Executive summary

On 23 June 2026, the Government delivered its promised package of tax and customs measures to reduce administrative burdens as well as to improve certainty, fairness and customer experience.

One day prior, on 22 June 2026, Sir Keir Starmer had announced his resignation as leader of the Labour Party. He will remain in post as UK Prime Minister until a successor is appointed, ensuring an orderly transition. Leadership nominations are expected to open on 9 July 2026 and close ahead of the summer parliamentary recess (16 July). If a single candidate secures sufficient Member of Parliament (MP) support, a new leader (and therefore Prime Minister) could be in place by mid-July. The growing expectation is that Andy Burnham MP, previously the Labour mayor for Manchester, may be appointed leader of the Labour party unopposed. There is no obligation on the new Prime Minister to call a United Kingdom (UK) General Election (which must be called before 9 July 2029).

An early question for the new Prime Minister will be whether Rachel Reeves remains as Chancellor or whether, as is widely expected, they opt to appoint a refreshed economic team. More broadly, any reshuffle may extend across the Treasury ministerial team (including the Ministers who focus on Tax Policy, such as the Financial Secretary, Exchequer Secretary and Economic Secretary (City Minister) to the Treasury), which could signal shifts in fiscal strategy, delivery priorities and engagement with business.

The Government has announced that there will be no new "major policies" or spending decisions during the transition to a new Prime Minister, but that existing business would continue as usual. From a tax perspective, this appears to mean that tax administration announcements and existing consultations will continue as normal. Indeed, on the day following the Prime Minister's resignation, the Government issued statements and consultations as part of "Tax Update 2026," focused on "simplification, modernisation and fairness." The next expected event is the draft legislation for the next Finance Bill which may be published ahead of the appointment of the new Labour leader.

Tax Update 2026

HMRC has published a policy paper setting out 40 measures (although some of these had been announced previously). Not all of the underlying documents referred to in the policy paper have been made available as yet.

The Tax Update 2026 measures are intended to "support legitimate high street businesses to compete on a level playing field, and help economic growth by simplifying processes, improving guidance and modernising HMRC systems and services." The majority of the measures are procedural, but some are particularly noteworthy. These include:

Corporate taxes

• A consultation to explore modernizing the rules that determine whether a payment to a company's noncorporate shareholders falls within the distributions regime
• Plans to introduce secondary legislation to amend the definition of augmented profits for corporation tax quarterly installment payments (QIPs)
• From April 2027, Research and Development Expenditure Credits, Audio-Visual Expenditure Credits and Video Games Expenditure Credits will no longer be included when determining whether a company is within the QIPs regime. This is a welcome change for some companies in the Creative sector as it is expected to prevent pure production companies from being brought into QIPs solely because they receive these credits. We will need to see the legislation to assess any wider implications.
• A summary of responses to the consultation on land-remediation relief, confirming that the Government sees a compelling case for reforming land-remediation relief and will consult with industry over the coming months to explore whether viable, cost-effective reforms can be made
• A consultation on the introduction of a criminal offense of reckless untrue declarations or reckless false statements for direct tax matters, aligning the legal framework with existing offenses in indirect tax
• The aim is to create an enforcement tool that could be used in direct tax cases in which dishonesty cannot be established but a sanction is appropriate to address reckless and culpable behavior.

Indirect taxes

• The announcement that the electronic procurement system Peppol will be the core interoperability network for e-invoicing in the UK
• Peppol is a framework designed to simplify and standardize the exchange of electronic business documents such as invoices, purchase orders and credit notes across borders and systems. The alignment of e-invoicing legislation to existing international standards is likely to be key to enabling businesses to comply successfully and efficiently.
• The UK e-invoicing mandate will go live from April 2029.
• An announcement that consideration will be given to supplementary value-added tax (VAT) return data and whether better use of the data already held in digital accounting systems could help HMRC work more efficiently
• A consultation seeking views on the proposed extension of the VAT online marketplace liability rules to UK-based businesses if their goods are situated in the UK at the point of sale
• The aim is to tackle persistent VAT noncompliance from both domestic and overseas businesses.
• Acceleration of the delivery of the new low-value import customs arrangements by six months to October 2028 at the latest
• A consultation taking forward the 2025 Budget announcement to consult on making Direct Debit the mandatory payment method for VAT and Pay As You Earn (PAYE) return liabilities, subject to defined exceptions

Individual taxes

• A consultation on reform to the taxation of UK-resident members of United States limited liability companies (US LLCs)
• The consultation document, which had been published on 10 June 2026, identifies where, under current rules, "unintended" high effective-tax rates may arise for these individuals, due to entity classification mismatches between the UK and other jurisdictions resulting in double taxation. The consultation sets out proposed solutions to remove barriers to global talent relocating to the UK — the main proposal being to match the transparent treatment in the foreign jurisdiction. The consultation does not represent an intention to change the position for UK-resident corporate members of US LLCs.

Other recent tax policy developments

Before Sir Keir Starmer's resignation, the Government had announced it would be taking forward a number of tax changes. Whether any of these will be revisited on a change of Prime Minister remains to be seen. Among those changes were:

• An announcement that the foreign permanent establishment (PE) exemption will become mandatory for all UK-resident companies conducting business through foreign PEs
• Under the current regime, UK-resident companies are subject to corporation tax on the profits of their foreign PEs, with credit available for overseas tax paid, although they may make an irrevocable election to exempt both the profits and losses of all their foreign PEs from UK corporation tax. The announced changes propose to remove this elective framework and replace it with a mandatory exemption, meaning that neither profits nor losses attributable to foreign PEs will be subject to UK corporation tax.
• For most companies, the mandatory exemption was announced as applying for accounting periods beginning on or after 1 January 2027. However, for UK-resident companies with foreign PEs carrying on activities in connection with the exploration or exploitation of oil and gas, the measure is due to take effect from 1 September 2026 (see EY Global Tax Alert, PE Watch | Latest developments and trends, June 2026, dated 11 June 2026).
• Plans to introduce the Taxation (Energy and Vehicles) Bill 2026-27 which would, in part, provide for an increase in the rate of the Electricity Generator Levy (EGL) from 45% to 55% from 1 July 2026

Implications

Businesses should monitor the development of UK tax policy in the coming months, as there may be a significant refresh of some areas in conjunction with the appointment of the new UK Prime Minister. It also seems that there will be progress made at the same time on "business as usual" and it will be important not to lose sight of these more procedural issues going forward.