out of Westminster”. How far this goes in practice, particularly when it comes to fiscal powers for metro mayors, will be worth watching.

Wealth taxes remain a focal point of pre-Budget speculation. Capital gains tax continues to attract attention, though the Prime Minister has sought to reassure investors, telling the Financial Times he has no intention of “taxing the wealthy out of Britain”. A standalone wealth tax looks unlikely, but further increases on property and pensions remain under speculation.

Business Secretary Jonathan Reynolds has also moved to calm nerves, privately assuring business leaders that a rumoured “exit tax” on UK companies listing or being acquired overseas is not on the cards.

Corporation tax rates look safe for now, with the expectation that the Government will stick to its published roadmap. That said, sector-specific levies remain in play.

Inheritance tax and social care are becoming increasingly intertwined. One proposal gaining traction is replacing inheritance tax with a “national care levy” on assets at death. The Government’s social care review will not report until summer 2027, so major changes are unlikely this Budget – but with the clock ticking on this Parliament, the window for meaningful reform is narrowing.

HMRC will continue to play a central role in the revenue-raising strategy. We can expect another round of anti-avoidance measures and tax administration reforms – a way of boosting receipts without technically raising rates. Measures under consideration include accelerating income tax payments and tightening the rules on loans to participators. We may also receive an update on the Government’s plans to extend the uncertain tax treatment notification regime to individuals and trusts which colleagues have written about previously. In short, expect the usual array of incremental tax tweaks – individually modest, but collectively adding yet another layer of complexity to the system.

If you would like to discuss how these developments might affect you, please get in touch with your usual Macfarlanes contact.

The UK operates a withholding tax on interest paid to overseas lenders by requiring payers of UK source yearly interest to deduct income tax at the basic rate of 20% (rising to 22% starting 6 April 2027). While the requirement to deduct is well understood, application in practice can be complex particularly when an applicable double tax treaty provides relief from withholding.

The UK Government is therefore considering how the administration of double tax treaty relief could be simplified or reformed while maintaining protection of the UK tax base.

Read Partner Greg Price and Tax Policy Specialist Milly Walker’s analysis of the Government's proposals.

The Government is seeking views on modernising the tax framework that covers distributions made by companies to shareholders who are either individuals or trusts.

The consultation is wide-ranging. It explores potential reforms to the UK tax treatment of reductions of share capital, demergers, and the purchase of own shares, as well as whether to align the tax treatment of distributions from non-UK resident companies with that of distributions from UK resident companies.

In an article published in Bloomberg Tax Partner Greg Price and Tax Policy Specialist Milly Walker consider the benefits and risks of these Government plans.

Uncertainty surrounding the UK tax treatment of US LLCs causes real difficulties in practice and can result in double taxation where UK individuals hold interests in US LLCs. 

The UK Government has recently published a welcome consultation document exploring solutions to this problem and for UK individuals with interests in other ”reverse hybrid” entities (entities that are transparent in their jurisdiction of establishment but opaque in another jurisdiction).

Read our thoughts on this development.

In our Spring 2026 edition we reported on the UK’s proposals for an International Controlled Transactions Schedule (ICTS) - a new annual filing requirement capturing factual information about relevant cross-border related party transactions in a standardised format.

The ICTS is expected to come into force for accounting periods starting on or after 1 January 2027. Introduction will mark a significant change in UK transfer pricing compliance, facilitating automated, data-led transfer pricing risk assessment by HMRC. Over the summer, HMRC conducted a technical consultation on the rules which will implement the ICTS.

In an article published in Bloomberg Tax, Partner Sarah Ling, Transfer Pricing Lead Wai Wan, and Senior Transfer Pricing Manager Bahar Eken analyse the draft rules and consider how taxpayers and their advisers should respond.

HMRC v Burlington Loan Management is a helpful Court of Appeal decision establishing that a genuine cross-border sale of debt to a taxpayer entitled to receive interest free from UK withholding does not, of itself, constitute improper tax arbitrage. This is the case even if the deal pricing takes the treaty benefits into account.

Read Senior Knowledge Lawyer Elizabeth Keeling’s discussion of the Court of Appeal's decision.

In Barclays Services Corporation v HMRC the Upper Tribunal decided that a US company was not entitled to join a UK VAT group via its UK branch because the branch did not have sufficient presence in the UK to meet the necessary “fixed establishment” test. Even if the condition had been met, HMRC was entitled to refuse the application on protection of revenue grounds because the application was driven by the opportunity to generate substantial tax benefits compared to the limited resources available to the branch.

