The 2025/26 UK Financial Act: Key Changes Businesses Need to Know

Vanessa Aradia
Mar 12
2 min read

As the UK government continues to reshape the economic landscape, the 2025/26 Financial Act introduces several key changes that will impact businesses, self-employed individuals, and investors. Understanding these updates is crucial for ensuring compliance, financial efficiency, and strategic planning. So, what does this mean for you? Let’s break it down.

1️⃣ Corporation Tax Adjustments

With ongoing economic recovery measures, the government has announced adjustments to Corporation Tax bands and reliefs. Key changes include:

Maintaining the 25% main Corporation Tax rate for businesses with annual profits over £250,000.
A new relief for SMEs focused on sustainable and tech-driven investments, encouraging green initiatives and digital transformation.
Tighter compliance on deductions, requiring stricter evidence for R&D claims and capital allowances.

2️⃣ Income Tax & Personal Allowance Updates

The Personal Allowance threshold remains frozen at £12,570, but there are adjustments to tax bands:

Higher-rate tax threshold lowered to bring more earners into the 40% tax bracket.
Adjustments to Dividend Tax rates, with potential increases for high-income earners.
National Insurance contributions (NICs) review, focusing on reducing the burden on lower earners.

3️⃣ Making Tax Digital (MTD) Expansion

MTD continues to roll out, with further mandatory digital tax filing requirements:

From April 2026, MTD for Income Tax Self-Assessment (ITSA) applies to individuals earning over £50,000.
From April 2027, it will extend to those earning over £30,000.
Quarterly digital tax reporting becomes compulsory, making real-time compliance essential for businesses and self-employed individuals.

4️⃣ VAT & Indirect Tax Changes

The government is refining VAT rules to simplify reporting and enhance compliance:

New digital VAT submission standards, aligning with MTD regulations.
Potential adjustments to VAT thresholds, affecting small businesses.
Greater focus on environmental taxes and sustainability levies.

5️⃣ Green Business Incentives & Carbon Reporting

Sustainability is a priority in the 2025/26 Financial Act, with increased incentives for businesses embracing green practices:

Tax relief for energy-efficient investments.
Expansion of the Plastic Packaging Tax.
New carbon reporting obligations, requiring companies to disclose emissions data.

6️⃣ Employment & Payroll Compliance

Employers must stay ahead of changes in payroll regulations, including:

Minimum Wage increases and the potential expansion of the Living Wage.
Updated IR35 guidelines for off-payroll working, reducing contractor misclassification risks.
Enhanced enforcement of holiday pay compliance and pension auto-enrolment.

How TCW Can Help You Prepare

At TCW Accountancy and Training Solutions, we stay ahead of financial legislation so you don’t have to. We can help you:

✔️ Optimise tax planning strategies to take advantage of new reliefs.

✔️ Ensure compliance with MTD, VAT, payroll, and corporation tax changes.

✔️ Prepare your business for green tax incentives and sustainability reporting.

✔️ Train your team to handle new tax and accounting regulations confidently.

📩 Get in touch today to discuss how we can help your business navigate the 2025/26 Financial Act changes with ease!