Business

Corporation Tax

The government has confirmed that the rates of Corporation Tax will remain unchanged, which means that, from April 2027, the rate will stay at 25% for companies with profits over £250,000. The 19% small profits rate will be payable by companies with profits of £50,000 or less. Companies with profits between £50,001 and £250,000 will pay tax at the main rate reduced by a marginal relief, providing a gradual increase in the effective Corporation Tax rate.

A temporary increase has been announced to the rate of Corporation Tax surcharge on banking companies to 6% for 15 months. The changes will apply from 1 January 2027 to 31 March 2028.

The government will introduce legislation to make the foreign permanent establishment exemption regime mandatory. This will apply for accounting periods beginning on or after 1 January 2027.

Following the launch of the Advance Tax Certainty Service in July 2026, the government has announced the entry threshold for qualifying projects will reduce from £1 billion to £300 million. The reduced entry threshold will apply from 4 November 2026. Additionally, changes have been announced to the definition of ‘qualifying investment projects’ and to the associated penalty provisions.

The government has announced a new, permanent additional 35% levy (the ‘Oil and Gas Revenue Levy’) on exceptional oil and gas revenues arising during periods of unusually high prices. The levy will apply to exceptional oil or gas revenues arising on or after the day immediately following the cessation of the Energy Profits Levy, which will be 1 April 2030 or an earlier date if the Energy Security Investment Mechanism is triggered.

The government will introduce legislation to repeal the remaining Advance Corporation Tax (ACT) regime with effect from 1 April 2031, with all remaining unrelieved ACT balances being extinguished when the regime ends.

From 1 April 2027, the Annual Tax on Enveloped Dwellings (ATED) annual charges will rise by 3.5%.

Capital allowances

The Full Expensing rules for companies allow a 100% write-off on qualifying expenditure on most plant and machinery (excluding cars) as long as it is new and unused. Similar rules apply to integral features and long-life assets at a rate of 50%.

The government has announced a reduction in the main rate Writing Down Allowance (WDA) from 14% to 12% per year from 1 April 2027 for Corporation Tax purposes and 6 April 2027 for Income Tax purposes. For businesses with chargeable periods which straddle those dates, a hybrid rate will apply. The WDA on the special rate pool remains at 6% per year.

For expenditure incurred on or after 1 January 2027, the government will increase the First Year Allowance (FYA) from 40% to 50% for all businesses on main rate assets, including most expenditure on assets for leasing. Cars, second-hand assets and assets for leasing overseas are not eligible. 

The Annual Investment Allowance (AIA) is available to both incorporated and unincorporated businesses. It gives a 100% write-off on certain types of plant and machinery up to a financial limit per 12-month period. The limit remains at £1 million.