Autumn Budget 2026 review

The Government has significantly improved the UK's tax-advantaged Enterprise Management Incentive (EMI) and Company Share Option Plan (CSOP) offering. However, the curbs to Business Asset Disposal Relief (BADR) will further limit tax relief for historic EMI awards. The proposed new 10% Founders' Relief will not, due to the extensive and onerous qualifying conditions, enhance the tax position of most option holders on exit, meaning the standard rates of CGT will typically apply.  

CSOP becomes EMI2 – and far more useful 

• Rebranded as "EMI2" formerly known as CSOP, and positioned as the natural next step once a company outgrows the already expanded EMI, from 6 April 2027; 
• From 6 April 2027, the individual option limit doubles to £120,000 (from £60,000), based on the unrestricted market value of the underlying shares (which can include a class of growth shares) at the date of grant; 
• Exercise period extended to 15 years from 6 April 2027, to match the recent change to EMI; and 
• From 6 April 2027, the EMI/CSOP combined cap is scrapped – employees can then (subject to meeting the eligibility criteria for each arrangement) hold £250,000 of EMI plus £120,000 of EMI2, taking the aggregate ceiling of awards value to £370,000. 

Commercial impact: These changes remove a long-standing retention gap for scale-ups that have outgrown EMI and should make EMI2 a credible choice for many more businesses where a liquidity event is likely to be 3 years or more from the CSOP grant (as that is the holding period usually required for a CSOP award to be tax-advantaged at exercise).  

EMI administrative easements 

Following last year's enhancements to EMI, we have further administrative easements announced today as follows:  

• From 6 April 2027, the exercise window after a disqualifying event is extended from 90 to 180 days;  
• From 6 April 2027, grant notifications move into the end-of-year return, rather than as a stand-alone notification by 6 July following the year of grant. Beware, however, that this may mean you can no longer file an EMI return late if it contains grant reporting, or the EMI tax-advantages for those grants may be lost – this is a technical point that has already been raised with HMRC and regarding which a response is awaited; and 
• From 6 April 2027, a £250,000 grant of EMI options no longer precludes a concurrent CSOP award. 

Commercial impact: These measures remove several practical challenges employers have historically faced with the administration of EMI arrangements.  

Founders' Relief: not a 10% rate for most option holders 

When EMI was first introduced in 2000, there was an objective to be world-leading as tax-efficient incentive and a maximum 10% tax rate applied when qualifying EMI shares were sold (up to a capped limit). The other measures announced today are not reinstating that low effective tax rate for many.    

• The new Founders' Relief 10% CGT rate on up to £10 million of lifetime gains from April 2027 is not a return to Entrepreneurs' Relief by another name. In practice, Founders' Relief will rarely apply. It demands a 25% founder-level stake held since incorporation, five years' UK residency, and company-level turnover, headcount and innovation hurdles – conditions an option-holding employee will likely not meet.  
• Most EMI/EMI2 participants will therefore remain on standard CGT rates, or BADR if they separately qualify – and BADR's own lifetime limit is being cut from £1 million to £500,000 for disposals from 6 April 2027. 

Commercial impact: a less generous CGT backdrop for employee shareholders but the tax-advantaged schemes become more generous in terms of award limits and simpler in terms of operation.  

The Government has also announced a review of non-compete clauses, aiming to ensure they are no longer "a barrier to hiring for our most promising startups and scaling firms" and do not prevent "everyday economy" workers from moving jobs. Detail is unlikely before a consultation in early 2027, but restrictive covenants may become harder and riskier to rely on. For more background on the proposed changes, read Jennifer Millins’ recent article.

If so, well-designed incentive arrangements – particularly good/bad leaver conditions, vesting tied to time or performance, and clawback – could step in as a retention tool, using the promise of a significant financial reward to discourage departures. 

Could, however, shareholder-level restrictive covenants be caught too?  

The Government's separate consultation on "wider restrictive practices" (due early 2027) has not been scoped yet, but the underlying working paper already asks whether reform should extend beyond non-competes to other restrictive covenants and beyond employment contracts to wider workplace contracts. Whether that could extend to restrictive covenants given by founders or shareholders in equity documents and shareholder agreements is not confirmed, but worth watching once the consultation detail emerges. 

