Tax - Corporate

The new Government's first Finance Bill received Royal Assent on 20 March 2025 and became the Finance Act 2025. Here's a brief overview of its key provisions:

• Corporation tax: maintaining the main rate of corporation tax for financial year 2026 at 25%.
  
  
• Capital Gains Tax:
  • for disposals made on or after 30 October 2024, both (i) an increased lower rate of CGT (for basic rate taxpayers) from 10% to 18%, and (ii) higher rates of CGT for higher rate taxpayers, trustees and personal representatives, from 20% to 24% (see Section 16: Tax – Incentives and Personal for more);
  • reforms to the taxation of carried interest (see Fundamental reform of carried interest taxation in the UK below for more); and
  • increased rates of taxation for business asset disposal relief (BADR) and investors' relief.
    
    
• International:
  • new Undertaxed Profits Rule (UTPR) – which took effect from 31 December 2024 – and repeals the Offshore Receipts in respect of Intangible Property (ORIP) regime. The UTPR is a component of Pillar 2 (the global minimum tax) designed to prevent multinational enterprises from exploiting low-tax jurisdictions by allowing the imposition of additional taxes on undertaxed overseas profits; and
  • changes to the operation of PAYE for internationally mobile employees.
    
    
• Domicile: replaces the UK's rules for non-domiciled individuals with a new, residence based, regime tax regime from 6 April 2025 (see Replacement of non-dom tax regime from 6 April 2025 below for more).
  
  
• SDLT: increases the SDLT surcharges on the acquisition of additional dwellings and properties (see Real Estate - SDLT surcharges increase below for more).
  
  
• UK Carbon Border Adjustment Mechanism (CBAM): providing HMRC with certain powers to prepare for the introduction of the CBAM, expected to take effect from 1 January 2027.

The Government published a Corporate Tax Roadmap alongside the Autumn Budget 2024. Intended to "provide clarity about the major features of the [UK's corporation tax regime] and highlight some areas where the government expects to consider changes", the main aim of the Roadmap is to create predictability, stability, and certainty for the duration of the current Parliament. It contains several commitments, including:

• Corporation Tax rate & base: maintaining current corporation tax rates.
  
  
• Capital Allowances: maintaining permanent full expensing, the Annual Investment Allowance, writing down allowances, and Structures and Buildings Allowance.
  
  
• R&D Relief: maintaining current R&D Expenditure Credit (RDEC) scheme and the Enhanced Support for R&D Intensive SMEs rules.
  
  
• Patent Box & Intangible Fixed Assets: maintaining the current regimes.
  
  
• International:
• Pillar 1: finding an international solution for the challenges caused by the digitalisation of the global economy; and
• Pillar 2: to ensure that the UK's domestic rules implementing the Income Inclusion Rule (IIR), Domestic Minimum Tax (DMT), and Undertaxed Profits Rule (UTPR) continue to reflect internationally agreed updates.
  
  
• Deductibility of Debt: to maintain the current rules on the deductibility of borrowing costs. The rule had been the subject of certain representations demanding tighter restrictions following the introduction of full expensing but, in a welcome development, the Government has confirmed that it does not intend to make any changes.
  
  
• Making Tax Digital: continuing the digitalisation of the administration of Corporation Tax, with the aim of improving customer experience and easing administrative burdens.

In addition, the Roadmap sets out a number of areas that the Government intends to review and potentially reform. These include:

• Capital Allowances:
• to clarify what qualifies for different capital allowances and simplify the regime for businesses; and
• to extend full expensing to leasing (when fiscal conditions allow).
  
  
• R&D Relief – to consult on widening the use of advance clearances for R&D claims to enable businesses to guarantee that an R&D claim for tax relief will be accepted. The consultation, Research and Development tax relief advance clearances, was launched alongside the Spring Statement 2025.
  
