The UK Autumn Budget keeps the 25% corporation tax rate and full expensing, but adds a long list of dated measures for multinational groups to track into 2027.
The UK Autumn Budget, delivered on 28 October 2026, contains few headline changes to the corporation tax rate. It does, however, include a long list of dated measures that group tax teams will need to track through 2027. The government reaffirmed the 25% main rate and full expensing for plant and machinery under the 2024 Corporate Tax Roadmap, confirmed several previously announced international measures, and launched a new corporate tax simplification agenda.
INTERNATIONAL TAX AND PILLAR TWO
- Pillar Two: Previously announced measures are confirmed, including implementation of the OECD Side-by-Side package for the Multinational Top-up Tax and Domestic Top-up Tax with effect from 1 January 2026.
- Foreign permanent establishment exemption: The elective exemption for foreign PE profits and losses becomes mandatory for accounting periods beginning on or after 1 January 2027. RSM notes the measure is expected to raise nearly £500 million a year.
- US LLCs and other reverse hybrids: The government has dropped its plan to treat these entities as transparent. Specified entities, including US LLCs, US S-Corps, Jersey LLCs and French SCIs, will instead be treated as opaque for individual members. Members can claim a new domestic credit for foreign tax paid personally, with claims possible from early 2028. Earlier periods and existing disputes are still under consideration.
- Sovereign investors: From 1 January 2029, a statutory sovereign tax status regime replaces common-law sovereign immunity, and a consultation on the taxation of sovereign investment has been announced.
- Interest withholding: RSM's summary also refers to an increase in the basic savings rate to 24%, with a corresponding rise in withholding tax on interest from April 2027, and a possible move to a self-assessment approach. Groups with UK interest flows should confirm the detail in the draft legislation.
CAPITAL ALLOWANCES AND SECTOR MEASURES
- Capital allowances: For assets outside full expensing, the first-year allowance rises from 40% to 50% for expenditure incurred on or after 1 January 2027, while the main pool writing down allowance falls from 14% to 12% from April 2027. RSM says that, because full expensing remains, the changes will not have a significant impact for many large corporates.
- Bank surcharge: The rate rises from 3% to 6% for a temporary 15-month period, from 1 January 2027 to 31 March 2028.
- Corporate interest restriction: From 1 January 2027, tax-EBITDA excludes Audio-Visual Expenditure Credits and Video Games Expenditure Credits.
- Oil and gas: A permanent 35% levy replaces the energy profits levy, which expires by 31 March 2030.
SIMPLIFICATION AND TAX CERTAINTY
The government published a consultation, Corporate Tax Simplification for Business Investment, alongside the Budget. It targets treaty relief from withholding tax on interest, the interaction between the anti-hybrid rules and Pillar Two, and the unallowable purpose rule for loan relationships. It closes on 21 November 2026. Ministers plan to engage stakeholders over the next year to shape and rank the reforms.
Other administrative changes include:
- Advance Tax Certainty Service: The entry threshold for qualifying projects falls from £1 billion to £300 million from 4 November 2026. Pinsent Masons reports that market knowledge suggests no applications were made after the service launched in July.
- R&D claims: RSM reports that the R&D claim notification requirement is removed from 1 April 2027.
- Treaty relief: The June consultation on moving away from the Directions-based system is still under review, and a further consultation is expected.
- Distributions: The government will take forward the June 2026 proposals on the distributions regime, with draft legislation consultations in 2027.
COMPLIANCE, STAMP TAXES AND VAT
- Duty to correct: From 1 April 2028, taxpayers will have an express, positive obligation to correct inaccurate returns, and HMRC gains power to issue Customer Correction Notices.
- Stamp taxes: Finance Bill 2027 will repeal stamp duty and stamp duty reserve tax and introduce a securities transfer tax, with commencement expected in late 2027.
- VAT reverse charge: From April 2027, the reverse charge for cross-border services is restricted to VAT-registered businesses.
- Online marketplaces: From October 2027, marketplaces will collect VAT on qualifying sales by UK businesses using their platforms.
- E-invoicing: Legislation will require prescribed electronic VAT invoice formats, and Baker McKenzie lists a roadmap for mandatory e-invoicing among the key VAT announcements.
WHAT HEADS OF TAX SHOULD DO NOW
- Model the branch exemption. Review any foreign branches currently within the elective regime, because the election falls away for periods beginning on or after 1 January 2027.
- Confirm the Pillar Two position. Check how the UK Side-by-Side implementation affects the group's UK top-up tax computations and filings.
- Respond to the consultation. The 21 November deadline is close, and the topics include the anti-hybrid and Pillar Two interaction.
- Review US LLC and reverse hybrid structures. Individual members may need to plan for the new credit mechanism, and open disputes may be affected.
- Calendar the 2027 dates. Capital allowance changes, the bank surcharge and the branch exemption all start on or around 1 January 2027, with further changes in April.
A MIXED READING OF 'SIMPLIFICATION'
Not every adviser is convinced. One Pinsent Masons partner expects the new consultation to be another exercise in which "simplification leading to even greater complexity" is the likely result. Details will only be settled when the Finance Bill is published, so groups should treat the figures above as announced policy rather than enacted law.
The rates mostly stay put, but the dates move: 1 January 2027 is the one to watch.
SOURCE/RECOMMENDED READ:
- A&O Shearman – UK Autumn Budget 2026: Business and Corporate Tax Measures
- RSM UK – Autumn Budget 2026: tax changes for large corporates
- Pinsent Masons – UK Budget 2026: corporate tax announcements
- Baker McKenzie – UK Autumn Budget 2026: key business tax and VAT highlights
UK Budget, Autumn Budget 2026, Corporate Tax, Pillar 2, Side-by-Side, Foreign PE, Reverse Hybrids, Capital Allowances, Bank Surcharge, HMRC, Tax Policy
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