British founders were a focus of the Chancellor's Budget today, specifically in relation to Capital Gains Tax (CGT) with the introduction of Founders' Relief and the reduction in the lifetime limit of Business Asset Disposal Relief (BADR). While the headline is generous, the detail raises real questions for the founders and investors we work with, particularly those who do not fit the standard profile.

The headline

From 6 April 2027, qualifying founders will be able to claim a reduced 10% rate of CGT on up to £10 million of lifetime gains, subject to the small print. 

It all sounds very familiar, with a nod to the original form of Entrepreneurs’ Relief, until you read the technical consultation. Broadly, we understand the main eligibility criteria for the founder as set out in the consultation to be as follows. The individual must have:

• held at least 25% of the company's ordinary share capital from the point the business began trading (or started preparing to trade) together with the voting rights;
• held the shares for at least five years; and 
• been UK tax resident throughout. 

The company must also meet additional criteria, including demonstrating sustained scale and growth, with new tests relating to turnover, headcount and innovation. 

The cut to BADR

The other significant change concerns BADR, the relief most founders currently rely on. The lifetime limit, currently £1 million at an 18% rate, is being halved to £500,000 for disposals from 6 April 2027.

Our initial thoughts

The technical consultation is open until 30 November 2026, and we are reviewing it in detail. A few preliminary thoughts on where the current drafting may cause friction in practice:

• 25% is a high bar for co-founding teams. A sole founder may meet the 25% threshold relatively easily. A genuine co-founder team, or an academic spin-out with several founding researchers, may struggle to get any single individual over the line, even though every one of them is, in substance, a founder. This is likely to make those early shareholding allocation discussions, that bit more difficult to agree.  
• The pivot problem. The company must continue the trade it was set up for, with no major change in the nature of that trade. We see it so often, start-ups pivot, often more than once. A founder whose business today looks nothing like the one first registered may find that history works against them rather than for them, irrespective of how successful the business eventually becomes.
• Will the relief be available to those individuals who have already used their lifetime BADR relief, particularly when it was at the generous £10m level?

We are working on a full response to the technical consultation and will share our follow up views soon. 

HMRC is modernising how it monitors the tax affairs of wealthy individuals and addresses non-compliance. Its wealthy compliance strategy promises a more connected view of individuals’ income, assets, trusts, businesses and offshore interests, supported by better data, advanced analytics and AI. As a part of its collection of 'Budget 2026 tax related documents', the Government today published a corporate report titled 'Modernising HMRC’s approach to wealthy compliance' (the Report).  

'Wealthy taxpayers' are defined as those with "income over £200,000 or assets over £2 million in any of the last 3 years" and are said to make up 1.3 million individuals. The Government's stated aim is to make it easier for taxpayers to understand and meet their obligations, using better information (through greater use of data, technology, and personnel expertise) to "reduce unnecessary contact" and identify potential problems earlier. 

The Report contains a commitment to increase the number of HMRC specialists focused on tackling offshore non-compliance by the wealthy by 400 by 2030, and bring in expertise in areas including wealth management, family offices, offshore structures, trusts and Inheritance Tax. This sits alongside the Complex Cross-Tax and Offshore team that was established by HMRC in April 2025 to strengthen its response to the most complex wealthy and offshore non-compliance, focused on bringing together specialists to view individuals' affairs holistically alongside any entities and structures connected to them. Whilst it is also stated that HMRC will "continue to recognise that complexity, a particular structure or participation in a sector does not in itself indicate non-compliance", individuals can expect their arrangements to be assessed in the context of their wider affairs.  

The Report also sets out a timetable for greater visibility of international assets. For example, from 2027, HMRC plans to use Crypto-Asset Reporting Framework data and enhanced Common Reporting Standard information to improve its understanding of cryptoasset transactions and holdings. From 2030, participation in the Organisation for Economic Co-operation and Development (OECD)’s automatic exchange framework for real-estate information is intended to improve visibility of overseas property interests and income. 