  
• International – to consult or review:
• the UK's transfer pricing rules, including the potential removal of UK-to-UK transfer pricing, lowering the exemption threshold for SMEs, and requiring multinationals to report cross-border related party transactions to HMRC;
• the domestic law definition of 'permanent establishment';
• the operation Diverted Profits Tax (DPT);
• possible further simplification of the UK’s international tax framework now that Pillar 2 has been implemented. As part of this, following the introduction of the UTPR, the Offshore Receipts in respect of Intangible Property (ORIP) regime was repealed by Finance Act 2025 with effect from 31 December 2024; and
• the continued application, and possible repeal of, the UK's Digital Services Tax (DST) during 2025 "in light of the progress made on Pillar 1".

For more detail, please see our Budget briefings, Autumn Budget 2024 - Business Taxes, and Autumn Budget 2024 - International.

The Stamp Duty Land Tax (SDLT) surcharge on the purchase of any additional residential property by companies increased from 3% to 5% on 31st October 2024. In addition, the SDLT rate for companies acquiring a dwelling for more £500,000 (the ATED-related SDLT charge) also rose from 15% to 17%. The purpose behind these rises is to further discourage the purchase of second homes and buy-to-let properties, enabling more properties to be acquired by first-time buyers. 

SDLT will normally be chargeable on the date of completion of an acquisition. However, it can be earlier where there has been "substantial performance", such where rent payments have been made or where early possession of the property is taken. Transactions substantially performed before 31st October 2024 will be subject to the previous 3% rate.

It is worth noting that the SDLT surcharge for non-UK residents remains at 2%. However, this surcharge can still compound with the new 5% surcharge, resulting in a potential SDLT charge of 19% for affected transactions.

Top of the watch-list for many at last year's Autumn Budget were the reforms to the UK's carried interest tax regime. 

The current minimum tax rate for carried interest rose to 32% (from 28%) for the 2025/2026 tax year. More fundamentally, from 6 April 2026, all carried interest (whatever its underlying source) will be taxed exclusively as trading income. Trading income is taxed at rates of up to 45% plus 2% national insurance contributions (NICs), but a discount mechanism will be applied to “qualifying” carried interest to give an effective tax rate (including NICs) of just over 34%.

To be “qualifying”, carried interest must not fall within the UK’s “income-based carried interest” (IBCI) rules – these rules, broadly, require the underlying fund to have a weighted average holding period for its assets of at least 40 months. In an important change, the IBCI rules will apply to all carried interest holders including employees (currently, only self-employed LLP members are in scope). 

The Government is considering whether a minimum co-invest condition or a minimum hold period before carried interest pays out should be attached to “qualifying” status.

At just over 34%, the UK will still have a competitive effective tax rate for carried interest, albeit narrowly the highest amongst rival mainstream European jurisdictions. In addition, the move to a trading income regime has the potential to give rise to difficult technical issues, especially for non-residents. It will therefore be important that the Government carefully structures the new regime to make it straightforward to apply and ensures that any additional conditions for “qualifying” status (beyond the IBCI rules) can be met by normal commercial carried interest arrangements.

There may also be some winners under the new rules. Executives who currently pay over 34% on their carried interest returns may end up better off with the new flat rate of just over 34% from 6 April 2026. This could be relevant for credit, infrastructure and real estate strategies that generate significant interest or rental income.

For more detail, please see our Budget briefing.

On 6 April 2025, the UK's current "non-dom" tax regime was replaced with a new residence- based regime. Broadly, individuals who become UK resident after 10 tax years of non-UK residence can choose not to pay tax on foreign income and gains (FIG) arising in the first four tax years after becoming UK resident. In addition, from 6 April 2025, inheritance tax moved from being based on domicile to being based on residence.

Under the UK's salaried members rules, a member of an LLP can be treated as an employee rather than self-employed for tax purposes, such that employer NICs and PAYE obligations arise. However, the regime will not apply if the individual has any of three facets of true partner-like status:

• the individual's remuneration is sufficiently variable by reference to the LLP's overall profits,
  
  
• the individual has "significant influence" over the LLP, and
  
  
• the individual has made a sufficiently large capital contribution.

