Corporation Tax
The government has confirmed that the rates of Corporation Tax will remain unchanged,
which means that, from April 2026, the rate will stay at 25% for companies with
profits over £250,000. The 19% small profits rate will be payable by companies with
profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will
pay tax at the main rate reduced by a marginal relief, providing a gradual increase
in the effective Corporation Tax rate.
Comment
The government has committed to capping the main rate of Corporation Tax at 25%
for the duration of the Parliament.
The penalty for taxpayers submitting a Corporation Tax return late will double for
returns for which the filing date is on or after 1 April 2026.
Capital allowances
The Full Expensing rules for companies allow a 100% write-off on qualifying
expenditure on most plant and machinery (excluding cars) as long as it is new and
unused. Similar rules apply to integral features and long-life assets at a rate of
50%.
The government will reduce the main rate Writing Down Allowance (WDA) from 18% to 14%
per year from 1 April 2026 for Corporation Tax purposes and 6 April 2026 for Income
Tax purposes. For businesses with chargeable periods which span 1 April (Corporation
Tax) or 6 April (Income Tax), a hybrid rate will apply. The WDA on the special rate
pool remains at 6% per year.
For expenditure incurred on or after 1 January 2026, the government will introduce a
new first year allowance (FYA) of 40% for all businesses on main rate assets,
including most expenditure on assets for leasing. Cars, second-hand assets and
assets for leasing overseas will not be eligible.
The Annual Investment Allowance is available to both incorporated and unincorporated
businesses. It gives a 100% write-off on certain types of plant and machinery up to
certain financial limits per 12-month period. The limit remains at £1 million.
The 100% FYA for qualifying expenditure on zero-emission cars and the 100% FYA for
qualifying expenditure on plant or machinery for electric vehicle chargepoints have
been extended to 31 March 2027 for Corporation Tax purposes and 5 April 2027 for
Income Tax purposes.
Targeted Research and Development Advance Assurance Service
The government will pilot a targeted advance assurance service from spring 2026. This
will enable small and medium-sized enterprises to gain clarity on key aspects of
their Research and Development (R&D) tax relief claims before submission to HMRC. A
summary of responses to the advance clearance consultation will also be published.
Advance Tax Certainty Service
A new Advance Tax Certainty Service will be launched in July 2026. This will provide
major investment projects in the UK with certainty on the application of tax law to
their specific circumstances. Qualifying project expenditure must be at least £1
billion. Subject to full initial disclosure of all material facts, a clearance will
bind HMRC for five years, and may be renewed for a further five years.
Enterprise Investment Scheme and Venture Capital Trusts investment limit increase
and restructure
The government has announced significant changes to the limits applying to the
Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCTs) from 6 April
2026. The gross assets requirement that a company must not exceed for EIS and VCTs
will increase from £15 million to £30 million immediately before the issue of the
shares, and from £16 million to £35 million immediately after the issue. The annual
investment limit that companies can raise will increase from £5 million to £10
million. For Knowledge-Intensive Companies (KICs), the annual investment limit will
increase from £10 million to £20 million. The company's lifetime investment limit
will increase to £24 million and for KICs to £40 million. The Income Tax relief that
can be claimed by an individual investing in VCTs will decrease from 30% to 20%.
Expanding the eligibility limits of the Enterprise Management Incentives scheme
The government is also increasing certain limits relating to the Enterprise
Management Incentives (EMI) scheme. For EMI contracts granted on or after 6 April
2026, the employee limit will increase from 250 employees to 500 employees, the
gross assets test will be increased from £30 million to £120 million, and the
company share option limit will be increased from £3 million to £6 million. The
limit on the exercise period will increase to 15 years, and will also apply
retrospectively to existing EMI contracts which have not already expired or been
exercised.
UK Listing Relief
The government has announced an exemption from the 0.5% Stamp Duty Reserve Tax (SDRT)
charge on agreements to transfer securities of a company whose shares are newly
listed on a UK regulated market. This measure will have effect for agreements to
transfer made on or after 27 November 2025. The exemption will apply for a
three-year period from the listing of the company's shares. The exemption will not
apply to the 1.5% SDRT charge, or where the transfer forms part of a merger or
takeover where there is a change of control.