The UK government has published the draft Finance Bill 2025/26 for technical consultation, with many of its key measures expected to come into effect from April 2026 or later. The consultation period runs until September 15, 2025. It's important to note that this is draft legislation and is subject to change following the technical consultation period. The final contents of the Finance Bill 2025/26 will be decided by the Chancellor.

Here are some of the key proposals and changes included in the draft Finance Bill 2025/26:

1. Business and Corporate Tax Measures:

• ‍Multinational and Domestic Top-up Taxes: Amendments to maintain consistency with OECD guidance, including:
  
  • Clarifying exchange rates for converting domestic top-up tax amounts to sterling.
  • Factoring in group relief payments for allocating the domestic top-up tax charge.
  • Introducing simplified calculations for non-material members using Country-by-Country Reports, effective for accounting periods from 31st December 2023.

• ‍Research and Development (R&D) Tax Relief: Clarifications to ensure the overseas restriction for R&D expenditure credit applies as intended in Northern Ireland for Enhanced R&D Intensive Support (ERIS) claimants, effective for claims from 30th October 2024 - Read more about the R&D Tax Relief scheme.

• ‍Land Remediation Relief (LRR): A consultation to review LRR’s effectiveness in boosting brownfield land development and its robustness against abuse, open until 15th September 2025

• ‍Employee Car Ownership Schemes (ECOS): Amendments to Benefit in Kind (BiK) rules to deem vehicles provided through ECOS arrangements as taxable benefits when made available on restricted terms.

2. Inheritance Tax (IHT) Reforms:

• Unused Pension Funds and Death Benefits: From 6th April 2027, most unused pension funds and death benefits will be brought into the scope of Inheritance Tax. This aims to treat pensions more like other assets and reduce their use purely as wealth transfer vehicles. Personal representatives, rather than pension scheme administrators, will be liable for reporting and paying any IHT due. Death-in-service benefits from registered pension schemes will be excluded.

• Agricultural Property Relief (APR) and Business Property Relief (BPR): From 6th April 2026, these reliefs will be capped. The 100% relief will only apply to the first £1 million of combined agricultural and business assets. Relief above that amount will be reduced to 50%. A 50% rate will also apply to quoted shares classified as "not listed" on recognized stock exchanges (e.g., AIM).

3. Tax Treatment of Carried Interest:

• From 6th April 2026, a revised tax regime will be introduced for carried interest, which is a form of performance-related reward for fund managers. It will be treated as deemed trading profits and subject to Income Tax and Class 4 National Insurance Contributions (NICs). For "qualifying" carried interest, 72.5% will be treated as trading profits, potentially leading to an effective tax rate of 34.1% for longer-term holdings.

4. Tackling Tax Avoidance and Non-Compliance:

• Tax Adviser Facilitated Non-Compliance: New penalty frameworks and powers for HMRC to publish information about tax advisers who deliberately facilitate non-compliance in their clients' tax affairs.
• Promoters of Marketed Tax Avoidance: A new criminal offense for promoters failing to notify arrangements to HMRC. The Disclosure of Tax Avoidance Schemes (DOTAS) and Disclosure of Tax Avoidance Schemes for VAT and Other Indirect Taxes (DASVOIT) civil penalty regimes will be updated to allow HMRC to issue penalties directly without tribunal approval.
• Umbrella Companies: From 6th April 2026, joint and several liability for unpaid PAYE taxes will extend to recruitment agencies and end clients if an umbrella company fails to comply. This aims to address non-compliance in the umbrella company sector, with further measures for National Insurance Contributions (NICs) liability expected in future legislation. The bill formally defines umbrella companies in tax law to tackle schemes like “mini umbrella” setups.

5. Data and Administration:

• Bulk Data Gathering Powers: The first phase of reforms to HMRC's bulk data gathering powers will be implemented, focusing on improving the provision of financial account information and card sales data.
• Tax Adviser Registration: A requirement for tax advisers interacting with HMRC on behalf of clients to register with HMRC and meet minimum standards from 1st April 2026.
• Making Tax Digital for Income Tax (MTD for IT) and Penalty Reform: A significant rewrite of existing provisions, with effects primarily relating to previously announced changes like the reduction in the turnover threshold to £20,000 from April 2028.
• New Online PAYE Service: A new online Pay As You Earn (PAYE) service for taxpayers to check and update their income, allowances, reliefs, and expenses, available via the Personal Tax Account or HMRC app.

6. Other Notable Measures:

• Charity Compliance Measures: Amendments to rules governing tainted donations, approved charitable investments, and attributable income for charities and Community Amateur Sports Clubs (CASCs).
• Private Intermittent Securities and Capital Exchange System (PISCES): Draft legislation to allow Enterprise Management Incentive (EMI) and Company Share Option Plan (CSOP) option agreements to be amended for PISCES shares.
• Pillar 2 rules: Updates to Pillar 2 rules based on stakeholder feedback and OECD guidance.‍
• The Euro 6e emissions standard: Introduction of the Euro 6e emissions standard for cars and vans in Great Britain from April 2026, subject to consultation.

7. Notable Omissions

• No rollback was included for the non-domiciled (non-dom) tax status changes effective from 6th April 2025, despite some expectations.
• Legislation for changes to agricultural property relief and business property relief for IHT, announced for April 2026, is not included but expected in a future bill, with a technical consultation completed in April 2025.

For further details, you can refer to the official GOV.UK page for the draft Finance Bill 2025-26 or related policy papers.

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