Before the Budget: The changes already shaping 2026 and beyond
New obligations, stronger enforcement and reforms on the horizon
Budget 2026 follows a year of significant developments across the tax system. The Government’s June Tax Update brought forward proposals affecting how taxpayers report information, pay liabilities and interact with HMRC. Meanwhile, measures introduced through Finance Act 2026 and earlier legislation are already changing the compliance landscape.
For clients, the implications extend beyond the amount of tax payable. Changes to reporting requirements, responsibility for third-party failures and HMRC’s enforcement powers can create new operational demands and sources of dispute. The following developments deserve particular attention.
Stronger powers and greater exposure
Development | Timing and status | What it could mean for taxpayers |
|---|---|---|
Prohibition of promotion of certain tax avoidance arrangements | The new “POP Regime”covers arrangements marketed as delivering a tax advantage where there is no realistic prospect of achieving it, alongside arrangements specified in regulations. | “Promotion” extends beyond marketing to certain activities involving making arrangements available or managing their implementation. Civil penalties can reach £1m plus £5,000 per participant, with criminal sanctions also available. Advisers and intermediaries should understand their exposure; an HMRC allegation requires early consideration of the statutory conditions, evidence and available challenges. |
Expansion of corporate criminal liability | The Crime and Policing Act 2026 (CPA 2026), which received Royal Assent on 29 April 2026, introduces new measures that will have significance for all companies operating in the UK. | From 29 June 2026, a company may be liable for the commission of a criminal offence if that offence was committed by a “senior manager” acting within the actual or apparent scope of their authority. This builds on the important changes introduced by the Economic Crime and Corporate Transparency Act 2023 (ECCTA 2023), where this same test was introduced in respect of certain economic crimes. The CPA 2026, now extends that test to all criminal offences – significantly broadening the corporate exposure to criminal liability. |
New anti‑avoidance information notice powers | The AAINs powers contained in Finance Act 2026 give HMRC significantly broader information-gathering powers when investigating the promotion or facilitation of tax avoidance | Failure to comply with AAINs can attract substantial financial penalties and, in serious cases, criminal consequences, ranging from an initial £5,000 penalty and daily penalties of up to £1,000 to enhanced penalties equal to the amounts received in connection with the avoidance arrangements and imprisonment for up to two years. Taxpayers should take any notice seriously, seek early advice and ensure that their response is timely, complete and accurate. |
A proposed criminal offence for reckless statements in direct tax matters | Consultation ran from June to August 2026. The offence remains a proposal, with commencement dependent on legislation. | The proposal seeks to address and inconsistency between direct and indirect tax offences. A new offence for making reckless untrue statements or declarations for direct taxes would be introduced. The asserted aim is to harmonise the criminal offences available across direct and indirect tax and create an enforcement tool that could be used in direct tax cases where dishonesty cannot be established but where a sanction is appropriate. |
Reform of HMRC’s information and inspection powers | Announced in June, with draft legislation published on 13 July 2026. Intended to take effect on Royal Assent to Finance Bill 2026–27. | Proposed changes include extending Financial Institution Notices to cryptoasset service providers and updating access to digital records, including information explaining how tax figures were produced. Businesses and intermediaries may face more technically demanding requests. Assessing their scope, relevance and statutory safeguards will remain essential when responding. |
Recovery of lower-value tax debts directly from accounts | Consultation ran from June to August 2026; announcements made in Budget 2026. | The proposal would would introduce an automated process to directly deduct instalment payments from those taxpayers with lower value debts who persistently do not engage with HMRC. The proposed measure emphasises HMRC's focus on reduce tax debt, and reinforces the importance of addressing HMRC correspondence promptly, identifying disputed liabilities and explaining genuine financial difficulties before recovery action escalates. |
New taxpayer duty to correct | In July 2026, HMRC published draft legislation for inclusion in the Finance Bill 2027 which, if enacted, will introduce a new duty on taxpayers to correct errors identified in their tax returns. | The proposed duty to correct tax errors would significantly increase the risks of leaving known inaccuracies unresolved: failure to take reasonable steps to correct them or notify HMRC could result in deliberate behaviour treatment, penalties of up to 100% of the tax lost and assessment time limits extending to 20 years. HMRC would also gain powers to require taxpayers to correct suspected inaccuracies or explain why no correction is needed. Taxpayers should review their processes for identifying and addressing errors, act promptly when concerns arise and document their reasoning carefully, particularly where the tax treatment is genuinely disputed. |
New responsibilities across the supply chain
Development | Timing and status | What it could mean for taxpayers |
|---|---|---|
Changes to PAYE Rules for labour supply chains that include umbrella companies | Applies to payments to workers made on or after 6 April 2026, including existing arrangements. | HMRC can recover PAYE underpayments from the agency contracting with the end client, or from the end client where no agency is involved. Businesses therefore face exposure arising from an umbrella company’s failure. Due diligence, contractual protections and ongoing monitoring matter, particularly where clients use substantial numbers of contingent workers. |
