Chancellor John Healey has delivered his first Budget, aimed at supporting British businesses of all sizes and setting a clear direction for the future. The government reiterated its commitment to the 2024 Corporate Tax Roadmap and to listening to suggestions for simplifying the UK’s corporation tax regime. Increases to the national minimum wage and bank surcharge aside, the key theme for businesses is stability.

Top takeaways

Capital allowances changes for business investment

Targeted changes to the capital allowances treatment of main rate assets that preserves the value of relief for future investment. This includes increasing the first-year allowance to 50% from 1 January 2027, which mainly affects assets for leasing and reducing writing down allowances from 14% to 12% from April 2027.

These changes will not have a significant impact for many large corporates as full expensing relief will remain. The government has also committed to explore options to clarify the tax treatment of predevelopment costs in light of recent case law. It will also review the wider capital allowances challenges for infrastructure investment.

Corporate tax simplification

The requirement to submit a research and development tax claim notification will be removed from 1 April 2027. The minimum expenditure threshold for HMRC’s advance tax certainty service will be reduced from £1bn to £300m, expanding access to this mechanism for gaining certainty on the tax treatment of large projects.

A new call for evidence focuses on simplifying the UK corporate tax regime. It covers proposed changes to innovation reliefs, provisions impacting interest deductibility and the international tax rules. The consultation doesn’t propose wholesale changes to these regimes, but requests views on tweaks to simplify the operation of these rules.

International tax: interest withholding tax and branch exemption

The basic savings rate increase to 24% is expected to bring a corresponding increase in withholding tax on interest from April 2027. Consideration of moving to a self-assessment approach for interest withholding tax continues.

The mandating of the branch exemption will continue as previously announced. The expected tax take is nearly £500m per year which illustrates the fact that this will have real impact for some businesses.

What does the Budget mean for large corporates?

There was a policy focus on the cost of living, devolution and supporting the growth agenda but Budget 2026 was relatively light on specific changes.

From the larger corporate side, the increase to the bank surcharge was presented as a quid-pro-quo for previous public support for banks. Beyond this, there were limited numbers of significant announcements. The changes to the writing down allowance rates are intended to encourage further investment. But their impact will be diluted by the number of businesses already benefiting from full expensing.

The wide-ranging corporate tax simplification for business investment is intended to show HMRC is listening to taxpayers' concerns around complexity and uncertainty in key areas. It will address questions arising from recent developments covering things such as the extent to which controlled foreign company rules are needed for those subject to Pillar Two. It will also seek to clarify aspects of the various incentive regimes and a range of administrative simplifications. The impact of the resulting changes may be considerably greater than any measures announced today, but it will take time to see what changes emerge. To the extent that these changes simplify the regime while maintaining stability, they should be welcomed.

In the meantime, the increase in minimum wage is a reminder of the growing cost base for people-intensive businesses. Additional resources and powers for HMRC suggest that large corporates can expect increased enquiry activity, supported by more sophisticated use of technology and data sources. Focusing on internal data systems and controls will therefore be a priority for many.

Contact your usual RSM adviser to discuss how these changes affect your investment plans and readiness for HMRC enquiries.