Corporation Tax and Business Investment
Capital allowances
To encourage investment, the main rate first-year allowance will increase from 40% to 50% for qualifying expenditure incurred on or after 1 January 2027. However, the main writing-down allowance will fall from 14% to 12% from 1 April 2027 for companies and 6 April 2027 for income tax purposes, increasing the importance of maximising upfront relief where available.
These changes will apply to expenditure that is not wholly relieved via full expensing or the Annual Investment Allowance, both of which remain unchanged.
Corporate Interest Restriction: Interaction with creative reliefs
From 1 January 2027, changes will be made to the interaction between the UK’s Corporate Interest Restriction regime and certain creative industry tax reliefs. The measure is intended to ensure that these reliefs are taken into account appropriately when applying the interest restriction rules.
VAT and Indirect Taxes
Online marketplaces
From October 2027, online marketplaces will become responsible for collecting VAT on sales made by UK VAT-registered businesses and certain other UK sellers with annual platform sales of at least £90,000. The measure is intended to improve VAT compliance and create a more level playing field between online and traditional retailers.
Private hire operators
From 2 January 2028, larger private hire operators will be required to account for VAT on the full value of fares. The government is consulting on the turnover threshold, with annual fare revenue of £50 million currently the lead option.
Cross-border services
From 1 April 2027, the reverse charge for imported services will be restricted to VAT-registered UK businesses. Overseas suppliers providing services to non-VAT registered UK businesses will generally be required to register and account for UK VAT in the normal way.
Social housing VAT relief
Land sold to registered providers of social housing will become zero-rated for VAT from 1 April 2027. The measure should reduce development costs, improve project viability and support the delivery of affordable housing.
Energy VAT reliefs
The temporary 0% VAT rate on domestic electricity has been extended until 1 July 2027. In addition, heat batteries will qualify for the 5% reduced VAT rate applicable to qualifying energy-saving materials installed in residential and charitable buildings from 1 April 2027.
Low value imports
The existing £135 Customs Duty Relief for low value imports will be abolished from October 2028 and replaced with a new customs framework designed to modernise the treatment of imported goods and improve compliance.
Business Rates
From 1 April 2027, the Small Business Rates Relief threshold for qualifying retail, hospitality and leisure properties will increase from £12,000 to £18,000 rateable value. The tapered relief threshold will also increase from £15,000 to £21,000.
From 1 April 2027, adult gaming centres will lose eligibility for the retail, hospitality and leisure multipliers. Vape shops will lose eligibility for both the retail, hospitality and leisure multipliers and Small Business Rates Relief.
Financial Services
Bank surcharge
The Bank Corporation Tax Surcharge will temporarily increase from 3% to 6% between 1 January 2027 and 31 March 2028, before reverting to 3% from 1 April 2028.
Duties, Environmental Taxes and Transport
Fuel duty
The temporary 5p per litre fuel duty cut will remain in place until 1 July 2027. The planned RPI-linked increase has also been deferred until that date, providing continued support for businesses with transport and logistics costs.
Alcohol duty
Alcohol duty rates will increase in line with RPI from 1 February 2027. However, Small Producer Relief will become more generous from the same date, providing additional support to smaller breweries, cider makers, wineries and distilleries.
Gaming duties
From 1 April 2027, Machine Games Duty will increase from 20% to 25% for machines with stakes exceeding £1 or prizes exceeding £100. A further change from 1 April 2028 will transfer liability for certain supplier-owned machines operating under profit sharing arrangements to the supplier. Gaming Duty bands will remain frozen until 31 March 2028.
Employment Tax
National Minimum Wage increases
From 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour. The National Minimum Wage for 18 to 20 year olds will increase to £11.27 per hour, while the rate for 16 to 17 year olds and eligible apprentices will rise to £8.31 per hour. Employers should review payroll costs and budgeting ahead of the changes.
Mileage allowances
From 6 April 2027, the approved tax-free mileage rate for business travel in excess of 10,000 miles per year will increase from 25p to 35p per mile. The existing 55p per mile rate for the first 10,000 miles will remain unchanged and is now permanent.
Benchmark travel and subsistence scale rate changes
Rules where employers reimburse business travel and subsistence expenses without requiring receipts to be checked will be simplified. From April 2028 outdated daily scale rates will be modernised to better reflect current subsistence costs for UK business travel, and current location specific overseas rates will be replaced with a tiered approach that should reduce administrative burden for employers.
Tax treatment of visa and immigration costs
Effective from 28 October 2026, employer payments of Immigration Skills Charges or Certificate of Sponsorship fees will not be treated as a taxable benefit in kind.
Mandatory Payrolling of Benefits in Kind
From 6 April 2027, all employers will be required to report car, van, fuel and medical benefits in real-time via the payroll. This is a significant change to current P11D reporting. Other benefits will need to be payrolled from April 2028. Special rules for globally mobile employees have also been announced.
Tax Administration and Compliance
Mandatory VAT e-invoicing
From 1 April 2029, VAT invoices must be issued in a prescribed electronic format. The government has published an implementation roadmap and will release detailed policy and technical specifications by April 2028.
Automatic payment of Tax liabilities
The government’s digital tax agenda continues. From April 2029, businesses will also be required to establish direct debit arrangements for VAT and PAYE liabilities.
Increased HMRC compliance activity
HMRC will recruit an additional 670 compliance officers by 2029/30, alongside expanded debt collection activity and new powers from July 2029 to recover certain unpaid tax debts directly from bank accounts where taxpayers are able, but unwilling, to pay.
Making Tax Digital
Taxpayers joining Making Tax Digital for Income Tax in April 2027 will receive a temporary easement from late filing penalty points for their first four quarterly submissions. The government has also deferred implementation for certain taxpayer groups pending further review.
