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 Key Tax Changes for UK Businesses in 2026

 Key Tax Changes for UK Businesses in 2026
2026 is a pivotal tax year for UK businesses, with mandatory digitalisation of income tax and self-assessment for many sole traders and landlords, and inheritance tax changes that affect all business owners (it’s not just a ‘Farm Tax’!). As the tax landscape evolves, your individual circumstances will shape the best approach. Engaging an advisor early is crucial to effectively managing risk and identifying opportunities under the new rules.
Why has this year brought so many developments for UK businesses?

Many of these tax changes reflect HMRC’s continued focus on revenue protection and transparency, but addressing economic distortions and perceived unfairness is another key motivation. 

 

Tackling non-compliance remains a central priority, with HMRC seeking greater visibility over income, profits, and gains through enhanced reporting and digitalisation. 

 

National debt limitation continues to shape fiscal policy, with tax measures focused on protecting and stabilising government revenues over the medium term. 

 

Simplification and modernisation of the tax system, particularly through digital reporting, have also driven reform. 

 

The government is also focused on reducing the gap between tax owed and tax collected.  

 

Key Tax Changes

Corporate Tax Changes 

  • Increased emphasis on accuracy in profit allocation and reporting.
  • The main rate of corporation tax remains capped at 25% for companies with profits over £250,000, with a small profits rate for those earning below £50,000. 
  • Additional reporting expectations designed to improve transparency. 
  • The main rate of capital allowances reduces from 18% to 14% from April 2026. 

 Business Tax Changes

  • From 6 April 2026, the UK government is significantly expanding Enterprise Management Incentive (EMI) eligibility to support scale-ups. 
  • The National Living Wage increases to £12.71 per hour. 
  • Expanded eligibility for Enterprise Investment Scheme relief for fundraising 
  • Salary sacrifice for pensions is to be heavily restricted from April 2029, with the benefits being almost eliminated. 

Personal Tax Changes Affecting Business Owners

  • Full Business Property Relief for Inheritance Tax is now capped at £2.5m per taxpayer for all business owners, whether they’re farmers or not. The allowance can be transferred between spouses, as with nil-rate bands. 
  • MTD (Making Tax Digital) for ITSA (Income Tax Self-Assessment) becomes mandatory for sole traders and landlords with annual income over £50,000.  
  • The taxation of dividends is increasing. 
  • Ongoing scrutiny of remuneration structures. 
  • Income tax thresholds remain frozen. 
  • The tax benefit of selling into an Employee Ownership Trust has been halved: it is no longer completely tax-free.  
  • Business Asset Disposal Relief will be at 18% from 6 April 2026 (currently 14%) 
  • The rate for IR (Investors Relief) will also rise to 18% 
Identifying the Opportunities 
The scale of these changes underscores the need for proactive planning over reactive responses, particularly for businesses affected by the Inheritance Tax changes, but it’s not just about mitigating risk; it’s about seizing opportunities. Hidden within these new measures is room to grow, and through relief optimisation, timing strategies, and structuring support, we can help you find it.
Practical Steps You Can Take Now:
To remain compliant and avoid unnecessary risk, businesses should take practical steps early in the year, including:
  • Reviewing corporate and group tax positions
  • Reassessing director remuneration and dividend strategies
  • Inheritance Tax planning, to mitigate the potential impact of the Business Property Relief changes
  • Modelling CGT exposure for planned transactions
  • Updating forecasts and budgets
  • Engaging with advisers early to implement changes before deadlines 
Thorough, timely planning in January can mitigate risk, enable strategic, thoughtful decision-making, and ensure you understand impending changes before they affect your organisation. By getting organised and seeking expert advice now, you can make the most of these changes, instead of letting them get the better of you.

Do you need help navigating 2026 tax changes? Speak with a member of our Corporate Tax Team today

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