The UK government will temporarily lift the banking surcharge to 6%, raise income tax rates on savings and property income from April 2027, and extend relief on fuel duty and domestic electricity VAT. The measures were set out in the Overview of tax legislation and rates published with Budget 2026.
UK’s Chancellor of the Exchequer John Healey presented Budget 2026 to Parliament on 28 October 2026. Most of the measures will be legislated through Finance Bill 2026-27, while others will be introduced through secondary legislation or future Finance Bills.
The measures apply across the UK unless stated otherwise.
Corporate tax
The Corporation tax surcharge on banking companies will rise to 6% for 15 months, from 1 January 2027 to 31 March 2028. The main Corporation Tax rate stays at 25% and the small profits rate at 19% for the financial year beginning 1 April 2028.
On capital allowances, the main rate first-year allowance rises to 50% for expenditure incurred on or after 1 January 2027. The main rate writing-down allowance falls to 12% from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.
A new Capital Gains Tax Founders’ Relief will give a lower rate on qualifying disposals of shares or securities from 6 April 2027. A technical consultation on the relief closes on 30 November 2026. The Business Asset Disposal Relief lifetime limit will be halved from GBP 1 million to GBP 500,000 for qualifying disposals from the same date.
Other corporate changes include:
- The foreign permanent establishment exemption becomes mandatory for accounting periods beginning on or after 1 January 2027.
- The OECD’s Side-by-Side package will be added to Multinational Top-up Tax and Domestic Top-up Tax rules for periods beginning on or after 1 January 2026.
- The entry threshold for the Advance Tax Certainty Service falls from GBP 1 billion to GBP 300 million from 4 November 2026.
- A permanent Oil and Gas Revenue Levy of 35% will apply to exceptional revenues once the Energy Profits Levy ends, on 1 April 2030 or earlier if the Energy Security Investment Mechanism is triggered.
- The Claim Notification Form for research and development relief claims will be scrapped for claims made on or after 1 April 2027.
The government is also consulting on a sovereign tax status regime, due to take effect from 1 January 2029, and will repeal the remaining Advance Corporation Tax regime from 1 April 2031.
Personal tax
From 6 April 2027, the savings basic, higher and additional rates of Income Tax will be 24%, 44% and 49% respectively. Property income will be taxed at the same rates in England, Wales and Northern Ireland.
The Trading Allowance will increase from GBP 1,000 to GBP 3,000 from 6 April 2027. The Self Assessment trading income reporting threshold will rise to the same level.
The government will retain the cash ISA limit at GBP 20,000 from April 2027 and will explore a new incentive for first-time Stocks and Shares ISA investors. A First Time Buyer ISA will replace the Lifetime ISA for new savers when it launches in April 2029. It will give a 25% government bonus on the final balance, up to GBP 20,000, towards a first home worth up to GBP 450,000. From 29 October, the Lifetime ISA withdrawal charge for purchases above the property cap will fall from 25% to 20%.
Employee share schemes will also change. The Company Share Option Plan individual option limit rises to GBP 120,000, and its exercise period is extended to 15 years. The Enterprise Management Incentives exercise window after disqualifying events is extended to 180 days.
Approved Mileage Allowance Payments and Simplified Mileage Rates for business mileage above 10,000 miles will increase from 25 pence to 35 pence per mile from 6 April 2027.
Most National Insurance limits and thresholds stay at 2026 to 2027 levels until the 2030 to 2031 tax year. The Lower Earnings Limit and Small Profits Threshold will be uprated by 3.5%, with the Lower Earnings Limit set at GBP 6,916 a year.
Several pension measures are included:
- The Pension Tax Allowance will be available for 2027 to 2028, 2028 to 2029 and 2029 to 2030.
- The two-year rule for pension and lump sum death benefits will be removed for payments made on or after 28 October 2026.
- Surplus payments from defined benefit schemes to members will be permitted under set conditions from 6 April 2027.
Employers must report and payroll most benefits in kind through Real Time Information. Company cars, vans, fuel and medical benefits are covered from 6 April 2027, and other benefits from 6 April 2028. A High Value Council Tax Surcharge on residential properties worth GBP 2 million or more will start from April 2028.
VAT
The temporary 0% VAT rate on domestic electricity will be extended until 30 June 2027. A zero rate will apply to medicines donated free of charge for a qualifying purpose, with effect from 23 June 2026.
The VAT online marketplace liability rules will extend to UK businesses from October 2027. Marketplaces will have to collect VAT on sales by UK VAT-registered businesses and other UK businesses above an annual sales threshold of GBP 90,000 per platform. The reverse charge on business-to-business services from overseas will apply only where the UK recipient is VAT registered, from April 2027.
Private hire vehicle operators will be treated as making the supply and must charge VAT on the full fare from 2 January 2028. The government will consult on the turnover threshold, with GBP 50 million the lead option. Electricity from publicly accessible electric vehicle charging points will be standard rated from 1 November 2026. The VAT exemption for a deputy for a medical practitioner will end from 1 May 2027.
E-invoicing requirements will apply from April 2029. A consultation on digital reporting runs until 20 January 2027.
Duties, levies and other measures
Machine Games Duty on higher stakes machines will rise from 20% to 25% from 1 April 2027, covering machines with a maximum charge to play above GBP 1 or a maximum prize above GBP 100. The gross gaming yield bands for Gaming Duty will be frozen for 2027 to 2028.
The temporary 5 pence per litre cut in main fuel duty rates will continue from 1 January 2027 to 30 June 2027. Rates will then return to pre-cut levels and be uprated in line with the Retail Prices Index.
Electric Vehicle Excise Duty will start on 1 April 2028 at 3 pence per mile for battery electric and hydrogen fuel cell vehicles, and 1.5 pence per mile for plug-in hybrids. Air Passenger Duty’s higher rate will extend to all private jets of 5.7 tonnes or more from 1 April 2027. Alcohol Duty rises in line with the Retail Prices Index from 1 February 2027.
In the Soft Drinks Industry Levy, the lower and higher rates will be GBP 2.25 and GBP 3.01 per 10 litres from 1 April 2027. The sugar threshold will fall from 5 grams to 4.5 grams per 100 millilitres from 1 January 2028, and the exemptions for milk-based drinks will be removed.
An International Student Levy of GBP 925 per student per year will apply from the 2028-29 academic year, with an allowance for the first 220 international students. A Securities Transfer Tax will replace Stamp Duty and Stamp Duty Reserve Tax from late 2027.
Tax administration and compliance
A new general obligation will require taxpayers to correct inaccurate returns from 1 April 2028. HM Revenue and Customs will be able to issue a Customer Correction Notice where it suspects an inaccuracy.
Taxpayers will have to set up a Direct Debit for VAT and PAYE return liabilities from April 2029. The tax authority will be able to recover lower value established debts through bank account deductions from 2029-30. The government will also introduce mandatory software standards to tackle fraud and publish more detail on deliberate tax defaulters.
Consultations on the Carbon Border Adjustment Mechanism, the Nicotine Approval Scheme and Machine Games Duty liability close on 20 January 2027, with the travel services VAT review running until 31 January 2027.
The government says it will work with stakeholders on the detailed design of these measures as the Finance Bill 2026-27 moves through Parliament.
