At a special conference in London on 17 July 2026, Andy Burham was elected unopposed as the Labour Party leader. In the United Kingdom (UK), the Prime Minister is the leader of the political party with a majority of Members of Parliament (MPs) in the House of Commons (currently the Labour Party) and as such, following Sir Keir Starmer's resignation, Mr. Burnham became UK Prime Minister on 20 July 2026 and appointed John Healey as Chancellor of the Exchequer to replace Rachel Reeves.

Specific policy announcements will follow over the next few days, and it is expected that a full UK Budget will be held in October 2026 (after the next Labour Party conference). In the absence of exceptional circumstances, the new Chancellor of the Exchequer must give the Office for Budget Responsibility at least 10 weeks' notice ahead of this event to allow it to prepare its independent economic and fiscal forecasts.

With respect to ongoing business as usual, the UK Government has progressed both the draft legislation for the next UK Finance Bill and several tax policy and administration announcements that were already in the pipeline. Most of the draft legislation is open for comment until 7 September 2026, while a number of consultations have been opened with similar response times. There is no guarantee that all the legislation or the proposals in the consultations will be taken forward in their current form. The Finance Bill is usually published a few days after the Budget.

Draft legislation for UK Finance Bill

On 13 July 2026, the Government released draft legislation for the next Finance Bill, which is open for comment until 7 September 2026 (with one apparent exception — see below). The legislation is still in draft and, as such, it is possible that some parts of it may not be taken forward, especially if there are policy changes under the new Prime Minister and Chancellor. The summary below highlights some of the key measures set out in the draft legislation.

Key business tax measures

Reform of the foreign permanent establishment (PE) exemption: The draft legislation would introduce a mandatory exemption for profits and losses attributable to foreign PEs from UK tax. The draft legislation, which builds on the existing elective regime, would have effect for accounting periods beginning on or after 1 January 2027. In a change from the Government's previous position, there is no separate earlier commencement date for UK-resident companies that conduct activities related to oil and gas extraction and exploration through foreign PEs. The draft legislation includes a transitional regime that would prevent companies from carrying losses and other amounts allocable to a foreign PE forward into a post-transition period. This draft legislation is noted as being open for comment until 13 September 2026.

The draft legislation would prevent changes to the length of accounting periods delaying the operation of the provision. The draft legislation also includes a provision to counteract avoidance arrangements that would apply to businesses with foreign PEs that enter into arrangements on or after 13 July 2026, with the main purpose of obtaining a tax advantage and where the arrangements circumvent the operation of the principal measure.

Pillar Two Side-by-Side Package and further amendments: These provisions would implement the Pillar Two Side-by-Side package into UK legislation in line with administrative guidance published by the Organisation for Economic Co-operation and Development (OECD) in January 2026. The draft legislation also includes technical updates to the UK's Pillar Two rules to maintain consistency with the commentary and administrative guidance. The Side-by-Side package would take effect for accounting periods beginning on or after 1 January 2026. The technical updates would mainly take effect for accounting periods beginning on or after 31 December 2026. (For background on the OECD's Side-by-Side package, see EY Global Tax Alert, OECD releases Side-by-Side Package on Pillar Two Global Minimum Tax: Detailed review, dated 16 January 2026.)

Oil and Gas Revenue Levy (OGRL): The draft legislation would create a new permanent levy to tax exceptional oil and gas revenues in times of high prices. The Oil and Gas Revenue Levy (OGRL) would take effect when the Energy Profits Levy ends at the end of March 2030, or earlier if the Energy Security Investment Mechanism is triggered. It would apply to upstream oil and gas companies operating in the UK or on the UK Continental Shelf at a rate of 35% of revenues from oil and gas sales above specified thresholds.

Profits from exploration and exploitation rights: These provisions look to ensure that profits from exploration and exploitation rights relating to oil and gas activities are defined in a clear, consistent and internationally aligned way when the UK's domestic rules interact with the UK's Double Taxation Agreements. The update would have effect for accounting periods beginning on or after 1 April 2027 for corporation tax purposes and from 6 April 2027 for income tax purposes.

Key stamp taxes measures

Stamp taxes on shares modernization: As announced in April 2025, stamp duty and stamp duty reserve tax (SDRT) are due to be replaced with a single tax on transfers of securities. The securities transfer tax would be introduced in 2027, with an update on the commencement date to be provided this Autumn. Transitional arrangements would apply to transfers of securities entered into before the commencement date to which stamp duty or SDRT applies but would not be due to be reported or paid until on or after that date. (For details, see EY Global Tax Alert, UK announces new single tax on securities to replace stamp duty and stamp duty reserve tax, dated 16 May 2025.)

Alongside the draft legislation for the UK Finance Bill, the Government also published a summary of responses to a consultation on the 1.5% charge on certain overseas transfers of UK securities. The summary confirms that the Government will proceed with proposals set out in that consultation on depository receipts, market value rules, notifications, and liable and accountable persons. The Government will also remove the charge to bearer instruments and exclude provisions for shares paid for in installments, and intends to exclude references to paired shares.

Key indirect taxes measures

Electric Vehicle Excise Duty (eVED): The draft legislation would implement eVED, a new mileage charge for electric and plug-in hybrid cars, which would come into effect from April 2028.