However, there have been important recent developments in relation to the last two of these facets. 

Significant influence – a narrower interpretation

Earlier this year, the Court of Appeal, overturning the decisions of the lower tribunals, held that "significant influence" must be construed narrowly. It held that the influence must derive from the legal rights and duties of the members and indicated that the focus should be only on strategic influence which itself should be over all the affairs of the partnership. This decision markedly restricts the scope of significant influence as compared to the lower tribunals' interpretation. We are waiting to hear whether BlueCrest will be granted permission to appeal to the Supreme Court. For more details, please see our briefing.

Capital contributions

Last year, HMRC controversially amended its published guidance on the salaried member rules to say that, in its view, increases in capital contributions made solely to fall outside the salaried members rules would be ineffective. Following strong concerns and disquiet expressed by many (including those in the private capital industry), HMRC decided to conduct an internal review of those changes. After months of uncertainty, HMRC has now concluded its review and announced that it intends to effectively reverse those changes. Read our briefing for more.

Since 19 March 2025, it has been possible to launch a RIF, a new form of UK unauthorised fund. The RIF is expected to be particularly attractive for investment in commercial real estate and, for the right investor base, could be an onshore rival to the Jersey Property Unit Trust.

In the main, the Chancellor stayed true to her promise that the Spring Statement 2025 would not contain any substantive tax measures. However, the Government re-committed itself to efforts to 'close the tax gap' with a broad package of measures aimed at investing in HMRC resources and tackling tax evasion and abusive tax avoidance activities.

Here's a snapshot of the key tax-related announcements:

• Anti-avoidance and evasion – in addition to HMRC expanding its counter-fraud capabilities and restarting its ‘direct recovery’ of tax debts, the Government published four new consultations that will significantly strengthen the HMRC's powers and reinforce some key elements of the UK's anti-avoidance legislation:
  • Closing in on promoters of tax avoidance – including proposals to:
    • strengthen the Disclosure of Tax Avoidance Schemes (DOTAS) regime;
    • introduce both Universal Stop Notices and Promoter Action Notices (which would require persons to stop promoting or enabling schemes or providing services to such persons);
    • introduce HMRC information powers to investigate 'controlling minds' behind the promotion of avoidance schemes; and
    • revise the existing rules as they apply to legal professionals (including so far as they relating to the availability of legal professional privilege (LPP)).
  • Enhancing HMRC's ability to tackle tax advisers facilitating non-compliance – including proposals to:
    • enhance HMRC’s powers to investigate tax advisers;
    • introduce stronger penalties for non-compliant tax advisers; and
    • broaden HMRC's ability to 'name and shame' advisers falling below professional standards.
  • Behavioural penalties reform – reforming the penalties regimes for tax compliance inaccuracies and 'failure to notify' offences.
  • Better use of new and improved third party data – improving HMRC's ability to acquire data (initially focused on financial account information) from third parties, and to acquire it more quickly and efficiently.
    
    
• Tackling 'phoenixism' – the Government announced a new joint plan by HMRC, Companies House, and the Insolvency Service to combat tax evasion resulting from contrived insolvencies. Measures include the increased use of upfront payment demands, holding more directors personally liable for company taxes, and increasing enforcement sanctions.
  
  
• Advance clearances – as promised in the Autumn Budget 2024, the Government has launched two consultations on tax clearance services:
  • Advance tax certainty for major projects consultation – proposing a new dedicated advance clearance service for companies undertaking the very largest and most innovative investment projects. The new process will be available in addition to the current services, with the main difference being that the new one will not require the demonstration of genuine uncertainty. Interestingly, the consultation suggests that a fee might be payable for the service and that the Government will publish summarised and anonymised past clearances. The Government hope that the new service will be available in 2026.
  • Research and Development tax relief advance clearances – the consultation explores two options to expand the use of advance clearance for R&D reliefs. The two approaches are (a) voluntary assurances, and (b) mandatory assurance. Both approaches are intended to reduce error and fraud, improve certainty for businesses, and enhance customer experience.