One final potential point of note is that every identified billionaire with a UK tax footprint (defined as an individual who is required to submit a UK Self-Assessment, whether or not they are UK resident) has been allocated a dedicated Customer Compliance Manager (CCM) and should be offered a "voluntary initial or pre-filing discussion" which is meant to help build a shared understanding of the customer's UK tax affairs and make subsequent engagement more focused and proportionate. If this initiative is successful in promoting proactive engagement between individuals and HMRC, this could offer opportunities for greater certainty and better working relationships with HMRC. However, the nature of these proposed 'discussions' and the billionaire-CCM relationship is not yet clear - the Report does state that around 2,400 customers each year are already allocated a CCM, and so the change could be negligible.  

Overall, the Report envisages fewer unnecessary contacts for lower-risk taxpayers, alongside more targeted intervention where HMRC identifies greater risk. Whether that distinction translates into a better experience in practice remains to be seen. Better-integrated systems and coordination between HMRC teams should reduce duplicated information requests. However, more effective risk identification and increased specialist capacity could also lead to more enquiries for some clients. The practical test will be whether HMRC’s interventions become better targeted, rather than simply more numerous. For wealthy clients and their advisers, the practical message is to consider whether tax reporting presents a consistent picture across the individual and their connected structures. HMRC intends to connect personal tax information with trust, company, partnership and overseas ownership data. Reviewing discrepancies and documenting the commercial rationale and tax treatment of complex arrangements may therefore be increasingly valuable. 

The Government has published its response to the consultation on modernising the taxation of company distributions and repayments of capital, confirming that it will proceed with all seven proposals as a cohesive package.   

The proposals are intended to bring the rules governing company distributions to individuals and trusts up to date and ensure similar transactions are taxed consistently, regardless of legal form, company residence or transaction structure. A technical consultation will follow in 2027, with any changes intended to apply from April 2028.  

The proposals would:  

• limit the amount treated as a repayment of capital following a share reorganisation to the amount originally subscribed, preventing share capital being uplifted to secure capital treatment on a later buyback or reduction of capital; 
• modernise statutory demerger relief so that it applies in a wider range of circumstances; 
• bring distributions from non-UK resident companies more fully into the charge to income tax; 
• introduce rules governing the interaction between the distributions code and loans to participators rules where an individual improperly extracts value from a company; 
• introduce a temporary charge for individuals who receive loans from non-UK resident companies in which they (or their associates) have a material interest, broadly mirroring the section 455 charge for UK close companies; 
• replace the subjective ‘trade benefit’ test for capital treatment on share buybacks with more mechanical conditions; and 
• replace the transactions in securities rules with a more modern, principles-based anti-avoidance regime. 

Taken together, these measures represent the most significant overhaul of the distribution rules in decades. The Government's response shows it has listened to some of the initial concerns raised by stakeholders regarding the detail of its proposals, if not the substance. However, much of the technical detail is still to be settled through further consultation with stakeholders.  

It therefore remains to be seen whether the final rules deliver the promised coherence without undermining commercial practice.  

With most unused pension funds and pension death benefits coming within inheritance tax (IHT) for deaths from 6 April 2027, today’s Budget offers a helpful refinement for estates making charitable gifts. 

Personal representatives will be able to choose whether pension property forms part of the estate’s general component or is treated as a separate component when calculating entitlement to the reduced IHT rate of 36% where at least 10% of the estate is given to charity. This flexibility should help prevent the unintended inclusion of pension wealth within existing charitable arrangements put in place before the changes.  

The second change addresses a practical issue for families and those helping them administer an estate: a prospective personal representative will be able to direct a pension scheme administrator to pay IHT directly to HMRC, subject to certain conditions.  

These are welcome adjustments, but unfortunately today’s announcements do not extend the IHT payment deadline, which we had hoped would be extended to accommodate the practical complexity that will follow when these measures are introduced in April 2027. Tax on pension property remains due by the end of the sixth month after the month of death, with interest accruing on unpaid amounts thereafter. In practice this is a very tight timeframe. For families, the clear message remains: keep pension records and expressions of wishes up to date, and consider pension and estate planning together

Property income 

Having committed to not raising tax on "working people", other sources of income were always vulnerable in this Budget. Against this backdrop, the Chancellor has increased the rate of income tax on property income by 2% in addition to the 2% increase announced last year. It means that from 6 April 2027, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%. Note that the Government has not sought to change the corporation tax rate on property income. 

