Rates of capital allowances

The government will increase the main rate of first-year allowance from 40% to 50% for qualifying expenditure incurred on or after 1 January 2027. To balance the Exchequer cost of this measure, the main rate writing-down allowance will be reduced from 14% to 12%, effective from 1 April 2027 for corporation tax and 6 April 2027 for income tax purposes.

Claims for R&D tax relief 

The government has announced that it will remove the claim notification form (CNF) requirement for research and development (R&D) tax relief claims made on or after 1 April 2027, and that it will simplify the additional information form from autumn 2027.

ICAEW welcomes these changes and has engaged extensively with HM Treasury on this issue. ICAEW has consistently argued that the CNF can prevent otherwise valid claims from being made due to procedural oversights, while offering limited evidence that it improves compliance or deters non-compliant claims. These changes should reduce unnecessary administration and improve access to relief for legitimate claimants.

Company payments to participators

The government has published its response to the consultation on company payments to participators and confirmed that it will not proceed with the proposed new reporting requirements at this time. Instead, HMRC will continue to engage with stakeholders to address concerns raised during the consultation and explore how taxpayers can be better supported in meeting their obligations.

ICAEW welcomes this decision, having raised concerns that the proposals would impose additional administrative burdens on companies and agents without delivering clear benefits. 

Further information:

• ICAEW warns against new requirements for close companies

Trading allowance increased to £3,000

It has been announced that the trading allowance will increase from £1,000 to £3,000 per year for 2027/28 onwards. As a result, individuals with gross trading income below £3,000 will not pay tax on that income and will not need to file a full self-assessment return, with HMRC's simplified online reporting service remaining available.

New consultation on corporation tax simplification

As part of the budget package, the government has published a consultation setting out its approach to simplifying the corporation tax system to support business investment, growth and competitiveness.

The consultation identifies areas where businesses and advisers have raised concerns about complexity, uncertainty and administrative burdens, and explores opportunities for targeted reform. While responses are requested by 21 November 2026, the consultation signals the start of a longer-term programme of work rather than immediate legislative change.

The government states that, over the next year, it will work with stakeholders to develop, prioritise and deliver reforms that have the greatest impact, refining and testing options before bringing forward detailed proposals in the highest-priority areas.

The consultation covers a wide range of corporation tax provisions. Annex B sets out the measures within scope, including innovation reliefs such as the patent box and R&D tax reliefs, as well as aspects of the international tax regime, including the controlled foreign company rules and restrictions on interest deductibility. The review will also consider opportunities to simplify administrative requirements and provide greater certainty for businesses.

Given the breadth of the review, the consultation is likely to be of interest to a wide range of companies and advisers. ICAEW will be considering the proposals and seeking members' views on areas where complexity creates unnecessary compliance costs or uncertainty for businesses. To give your feedback to ICAEW, please contact Angela Clegg. 

Temporary increase to bank surcharge 

The government has announced a temporary increase in the bank corporation tax surcharge as part of the budget. The surcharge will rise from 3% to 6%, with the increase applying for 15 months from January 2027.

Announcing the measure, Chancellor John Healey said that the banking sector would help fund the government's package of support designed to provide “breathing space” for households facing ongoing economic pressures. The government stressed that the increase is time limited and remains below the 8% surcharge that applied prior to 2023. 

Tax support for entrepreneurship

The government has published its response to the Tax Support for Entrepreneurship call for evidence. Overall, the government concluded policy should focus more on helping high-growth businesses access capital, scale successfully and remain in the UK. 

The headline tax measure is the introduction of a new founders' relief, which is considered in a separate article.

Advance tax certainty service

The government will introduce legislation in Finance Bill 2026-27 to reduce the minimum expenditure threshold for HMRC’s advance tax certainty service from £1bn to £300m, expanding access to the service from 4 November 2026. The service will be kept under review with a view to developing it further in the future.

Modernising Corporation Tax administration: call for evidence launched

The government has launched a call for evidence on the future of corporation tax administration, seeking views on how the system could be made simpler, more efficient and better aligned with modern business practices. The review covers areas such as digital services, record keeping, software and artificial intelligence, information flows, and the role of agents and advisers.

The proposal takes a long-term strategic view and does not propose immediate changes to existing corporation tax rules. Instead, it is intended to inform future reforms aimed at reducing duplication, improving compliance and creating a more proportionate administrative framework for businesses of different sizes.

ICAEW will be engaging with members and other stakeholders to gather views on the proposals and intends to respond to the call for evidence. The call for evidence closes on 20 January 2027. Please send any feedback to Angela Clegg.

Predevelopment costs

The government has published its response to the consultation on the tax treatment of predevelopment costs. While respondents highlighted ongoing uncertainty following the case of Orsted and called for broader tax relief, the government has stopped short of announcing legislative change. Instead, the government will consider ways to improve clarity and simplify the existing rules, including through updated guidance, while keeping potential legislative reform under review. 

Further information:

• New tax relief needed for predevelopment costs