Senior Counsel Chris Mortimer and Senior Knowledge Lawyer Elizabeth Keeling consider what the case means for practitioners.

The Spring Statement, delivered by the Chancellor on 3 March 2026 was purposefully designed to be a low-key affair with no new tax rises or reforms announced. The forecast published by the Office for Budget Responsibility (OBR) acknowledged that the UK’s long-term fiscal outlook remains challenging. Expected GDP growth for 2026 is 1.1%, down from 1.5% in 2025, with the OBR noting that a number of factors (including the conflict in the Middle East and recent changes in US tariff policy) could have a significant impact on their forecast. Accordingly, whilst no new tax rises materialised yesterday, further fiscal announcements later this year cannot be ruled out.

Taxpayers should not lose sight of other upcoming tax reforms, announced at the 2024 and 2025 Autumn Budgets. Key measures coming into force on 6 April 2026 for private clients can be found in an update prepared by Partner, Paul Hardwick and Senior Knowledge Lawyer, Clare Wilson.

 

Recognising the importance of tax certainty in encouraging investment in the UK, a dedicated HMRC service will launch this summer with the aim of providing greater certainty to taxpayers (and their advisers) on how UK corporation tax, VAT, SDLT, income tax, the pay-as-you-earn (PAYE) regulations and the construction industry scheme will apply to new UK investment. The service will apply to investments with a qualifying expenditure of £1bn or more over the lifetime of the project.

Partner, Gregory Price and Associate, Finn Halton offer their thoughts on the Government’s plans and explore some of the other channels that exist in the UK tax system to secure tax certainty.

 

The Supreme Court (the UK’s highest court) confirmed in HMRC v Hotel La Tour that there is no general “fundraising exception” enabling a taxpayer to recover VAT on professional costs when selling a subsidiary. The taxpayer company had tried to argue that it was entitled to recover the VAT element of its advisers’ fees because those fees were incurred in connection with the sale of shares and the purpose of the sale was to fund taxable activity. The Court rejected this argument. The fees were directly and immediately linked to an exempt supply (the share sale) and the VAT on those costs was irrecoverable, notwithstanding the reason for the sale.

Read the thoughts of Senior Counsel Chris Mortimer and VAT Specialist Lucy Green on the Court’s decision.

 

New rules that are expected to come into force for accounting periods starting on or after 1 January 2027 will require in-scope multinationals to file an International Controlled Transactions Schedule (ICTS). 

The ICTS will comprise an annual filing requirement that captures specific factual information about relevant cross-border related party transactions in a standardised format. The information will be used for risk assessment by HMRC compliance teams, prior to the opening of tax enquiries. UK resident businesses and foreign businesses with UK permanent establishments will be within scope and while the precise thresholds have yet to be determined, the Government estimate that around 75,000 businesses will be affected by the new rules. 

Separately, updated HMRC guidance details out a more structured approach to how HMRC and taxpayers should apply benchmarked arm’s length price ranges, in particular what should happen if a taxpayer finds that their results fall outside a benchmarked range.

Partner, Sarah Ling and Transfer Pricing Lead, Wai Wan explain these developments and consider how taxpayers and their advisers should respond in the following articles: Countdown to the International Controlled Transactions Schedule and HMRC guidance raises the bar for benchmarking studies.

 

The OECD has updated its Manual on Effective Mutual Agreement Procedures (MEMAP). Whilst the manual is non-binding, and jurisdictions are not compelled to adopt all or any of the OECD’s recommendations and best practices, it nonetheless provides a valuable framework for improving the efficiency and effectiveness of MAP globally. It will be interesting to observe whether the standards presented by the OECD ultimately serve to support taxpayers accessing MAP and resolve cross-border tax disputes more efficiently. 

Our transfer pricing specialists, Wai Wan and Bahar Eken, explain more about the publication and why this represents a practical step forward in international tax dispute resolution.

The major international tax development from the beginning of the year is the OECD’s “Side-by-Side” deal that grants a significant exemption from the Pillar Two rules for US-headquartered multinationals (and in time, possibly other jurisdictions). The publication of detailed rules is a welcome step that draws one chapter to a close, though it is clear the saga has some way yet to run.

In an article published in Bloomberg by Partner, Gregory Price and Associate, Elvira Colomer Fatjo, we explore what the deal means for non-US groups.

 

In further work undertaken by the OECD, a recent update of its commentary on the Model Tax Convention is intended to provide clarity on when remote work may create a permanent establishment of the home country employer. The update covers many of the types of cross-border work we see in practice, but some uncertainties remain.

Partner, Gregory Price and Associate, Edward Hughes provide commentary on the practical impact of the updated guidance.