Less of a headline announcement, and more in the form of the classic stealth tax, is the proposed reduction from 14% to 12% in the annual writing down allowance which investors in certain plant and machinery (in the so-called "general pool") can claim. The Government projects that it will collect an extra £1bn as a result of this change (NB readers will recall that HMRC had only just reduced the main rate pool writing down allowance to 14% as of this year. 

There were several other eye-catching announcements. These included: 

Sovereign immunity 

Building on its previous consultation, HMRC launched a new consultation regarding bringing entities previously claiming sovereign immunity within the scope of UK tax on their income and gains from 1 January 2029. Part of the proposal includes giving such investors access to a modified form of the UK REIT rules, the intention being that they would be subject to an effective rate of tax of 15%. The consultation closes on 20 January 2027. 

VAT: zero-rating on sale to registered providers of social housing 

We already knew about this one: HMRC has now issued a response to its consultation on creating a new "zero-rating" on the sale of land to a registered provider of social housing ("RP") and has confirmed that the new rules shall apply from 1 April 2027. Zero-rates are the holy grail of VAT – the seller is entitled to recover its associated VAT costs but does not have to charge VAT to the buyer, so the new zero-rate is very welcome, and will make the sale of land to RP's much simpler. For example, it should mean that so-called "golden brick" structuring (whereby a seller builds out a scheme to above foundation level before sale) becomes unnecessary on a sale to an RP – simplifying and speeding up the transaction considerably. However, we have definitely not seen the last of "golden brick" structuring – any other investor in new build residential property (whether affordable or otherwise) is outside the scope of this new zero-rate. 

Stamp Duty Land Tax (SDLT)  

Removing SDLT on rent under assured tenancies. This pre-announced change has confirmed the removal of a headache that the Renters' Rights Act had created for residential tenancies. Since all tenancies are now periodic (i.e. they can no longer be for a fixed term), the existing SDLT "growing lease" provisions applied to them.  This technically meant that, each year, the original tenancy would be deemed to be for one year longer. The effect of this would be that a person who rented for long enough could suddenly find themselves with an unexpected SDLT bill. To remove the red tape of long-term renters having to consider these rules, and the potential SDLT charge itself, the Government has agreed to remove all assured tenancies from the scope of SDLT. Although the legislation will come into force next year, it will be backdated to 1 April 2026 - before the Renters' Rights Act came into force. This is a welcome change, although should be seen more as clearing up an unintended SDLT complication of the Renters Rights Act rather than a valuable new tax relief. 

SDLT group relief 

It is worth noting that HMRC is fixing a perceived loophole in the SDLT group relief rules, whereby liquidating a seller after an intra-group transaction could potentially "switch off" the SDLT clawback rules. The proposed change is not entirely surprising given the recent HMRC loss in the HC-One case. 

The UK’s Budget 2026, published today, focuses immigration policy on attracting high-skilled workers and graduates.

High-skilled routes

The Government wants “the most pro-business migration system in Europe for high-skill workers.” It has expanded the Global Talent visa endorsed funder pathway, letting over 100 R&D-intensive businesses sponsor leading scientists and engineers, and widened the High Potential Individual (HPI) visa to graduates of the world's top 150 institutions, with a proportional increase to the cap.

The Graduate visa will extend to two years (from its current post-study period) for graduates of “high compliance” universities with strong labour-market outcomes, helping the UK retain international graduates in skilled work.

From 2027, the highest-skilled sponsored workers will get a curtailment period of up to six months (duration depending on time in their previous role), giving longer to find new sponsorship if their job ends.

From spring 2027, the Government will adopt the Migration Advisory Committee's (MAC) recommendations on salary thresholds: occupation-specific minimums drop from the median to the 25th percentile; the general threshold is uprated using 2026 wage data, then annually against ONS (ASHE) wage inflation; new entrant discounts are consolidated into one figure; and the PhD salary discount is removed. Sponsoring employers should factor these changes into recruitment and salary planning.

Tax treatment of Certificate of Sponsorship and Immigration Skills Charge fees

From 28 October 2026, Finance Bill 2026–27 will exempt an employer’s payment of the Certificate of Sponsorship (CoS) fee and the Immigration Skills Charge (ISC) from income tax, removing uncertainty over whether employer-funded sponsorship costs are a taxable benefit for the sponsored worker.