Changes to the Construction Industry Scheme | Significant changes to the Construction Industry Scheme (CIS) came into effect from 6 April 2026, introducing new measures to streamline CIS administration and combat fraud in the construction sector. | The CIS changes increase businesses’ exposure to fraud in their supply chains: contractors who knew or should have known that a transaction was connected to fraudulent tax evasion can face liability for the lost tax and penalties of up to 30%. Directors and connected persons may also face penalties, while businesses risk immediate withdrawal of gross payment status and a five-year wait before reapplying. Businesses should review their CIS controls, strengthen due diligence on subcontractors and labour suppliers, and retain clear evidence of the checks undertaken to help defend their position if HMRC challenges a transaction. |
Mandatory registration of tax advisers | Registration opened in phases from 18 May 2026. Later windows begin on 18 November 2026 for qualifying payroll-only providers and 31 December 2026 for relevant financial services organisations, generally allowing three months to apply. Advisers already holding an Agent Services Account do not need to register again. | The regime can apply to businesses that do not describe themselves as tax advisers but are paid to interact with HMRC for others. Registration conditions and continuing checks create new compliance demands. Restrictions on an adviser’s ability to act could also disrupt clients’ reporting or handling of an enquiry. |
Extension of VAT liability for online marketplaces | The consultation ran from June to August 2026; announcements made in Budget 2026. | The Budget Announcement extends, from 1 October 2027, VAT online marketplace liability rules, requiring online marketplaces, such as Amazon, eBay and Temu, to collect and remit VAT on business-to-consumer sales by UK sellers through their platforms. The Government has set the minimum platform threshold at £90,000, aligned with the VAT registration threshold, so that businesses legitimately trading below that threshold remain outside the extension. Platforms will need to change seller checks, systems and contractual arrangements. Sellers will also face changes to VAT accounting and payment flows, making responsibility for tax and the treatment of transactions important areas to monitor. |
Reform of customs treatment for low‑value imports | Delivery has been accelerated to October 2028 at the latest, with draft legislation published in July 2026. | Removing the £135 customs duty relief and introducing new arrangements will affect sellers, marketplaces, parcel operators and customs intermediaries. Clients should anticipate changes to import costs, data requirements and liability allocation. Proposed fiscal representatives would assume joint and several liability for relevant overseas sellers’ customs debts. |
Reporting and payment are becoming more demanding
Development | Timing and status | What it could mean for taxpayers |
|---|---|---|
Making Tax Digital for Income Tax | The first mandatory cohort started on 6 April 2026, covering qualifying self-employment and property income above £50,000. The threshold falls to £30,000 from April 2027 and £20,000 from April 2028, based on the relevant earlier tax year. This is the implementation of previously announced reforms. | Affected individuals need to adapt their record-keeping and reporting processes. The thresholds concern gross qualifying income, rather than profit, so clients with modest taxable profits may still fall within scope. Partnerships have a separate, as-yet unannounced implementation timetable. |
More timely Self Assessment payments and mandatory Direct Debit proposals | June consultations propose collecting more forecast Self Assessment liabilities through PAYE from April 2029, alongside possible changes to payments on account. Mandatory Direct Debit for VAT and PAYE remains subject to consultation outcomes and implementation decisions. | These measures could change when funds leave clients’ accounts and how liabilities are administered. Clients may need to revisit cash-flow forecasts and payment controls. Accurate estimates and processes for correcting liabilities will become particularly important where tax is collected before the final position is established. |
Electronic invoicing | The June update identified Peppol as the core interoperability network supporting the planned 2029 e‑invoicing mandate. | Businesses should factor compatibility, data quality and record retention into future systems investment. The operational challenge will be ensuring that invoicing processes support accurate VAT reporting and provide reliable evidence when transactions are scrutinised. |
Opportunities to reduce costs and resolve disputes
Development | Timing and status | What it could mean for taxpayers |
|---|---|---|
The new loan charge settlement scheme | Legislation enacted as part of Finance Act 2026 to give effect to the new scheme and scheme guidance was published in July 2026. HMRC has begun issuing formal settlement offers to eligible taxpayers, who will have at least 90 days to accept. | The scheme offers eligible individuals and employers an opportunity to resolve outstanding disguised remuneration loan charge liabilities. The scheme provides more favourable settlement terms than have previously been offered by HMRC. Eligibility liability calculations, the impact of any existing settlements and other disguised remuneration liabilities require careful review. Taxpayers should assess both the financial terms and the consequences for ongoing enquiries or appeals before accepting a binding settlement. |
Expenditure credits and Corporation Tax instalment payments | The June update announced plans to introduce legislation to amend the definition of augmented profits for Corporation Tax QIP. From April 2027, R&D Expenditure Credits, Audio‑Visual Expenditure Credits, and Video Games Expenditure Credits will no longer be included when determining whether a company is within the QIP regime. | The planned changes are intended to prevent companies from being brought into QIP solely as a result of receiving the relevant credits, reducing administrative burdens and easing cashflow pressures for affected businesses. |
A new exemption for qualifying UK-to-UK transfer pricing arrangements | Applies to chargeable periods beginning on or after 1 January 2026, subject to eligibility conditions and disqualifying criteria | The exemption can reduce compliance work for qualifying domestic arrangements. Groups should nevertheless establish whether the conditions are met and retain supporting evidence, particularly where historic periods remain under enquiry or an arrangement falls outside the exemption. |