Autumn Budget 2026: what it means for companies
If you were bracing yourself for a corporation tax rise, you can breathe out. The main rate stays at 25%, the small profits rate at 19%, and the Chancellor has stuck to the 2024 Corporate Tax Roadmap.
But ‘no rate rise’ is not the same as ‘no change’. This Budget makes a series of quieter announcements in respect of how profits are extracted, how investment is relieved and how tax is paid.
Taking profits out of your company: the distributions reforms
For owner-managed and family companies, this is the one to watch.
The Government is pressing ahead with all seven parts of its plan to modernise how company distributions are taxed. Arrangements that facilitate the payment of amounts as capital that are not otherwise counteracted by current anti-avoidance rules may increasingly be taxed as income.
Purchase of Own Shares conditions, for example, will be rewritten with clearer, more mechanical conditions. The proposals will also affect how demergers will be effected and in particular capital reduction demergers which are a popular way to restructure will not be possible.
Genuine family succession should be protected, and nothing changes before April 2028, with draft legislation due in 2027. Dividend tax rates are unchanged.
Capital allowances: faster relief for new spend, slower for old
Companies will continue to benefit from the Annual Investment Allowance of £1 million.
For those companies and groups with annual spend in excess of this amount that do not qualify for full expensing, such as leasing businesses, some additional relief has been announced. Such businesses may instead claim a first year allowance (FYA). This will increase from 40% to 50% from 1 January 2027.
However, the main rate writing-down allowance on the existing main rate pool falls to 12% from April 2027 from 14%.
If you are planning capital investment, the timing of purchases should be considered.
Founders’ Relief: a 10% rate for high-growth companies
A new 10% CGT rate on up to £10 million of lifetime gains, for disposals from 6 April 2027.
It is aimed squarely at founders and early investors in genuinely high-growth businesses: you will need to have held 25% from the outset, owned the shares for five years and been UK resident for five years, and the company needs turnover of at least £10 million, at least 15 full-time staff, and to pass two of three growth and R&D tests.
A high bar, but a generous reward. The consultation closes on 30 November 2026.
Employee share schemes: EMI2 arrives
CSOP becomes EMI2. The individual option limit doubles to £120,000, options can be exercised for up to 15 years, and the combined £250,000 cap with EMI is removed, so employees can hold up to £370,000 of options across both schemes.
All from April 2027, and good news for scaling businesses competing for talent.
One key corporation tax aspect of these changes is that companies benefit from statutory deductions on the exercise of share options which is based on the market value of shares at the exercise date rather than the income tax value.
Overseas branches: the foreign PE exemption becomes mandatory
For accounting periods beginning on or after 1 January 2027, the profits and losses of overseas permanent establishments will sit automatically outside UK corporation tax (subject to certain exemptions).
Groups relying on branch losses to shelter UK profits should review their structures now.
R&D relief: less paperwork
The Claim Notification Form disappears for claims from 1 April 2027 and the Additional Information Form will be simplified from autumn 2027. A welcome practical change for regular claimants, and one more reason to keep R&D claims in good order, especially since Founders’ Relief may now depend on them.
The simplification proposals also seek views on aspects of the rules.
Simplifying corporate tax: have your say
A new consultation sets out where the government thinks the corporate tax rules could be simpler, and it is more specific than the title suggests.
The firmest commitment is to repeal the separate International Movement of Capital report for transactions above a certain size. Beyond that, the government wants to look at areas such as a lighter Controlled Foreign Company and anti-hybrid rules for the largest groups now that the Pillar Two global minimum tax applies.
In addition, they are looking at an easier route to benefit from treaty relief on interest paid overseas (see below).
The Government says it has found no significant simplification that wouldn’t cost money regarding the corporate interest restriction. With funds tight, low or no-cost fixes are most likely. Expressions of interest in the working groups are due by 21 November 2026, with detailed proposals expected next summer.
Paying tax: direct debit, e-invoicing and payrolled benefits
A cluster of administrative changes is on the way.
- Mandatory payrolling of benefits in kind starts in April 2027 for cars, vans, fuel and medical cover, with most others following in April 2028
- VAT invoices must be issued electronically from April 2029
- Direct debit becomes the required way to pay VAT and PAYE from 2029
None of this changes how much tax you pay, but your finance team and software will need to be ready.
Banks pay a little more, for a while
The Bank Corporation Tax Surcharge doubles from 3% to 6% from 1 January 2027 to 31 March 2028, to help fund household energy support. Narrow in scope, but a clear signal of where the Chancellor looked for revenue.
Also on the radar: transfer pricing reporting (ICTS)
Not new today, but don’t let it slip off the radar. Some groups within the UK transfer pricing rules will need to file an ICTS, a standardised summary of cross-border related-party transactions, for accounting periods beginning on or after 1 January 2027.
HMRC will use the data to target enquiries, so it pays to make sure your transfer pricing documentation, tax return and ICTS tell the same story. Final regulations are expected by the end of 2026.
Withholding tax on interest
Two things to note if your group pays interest overseas.
First, the withholding tax rate on UK interest rises from 20% to 24% from April 2027 (previously announced to be 22%), following the higher savings income tax rates.
Second, as above, the Government accepts the treaty relief process can be streamlined. It will look further at a self-assessment approach but has heard concerns that replacing HMRC directions could undermine the certainty lenders rely on. A formal response is due shortly, and in the meantime HMRC will publish new guidance on operating the current rules, including what happens when paperwork goes wrong. Now is a good time to check your lender documentation is in order.
How BKL can help
Most of these changes do not bite until 2027 or 2028, which gives you time to plan, especially if you are considering a reorganisation, a share buyback, an investment programme or an exit.
Our corporate tax team would be happy to talk through what the Budget means for your business. Get in touch with Helena using the form below.
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