Autumn Budget 2026: Corporate taxes and reporting

The government has announced an increase in the first-year allowance (FYA) for qualifying expenditure on new main rate plant and machinery from 40% to 50%, effective from 1 January 2027. A reduction in the main pool writing down allowance (WDA) from 14% to 12% was also announced, effective from April 2027.

Summary

The 2026 Autumn Budget saw several changes to the capital allowances regime for both corporation tax and income tax paying businesses.

The 40% FYA available to businesses subject to income tax on expenditure incurred on new qualifying plant and machinery, and to businesses incurring qualifying expenditure on assets used for leasing, will increase to 50% for expenditure incurred from 1 January 2027.

The main pool WDA rate will be reduced from 14% to 12%, with effect from 1 April 2027 for corporation tax paying entities and 6 April 2027 for income tax paying entities. The reduced rate will apply to existing main pool balances, as well as expenditure that does not qualify for upfront capital allowances relief. This is the second consecutive reduction in the main pool WDA rate, which was already reduced from 18% to 14% last year.

The current 100% full expensing FYA for companies investing in qualifying new main rate assets will continue to apply, as will the 50% first-year allowance for qualifying special rate expenditure

Our comment

We welcome the increase in the main rate FYA. The measure further narrows the gap between the relief available to income tax paying businesses and those undertaking qualifying leasing activities, and the full expensing regime available to companies.

However, this benefit is offset by the further 2% reduction in the main pool WDA rate. Asset-intensive businesses, such as real estate, infrastructure, healthcare and hotel and leisure, which have large main pool balances, will now obtain tax relief over a longer period.

The fact that these measures are expected to generate significant additional revenue for the government, as it is the biggest revenue raiser over the forecast period after HMRC measures to close the tax gap, suggests that the reduction in WDA rates is expected to outweigh the benefit of the increased FYA across the wider economy.

This emphasises that capital allowances planning remains increasingly important, with businesses needing to maximise access to upfront reliefs and carefully assess the timing and structure of capital investment decisions.

From 1 April 2027, business rates relief for pubs, social clubs and eligible live music venues will be enhanced. The small business rates relief thresholds are also increasing to support smaller businesses.

Summary

The Budget's business rates package is heavily focused on supporting retail, hospitality and leisure (RHL) businesses. The government's stated aim is that every RHL business in England will see its business rates either frozen, reduced or eliminated from April 2027.

From April 2027, relief for pubs, social clubs and live music venues will increase from 15% to 35%. The small business rates relief thresholds for eligible RHL properties will also rise significantly from April 2027, with the 100% relief threshold increasing from £12,000 to £18,000 rateable value and the taper threshold increasing from £15,000 to £21,000. Business rates bills for qualifying RHL properties will also be frozen in real terms for 2027/28 and 2028/29 rate years.

The government estimates that around 70,000 additional businesses will pay no business rates as a result, and that around half of all RHL properties in England will become exempt from business rates altogether.

In addition to these relief measures, the government announced a number of structural reforms. A new general anti-avoidance rule (GAAR) for business rates will be introduced to tackle avoidance schemes. Vape shops and adult gaming centres will lose access to certain reliefs, while the existing 1p transitional relief supplement will be extended for a further two years to help fund the wider package.

The Budget also advances business rates devolution, with mayoral authorities receiving a share of business rates payments from next year and plans for full local retention of rates income by the end of the decade.

Our comment

The measures announced are a welcome step for businesses facing continued cost pressures across the RHL sectors.

Increasing the small business rates relief thresholds and enhancing rates relief for pubs, social clubs and live music venues will help reduce costs, improve cash flow and support investment. The real-terms freeze on business rates bills also provides greater certainty for occupiers at a time when inflationary pressures and rising operating costs remain significant.

Whilst these measures provide meaningful short-term support for RHL businesses, a more ambitious and permanent reduction in the business rates multiplier would have been welcomed, ideally to a level closer to 35p. Such a measure would have provided greater certainty for occupiers and delivered a more substantial reduction in the property tax burden faced by RHL businesses.

Many would also have preferred the removal of the higher multiplier for all properties with a rateable value of £500,000 and above. Retaining this surcharge risks discouraging investment in larger commercial properties, many of which are significant employers and key contributors to local economies. Removing the higher multiplier would have helped create a fairer and more competitive business rates system, while supporting business growth and regeneration.

HMRC announced it will remove the R&D claim notification requirements for claims made on or after 1 April 2027. The additional information form (AIF) will also be simplified from autumn 2027.

Summary

The Finance Bill 2026/27 will remove the requirement to notify HMRC of the intention to make an R&D claim for claims made on or after 1 April 2027. These changes will impact companies that claim tax relief under both the R&D expenditure credit (RDEC) and the enhanced R&D intensive support (ERIS) schemes.

HMRC has also announced it will rationalise and simplify the AIF to remove duplication, ask for more targeted information on contractors and externally provided workers, and will clarify the project information requirements.

HMRC is also seeking practical suggestions on simplification of the R&D legislation while maintaining the safeguards and policy intent.

Our comment

Following several changes to the R&D tax relief regime over recent years, this announcement maintains the status quo of the current reliefs. The removal of the claim notification requirement is a welcome amendment, as this often caught out first-time claimants or taxpayers who have had a break in their R&D claim periods.

HMRC is welcoming practical suggestions on further simplification of the R&D legislation to make the rules easier to comply with, while maintaining the safeguards that the recent changes have introduced.