Employers must pay both the CoS fee and, where applicable, the ISC, and cannot recover these costs from the sponsored worker. The ISC applies when assigning a CoS for most Skilled Worker and Senior or Specialist Worker sponsorships; the CoS fee is payable per certificate. Previously, HMRC could treat employer payment of these costs as an employment-related benefit, triggering income tax and employer National Insurance; the new legislation confirms no taxable benefit arises for the employee.

The exemption only concerns income tax; it does not change the ordinary corporation-tax rule allowing deduction of revenue expenses incurred wholly and exclusively for business purposes. As employer regulatory costs tied to recruiting and retaining sponsored staff, the ISC and CoS fee should generally remain deductible for corporation tax, subject to the usual rules.

Current costs: the ISC, charged per sponsored worker, is £480 for the first 12 months for small or charitable sponsors and £1,320 for medium or large sponsors from 16 December 2025 (further amounts apply for each additional six months). The CoS fee for Skilled Worker, T2 Minister of Religion, and Senior or Specialist Worker routes is £525 per certificate.

Practical effect

• Employees: no income-tax charge arises on employer payment of the CoS fee or ISC for payments made on or after 28 October 2026.
• Employers: costs remain employer-borne and are treated as business expenses for corporation tax.
• Sponsors: must still comply with Home Office rules prohibiting recovery of these costs from workers.
• Other costs: the exemption is specific to the CoS fee and ISC; visa fees and the Immigration Health Surcharge can still raise separate benefit-in-kind questions.

Sponsored workers: Navigating benefit-in-kind and pay parity risks

It remains to be seen if HMRC now pursues collection for prior tax years where it remains unclear that HMRC would be on strong footing to enforce tax collection for these charges.

This future legislation change brings clarity, but some would argue that the position for historic years is not necessarily clear cut and there may yet be grounds for arguing no BIK for such historic costs too. Updated advice should be taken

Further details on this topic can be found here.

In the 2025 Budget it was announced that HMRC would clarify the tax treatment of image rights in 2027. This clarification is now taking place, but its implementation is being pushed back to 2028. No draft legislation is currently available. 

The use and tax treatment of image rights has been a long running contentious issue giving rise to much uncertainty (as Messrs Bergkamp and Platt found out following litigation concluded in 2000 – which they won - and Portsmouth FC experienced in 2010). Certain A list performers and sports persons (and some not so well-known ones) seek to establish that they operate their image rights business separate from their employment. Advisers argue (amongst other things) that the revenues from image rights should not be subject to employment taxes because those rights do not arise from an employment opportunity but rather are personal to the individual or are capital assets of a business. Historically HMRC has been sceptical about these arrangements regarding many structures as shams. HMRC's approach is now hardening. 

The UK is somewhat behind other EU countries who have addressed this issue. For example, Spain had an 85/15 rule whereby the amount paid by the club to the player for image rights was limited to 15%. If the limit was exceeded, the entire amount paid by the club to the image rights company would be considered employment income for the player (and taxed at the highest rate). It is not clear how HMRC will tackle the problem. Will they try to define when such rights are "related to an employment" or use an IR35 style approach?  

Alternatively, they could introduce a substantive economic activity/bona fide commercial test applied to the image rights company (i.e. no tax avoidance or tax advantage) or just deem all such income to be employment related. Whichever route they choose, it will need to dovetail with the existing regime covering foreign entertainers, artists, and sportspersons. 

The Government has announced minor technical changes to a capital gains tax (CGT) anti-avoidance provision.  

The provision applies to close companies, which can broadly be thought of as companies with five or fewer shareholders (although the precise definition is more nuanced than this). When working as intended, the anti-avoidance provision attributes the capital gains of the close company to its UK tax resident shareholders in proportion to their shareholdings, such that the gain is taxable on them personally.  

A protected cell company (PCC) is a specific type of company with multiple "cells", where each cell provides entitlement to specific assets that are ring-fenced from those of every other cell and from the core. A PCC is, as a matter of company law, a single legal entity: the cells are not separate persons, even though their assets and liabilities are segregated as between themselves. However, in a practical sense the ownership of an individual cell is in some ways akin to the ownership of a separate company. This has led to some uncertainty regarding whether the anti-avoidance provision mentioned above applies to an individual cell of a PCC where the cell itself meets the definition of a close company, but the PCC as a whole does not.  

