The UK’s Budget 2025 sets out a major digital-tax modernisation agenda centred on mandatory e-invoicing from 2029 alongside wide-ranging reforms to tax administration, compliance, transparency, and sector-specific taxes.
The UK government published Budget 2025 on 26 November 2025, introducing various measures to improve digital tax administration. One key measure is the requirement for all VAT invoices to be electronic from 1 April 2029.
The shift to e-invoicing is intended to streamline administration, improve reporting accuracy, speed up payments, and help close the VAT gap. This initiative is also expected to improve how HMRC uses information from third parties and to build new technology to increase the use of data-driven prompts to help taxpayers avoid errors when submitting tax returns.
The reform also brings the UK in line with the EU’s ViDA initiative, which will mandate e-invoicing for cross-border transactions from July 2030.
To further drive productivity, the government will require the use of electronic invoicing for all VAT invoices for business-to-business and business-to-government transactions from 2029, with a roadmap to be published at Budget 2026.
Other notable measures are:
Closing in on promoters of marketed tax avoidance
The government will introduce new powers to close in on promoters of marketed tax avoidance. These will be legislated for in Finance Bill 2025-26. The government will publish a consultation on further measures to tackle promoters in early 2026.
Clamping down on electronic sales suppression
The government will publish a call for evidence in early 2026 relating to software standards for the Electronic and Mobile Point of Sale Sector to explore how best to embed standards across the latest products and innovations.
Capital Gains Tax anti avoidance share: exchanges and reorganisations
The government will modernise the anti-avoidance provisions that apply to share exchanges and company reorganisations with immediate effect. This will be legislated for in Finance Bill 2025-26.
Capital Gains Tax: Non-resident capital gains
The government will amend non-resident capital gains tax rules, closing loopholes for protected cell companies and clarifying legislation for investors. Changes apply with immediate effect, with further administrative reforms from 6 April 2026. This will be legislated for in Finance Bill 2025-26.
VAT and PAYE timely payments
The government will publish a consultation in early 2026 considering ways VAT and Pay As You Earn (PAYE) liabilities can be paid promptly without the taxpayer falling behind on their payments, including requiring more tax payments by direct debit.
Digital prompts for VAT and Corporation Tax
The government will invest GBP 59 million in new technology over the next five years to provide taxpayers with real-time digital prompts for VAT filing software from April 2027, and Corporation Tax filing software from April 2028.
Transfer Pricing: International Controlled Transaction Schedule
The government will legislate to require in-scope multinationals to submit an International Controlled Transaction Schedule (ICTS) which will report information annually on cross-border related party transactions. This measure is expected to take effect for accounting periods beginning on or after 1 January 2027. Technical consultation on its design will take place in spring 2026.
Requiring domestic reporting of UK resident cryptoasset users under the Cryptoasset Reporting Framework
UK reporting Cryptoasset Service Providers will be required to report on their UK tax resident customers under the Cryptoasset Reporting Framework. Information for first reports to HMRC will be collected from 1 January 2026 and reported to HMRC in 2027.
Enhancing tax transparency on real estate
The UK intends to participate in a new international agreement which will tackle tax evasion by providing for the automatic exchange of readily available information on real estate from 2029 or 2030.
Increases to Corporation Tax late filing penalties
The government will double the penalty for taxpayers submitting a Corporation Tax return late from 1 April 2026. This will be legislated for in Finance Bill 2025-26.
Penalty reform: Updates to the penalty regime for Self Assessment and VAT
The government will not apply late submission penalties for quarterly updates during the 2026-27 tax year for Income Tax Self Assessment (ITSA) taxpayers required to join Making Tax Digital (MTD). The government will apply the new penalty regime for late submission and late payment to all ITSA taxpayers not already due to join the new system from 6 April 2027. This will be legislated for via secondary legislation. The government will increase the penalties due for late payment of ITSA and VAT from 1 April 2027. This will be legislated for via secondary legislation.
Modernising and standardising Corporation Tax submissions
The government will consult in early 2026 on delivery timescales and enforcement for prescribing the content and tagging of the Corporation Tax computation. This builds on prior public engagement by HMRC on this subject.
Low Value Imports
The government is removing the customs duty relief on goods imported into the UK valued at GBP 135 or less, making them subject to customs duty from March 2029 at the latest, and consulting on implementing a new set of customs arrangements for these goods.
Landfill Tax Rates 2026-27
The government will increase the standard rate of Landfill Tax by RPI and the lower rate by the cash amount of the increase in the standard rate, maintaining the differential between the two rates in cash terms.
Plastic Packaging Tax rate and threshold 2026-27
To incentivise businesses to use recycled instead of new plastic in packaging, the government will increase the Plastic Packaging Tax (PPT) rate for 2026-27 in line with CPI inflation.
Oil and Gas Price Mechanism
The government confirms that the temporary Energy Profits Levy (EPL) will be replaced by the permanent Oil and Gas Profits Mechanism (OGPM). The OGPM will be a revenue-based mechanism which only operates in times of high prices and will replace the EPL when it ends in 2030, or earlier if the EPL price floor triggers. The rate will be 35% with thresholds of USD 90/barrel (oil) and 90p/therm (gas).
Soft Drinks Industry Levy (SDIL) consultation response
The government will reduce the threshold at which the SDIL applies from 5g to 4.5g sugar per 100ml and remove the exemptions for milk-based and milk substitute drinks with added sugar to create a level playing field between pre-packaged beverages.
Gambling Duty
Following consultation, the government will not proceed with a single tax on remote betting and gaming. Instead, the government will increase duties on remote gambling, but maintain different rates for remote betting and remote gaming. Remote Gaming Duty will increase from 21% to 40% from 1 April 2026. A new Remote Betting Rate will be introduced at 25% from 1 April 2027 within General Betting Duty.
Vehicle Excise Duty (VED) exemption for search and rescue vehicles
The government will exempt search and rescue vehicles from VED and will work with stakeholders to design and implement an exemption from April 2027.
Inheritance Tax: Unused allowance for agricultural and business property reliefs
Any unused GBP 1 million allowance for the 100% rate of agricultural property relief and business property relief will be transferable between spouses and civil partners, including if the first death was before 6 April 2026. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026.
Carbon Border Adjustment Mechanism (CBAM)
The government will legislate in Finance Bill 2025-26 to introduce the CBAM from 1 January 2027. The inclusion of indirect emissions within the scope of the CBAM will be delayed until 2029 at the earliest. This is to reflect continued support for the Energy Intensive Industries (EII) Compensation Scheme.
