The UK’s Budget 2025 outlines a significant digital tax modernisation plan, featuring mandatory e-invoicing from 2029 and comprehensive reforms to tax administration, compliance, transparency, and sector-specific taxation.
The UK Parliament is currently reviewing the Finance (No. 2) Bill (Bill 342 for 2024–26), which was introduced to the House of Commons on 4 December 2025.
The bill has completed its first reading and outlines the key tax and financial measures announced in the 2025 Budget delivered on 26 November by Chancellor Rachel Reeves.
The Finance (No. 2) Bill has been organised into eight parts:
- Part 1: Income tax, capital gains tax, and corporate taxes
- Part 2: Inheritance tax
- Part 3: Other existing taxes (including VAT, environmental taxes, gambling duties, and others)
- Part 4: Vaping products duty
- Part 5: Carbon border adjustment mechanism
- Part 6: Avoidance provisions
- Part 7: Tax advisers
- Part 8: Miscellaneous and final measures
Key provisions:
E-Invoicing
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. 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.
Tackling Tax Avoidance
New powers will target promoters of tax avoidance schemes. CGT rules for share exchanges and non-resident investors will be modernised immediately, with legislation to follow in Finance Bill 2025-26. The government will also examine measures to prevent electronic sales suppression.
Digital Reporting and Transparency
Investment in new technology will introduce real-time VAT and Corporation Tax filing prompts from 2027–28. Multinationals will submit a new annual transaction schedule from 2027, while crypto service providers must report UK customers’ data from 2026. The UK will also join future international efforts to share real estate ownership data.
Payment and Penalty Reform
The government will consult on measures to ensure VAT and PAYE liabilities are paid on time. Corporation Tax late filing penalties will double from 2026, and updated penalty regimes will apply for Self Assessment and VAT starting April 2027.
Customs, Environmental and Sector Measures
Customs duty will apply to low-value imports by 2029. Increases will be made to Landfill Tax and the Plastic Packaging Tax, while a permanent Oil and Gas Profits Mechanism will begin no later than 2030. Gambling duties will also rise, and the Soft Drinks Industry Levy threshold will be reduced.
Other Updates
VED exemptions will apply to search and rescue vehicles, and unused agricultural and business property relief allowances will become transferable from 2026. The Carbon Border Adjustment Mechanism will be introduced from 2027, with indirect emissions included no earlier than 2029.
Earlier, the UK government published Budget 2025 on 26 November 2025, introducing various measures to improve digital tax administration.