The changes announced by the Government today clarify the position by making it clear that an individual cell can now satisfy the definition of a close company, such that the anti-avoidance provision mentioned above would apply and the gains of the cell would be attributed to a UK tax resident owner of that cell (provided the cell met the definition of a close company). The changes take effect from today, 28 October 2026.These changes are in line with similar amendments that were announced in last year's Autumn Budget which, in a similar manner, clarified the application of another anti-avoidance provision to PCCs which targets non-UK companies that own UK real estate. 

The Government has announced changes to prevent “unintended deductions” for liabilities connected with trust property. The aim is to restrict when debts can reduce the value of assets for inheritance tax (IHT), align their treatment with personal liabilities and strengthen anti-avoidance rules. 

Why does this matter? 

Allowable debts can reduce the value exposed to IHT. For example, a trust holding £1 million of assets with a deductible £300,000 liability could have a starting taxable value of £700,000, before other adjustments. 

But not every debt qualifies. Existing rules already restrict deductions according to what the borrowed money financed, including assets outside the IHT charge or qualifying for certain reliefs. There are also restrictions where the borrowed money was separately given to the lender by the borrower. 

The announcement suggests that trust-related liabilities will face greater restrictions. The supporting Policy Paper commented that the government's aim is to ensure that certain liabilities funded using value originating from a beneficiary's own estate cannot reduce trust IHT charges. However, the precise scope needs to be checked against the detailed legislation in due course. 

The measure will have effect for deaths and other chargeable events occurring on or after 28 October 2026. 

The Government released its response to the consultation on the taxation of UK resident individual members of LLCs and similar "reverse hybrid" structures. The consultation arose from the concern that the potentially high effective rates of taxation on structures which are treated as 'transparent' in their jurisdiction of establishment, but 'opaque' in the UK, was making the UK an unattractive place for globally mobile individuals to live, work and invest.  

The responses to the consultation overwhelmingly favoured reform. Whilst the Government's original proposal was that eligible hybrid entities should be treated as transparent for UK income tax and capital gains tax purposes, following consideration of the responses, it has decided instead to proceed with a "credit-based relief mechanism". Eligible entities will be treated as 'opaque' for UK tax purposes, meaning a UK resident individual member is subject to UK income tax at dividend rates on distributions, whilst the entity itself could - if it is UK resident or has a UK permanent establishment - be subject to UK corporation tax on its profits. The key change is that the member would be entitled to receive a credit against their UK tax liability for eligible foreign taxes paid by them personally on the entity's profits, income and gains. In a step which could be highly valuable for certain US taxpayers, not just federal tax but also state and local-level taxes would be eligible for the credit.  

There will be winners and losers from the change of approach. Notably, where taxpayers can postpone receiving any distributions whilst they are subject to UK taxation and provided care is taken to ensure the structure itself does not become UK resident, it should be possible to prevent any UK tax exposure whatsoever in relation to a hybrid entity, even if it continues to generate profits whilst a member is UK resident.  This could prove favourable even where those profits remain subject to tax in another jurisdiction, given the UK's relatively high marginal rates of tax.  

The revised approach will not, however, address one common trap of the current rules, which is where single-member LLCs or similar closely-held structures become UK resident as a result of their decision maker(s) moving to the UK, and therefore their 'central management and control' taking place from the UK. This can result in the structure becoming subject to UK corporation tax on its worldwide profits, irrespective of whether any distributions are made to UK residents. Whilst this risk can sometimes be mitigated by ensuring all core decisions of the business continue to be made outside the UK, this is a complex area and taxpayers without the benefit of proper advice can easily walk into unexpected UK tax liabilities.   

Draft legislation will be included in a future Finance Bill, following further consultation as to the detail of the rules. One point already identified as requiring further consideration is how to account for timing mismatches where the taxpayer is subject to a foreign tax charge when profits arise within the entity, then will be subject to a UK tax charge when that profit is distributed potentially many years in the future.  

The Government states that it will be possible to claim the new credit from "early 2028". This is disappointing for current UK residents with interests in reverse hybrids: the Government states that it is "considering practical options" for prior periods and for taxpayers with ongoing disputes. What this means in practice remains to be seen. In the interim, affected individuals may wish to defer distributions where practical until the new rules take effect.  

