Kirk Rice Blog

Changes to UK Business Tax Coming in 2026Written on December 16, 2025 by Kirk Rice LLP

Key UK business tax changes in 2026:

• Several confirmed business tax and compliance changes will come into force between 2026 and 2029, affecting planning, forecasting and cash flow for SMEs, start-ups and UK subsidiaries.
• Capital allowances are changing from 2026, with a lower writing down allowance but a new 40% first year allowance for certain assets, which may influence the timing and structure of investment.
• Incentives linked to growth and ownership are being adjusted, including wider eligibility for EMI share options, higher EIS and VCT investment limits, and reduced CGT relief for Employee Ownership Trust sales.
• Employer cost structures will be affected by future changes to salary sacrifice National Insurance relief from 2029 and new per-mile charging for electric and hybrid company vehicles from 2028.
• Reviewing forecasts, payroll arrangements and investment plans ahead of these changes can help businesses understand potential impacts and prepare more effectively.

Several measures announced in the Autumn Budget will affect UK businesses over the coming years. While some take effect in April 2026 and others arrive later, they all influence planning, forecasting and cash flow.

This article summarises the confirmed changes that matter for SMEs, start-ups and UK subsidiaries, explains when they begin, and sets out why it is sensible to think ahead.

How will the new Budget affect UK businesses?

The Budget included a number of business-focused tax and compliance changes. These adjustments influence areas such as business sales, payroll, benefits, digital requirements and company vehicle costs. Understanding what is changing and when it happens helps businesses make more informed decisions about investment, remuneration and future planning.

What are the confirmed business tax changes?

Capital Allowances

Reduction in Writing Down Allowance: The main rate of writing down allowance for plant and machinery will be reduced from 18% to 14% from April 2026 (for corporation tax) and from 6 April 2026 for income tax. This means businesses will receive tax relief on their capital expenditure at a slower rate for assets not covered by full expensing or the Annual Investment Allowance (AIA .

New 40% First Year Allowance: A new 40% first year allowance will be introduced for main pool plant and machinery additions from 1 January 2026. This is particularly relevant for assets that are not eligible for full expensing, such as those intended for leasing and for unincorporated businesses. The AIA remains unchanged at £1 million.

Enterprise Management Incentive (EMI) Scheme

Expanded Eligibility: From 6 April 2026, the EMI scheme will be available to larger companies. The gross assets limit increases from £30 million to £120 million, the employee limit from 250 to 500, and the company option pool from £3 million to £6 million. The exercise period for options will also increase from 10 to 15 years, including for existing options.

Venture Capital Schemes (EIS and VCT)

Increased Limits: From April 2026, the annual and lifetime investment limits for companies under the EIS and VCT schemes will be substantially increased (e.g., annual limit to £10 million, lifetime limit to £24 million, and higher limits for knowledge-intensive companies). The gross assets test will also increase.

Reduced VCT Income Tax Relief: The rate of VCT income tax relief for individuals will decrease from 30% to 20% from April 2026

Employee Ownership Trusts (EOTs)

CGT Relief Reduced: For disposals to EOTs on or after 26 November 2025, the capital gains tax relief is reduced from 100% to 50%. Business Asset Disposal Relief and Investors’ Relief are not available to reduce the gain. The gain is deferred until the shares are disposed of by the trustees

Salary sacrifice National Insurance cap from April 2029

From April 2029, the NIC advantages linked to salary sacrifice pension contributions will be capped at £2,000 per year. This affects employers offering salary sacrifice as part of their reward structure.

Company vehicle and EV-related changes from 2028

Electric and plug-in hybrid vehicles will move to a per-mile charging system from April 2028. This will influence budgeting and fleet planning for businesses offering company cars.

What businesses should do next

It is sensible for SMEs, start-ups and UK subsidiaries to check their current position against the confirmed changes. Reviewing forecasts and updating cost assumptions can provide a clearer picture of the next few years. Businesses may also want to ensure bookkeeping is accurate, payroll processes are up to date, and any future investment or structural decisions have been considered in the context of the new rules.

How Kirk Rice can help

Kirk Rice supports SMEs, start-ups and UK subsidiaries with practical accounting and tax services. If you would like clarity on how the confirmed tax changes may affect your future plans, reporting or cost base, our team can explain the areas that are relevant to you.

Kirk Rice can help businesses with:

• Tax advisory services
• Outsourced Bookkeeping and Payroll Services
• VAT reporting, registration and returns
• Management accounts and financial reporting

If you would like to discuss how the changes may affect your business, you can get in touch with our team via info@kirkrice.co.uk

Please note: This article is correct as at the publication date. The answers are given for general guidance only and specific advice should be taken before acting on any of the suggestions made. The information is based on current tax legislation which may change in future. Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of relief from taxation are subject to change. The Financial Conduct Authority does not regulate tax planning.