This consultation has been closely watched in particular by UK resident US persons, who frequently use US LLCs for both business and asset-holding structures, where they can provide practical and privacy benefits. The current tax position renders such individuals potentially exposed to double economic taxation on structures which were always intended to be 'tax neutral', with the US/UK income tax treaty failing to offer a solution. It will be a relief to know that the Government confirmed its commitment to resolving this inequality.

A slightly cryptic announcement in the Budget promises an “administrative easement” to the capital gains tax exit charge that can arise when a trust ceases to be UK resident. Oddly, the stated aim is to make it easier for “globally mobile talent” to relocate to the UK more quickly, with legislation to be introduced in Finance Bill 2026–27 applying to exit charges arising on or after 28 October 2026. Whilst this language would suggest a welcome improvement to the current position, quite how an easement to an exit charge will make things easier for those moving to the UK is not yet clear, and we will need to see the draft legislation to understand its scope and practical impact. 

One possible focus could be individuals who act as trustees of trusts they have settled, a common arrangement for US persons in particular. When those individuals move to the UK, their commencement of UK tax residency can make trusts of which they are trustee UK tax resident trusts, potentially without the individual appreciating the consequences, while a subsequent departure by that individual can trigger an exit charge if the trust then ceases to be UK resident. The proposed easement might allow a departing trustee more time to appoint a replacement UK-resident trustee, preserving the trust’s UK residence and avoiding an exit charge. Alternatively, it might ease or remove the requirements to register certain qualifying UK resident trusts on HMRC's Trust Registration Service. Or the Government could go further and prevent a trust from becoming UK resident solely because an individual trustee moves here, at least during their first four years of UK residence (which would align with the four years provided by the UK Foreign Income and Gains (FIG) regime).  

These are speculative possibilities rather than confirmed changes, but in any event, this sounds in principle like a positive change that could potentially remove a trap for internationally mobile individuals. For now, the announcement leaves important questions unanswered. 

The Government has announced a further 2% increase to the income tax rates charged on savings income and property (rental) income. This is in addition to the 2% increases announced in the 2025 Autumn Budget, meaning the rates will now increase by 4% compared with current rates.  

The previous Autumn Budget also added 2% to the basic and higher rate on dividends; those rates remain unchanged after today's Budget. 

The increases offer little encouragement to savers and are likely to be seen by private landlords as a further unwelcome burden. There is a risk that more private landlords will leave the market, accelerating the shift towards corporate ownership and potentially reducing rental supply, putting upward pressure on rents. 

The new rates will come into effect on 6 April 2027. They will be legislated for in the Finance Bill 2026/27, meaning the changes are not yet enacted and remain subject to the normal parliamentary process before they are finalised. 

The new tax rates  

Once in force, the new tax rates for savings and rental income will be: 

• basic rate: 24% 
• higher rate: 44%  
• additional rate: 49% 

The new tax rates on savings income will apply to UK resident individuals, including taxpayers in England, Wales, Scotland and Northern Ireland.  

The new tax rates on property income will apply to taxpayers in England, Wales and Northern Ireland only. Scottish tax residents are subject to separate income tax rules on property income and should seek specific advice from their Scottish advisors in this regard.   

After months of speculation about what the Budget might have in store for the residential property market, the Chancellor has, thankfully, given us relatively little to talk about. For buyers and sellers, that may well be the best news of all. 

Uncertainty has never been particularly good for the property market, especially at the higher end, where the prospect of an unexpected tax change can be enough to put even the most determined buyer or seller off their stride. With the Budget now behind us, those who have been sitting on their hands can hopefully start making decisions again. 

There are changes for landlords to factor in, including the additional 2% income tax on rental income on top of the 2% increase announced last year, taking the rate to 49% for top-rate taxpayers from April 2027. This will put some pressure on returns, with possible knock-on effects for rents and values, but the suggested introduction of National Insurance on rental income has not materialised. 

Ultimately, the most significant impact of this Budget may be what it hasn’t done rather than what it has: no reduction in the mansion tax threshold and no increases in SDLT or CGT on property. People rarely buy or sell their homes purely for tax reasons, but they do need confidence to make significant financial commitments. A little less speculation and a little more certainty should help bring some much-needed momentum back to the market.