Customs treatment of low-value imports into the UK: Draft legislation would progress the reform of the customs treatment of low-value imports (LVIs). This measure would remove the £135 LVI relief, making LVIs subject to customs duty, and introduce a new set of customs arrangements designed to support fair competition and improve compliance. The changes would come into force by October 2028.

Key personal and employment tax issues

Mandatory reporting of benefits in kind (BIKs) from April 2027: The draft legislation would introduce mandatory payrolling of BIKs from 6 April 2027. The draft legislation sets out the framework for the mandatory reporting through "Real Time Information," alongside provisions to ensure a proportionate approach to penalties during the initial years of implementation. It would provide powers to ensure that certain benefits will remain outside mandatory payrolling if real-time reporting is not yet practical. Secondary legislation, for income tax and Class 1A National Insurance contributions, to be introduced at Budget 2026, will set out the detailed scope of BIKs covered, any exclusions and the operational rules for employers.

Enterprise Management Incentives (EMI): Draft legislation would remove the requirement for a company to submit a separate notification of a grant of EMI options. Instead, a company would be required to report details of the grant of options through the existing EMI end-of-year return. These changes would apply to options granted on or after 6 April 2027.

Defined benefit pensions — surplus extraction tax regime: Draft legislation would introduce a new authorized payment from defined benefit pension schemes, allowing surplus funds to be paid directly to members. This measure would enable schemes to distribute surplus to members as pension income, taxed at the individual's marginal rate. The legislation would take effect for payments made on or after 6 April 2027.

Taxation of stablecoins: Draft legislation would exempt individuals and trustees from capital gains tax in respect of the disposal of eligible stablecoins. It would also tax interest-like returns in relation to eligible stablecoins as savings income for the purposes of income tax. For companies, the tax treatment of particular transactions involving eligible stablecoins would be based on amounts recognized in their accounts.

Crypto-asset loans and liquidity pools: Draft legislation for individuals and trustees in relation to crypto-asset loans and liquidity pools would treat certain disposals as being "no gain, no loss," deferring capital gains tax until an economic disposal of the crypto-asset.

Key tax administration issues

Errors correction: Draft legislation would address the correction of inaccuracies in returns or documents provided to His Majesty's Revenue and Customs (HMRC) and introduce an explicit obligation requiring taxpayers to take reasonable action to correct errors once they are identified. It would also give HMRC new power to issue a Customer Correction Notice, which would require the taxpayer to check their position, and either correct the inaccuracy or explain why no correction is needed.

Reforms to civil tax information and inspection powers: Draft legislation covers a number of reforms that would improve HMRC's ability to carry out compliance checks by meeting OECD Global Forum standards on information exchange related to deceased taxpayers and crypto-asset related businesses. This would be achieved by (1) improving the administration and record-matching of an information notice that requires the identification of a taxpayer, (2) allowing flexibility in publishing reporting data, and (3) modernizing definitions involving computer records.

New consultations launched

Alongside the draft legislation for the next Finance Bill, the UK Government launched four new consultations.

Tax treatment of predevelopment costs (open until 21 September 2026): In the Corporate Tax Roadmap, the UK Government committed to providing greater certainty for businesses to invest, including by providing greater clarity on what qualifies for different capital allowances. Following the Supreme Court judgment in the case of Orsted West of Duddon Sands (UK) Ltd. and others, this consultation is seeking to understand whether businesses believe uncertainty remains regarding the current tax treatment of predevelopment costs (especially as HMRC has recently updated its guidance in this area). However, the consultation goes further than looking at existing law and seeks to understand how far the issue of predevelopment costs being deductible or not for tax purposes impacts business and investment decisions. The consultation is focused on predevelopment costs that are more directly required before plant and machinery can be installed or operated.

Simplification of withholding tax on interest (open until 7 September 2026): This consultation addresses simplifying the administration of treaty relief on withholding tax on payments of interest. The consultation makes it clear that the UK Government has not yet determined how best to reform the current regime. The consultation does not cover the (currently paused) concessionary treatment by which tax that otherwise would be assessed on the UK payer following a failure to operate the withholding process is not pursued to the extent that it is clear that any tax collected would be repaid to the lender under the terms of a double tax agreement.

Land Remediation Relief (open until 21 September 2026): Land Remediation Relief (LRR) is a 150% corporation tax relief aimed at incentivizing the regeneration of brownfield land and reducing the pressure to develop greenfield sites. Following a previous consultation on its effectiveness and robustness, this new consultation seeks views on changes to the timing of the relief, aligning eligible contamination expenses with planning processes, and how to define and provide relief for long-term derelict land.

National Insurance contributions (open until 12 October 2026):This consultation concerns removing debts relating to National Insurance contributions from the scope of the Limitation Act 1980 and aligning processes with other forms of taxation. It aims to deliver greater consistency in how debts are treated across taxes, introducing assessment, recovery and repayment time limits that mirror those for income tax.

These consultations follow consultations launched on 23 June 2026, as part of the Government-termed Tax Update 2026. (See EY Global Tax Alert, United Kingdom | What's next for tax policy in the UK?, dated 24 June 2026). The Government announced that the package of tax and customs measures was designed to reduce administrative burdens as well as to improve certainty, fairness and customer experience.

A key consultation released on that day was the consultation on modernizing the distributions framework, which is open until 14 September 2026. The consultation is intended to modernize the rules that determine whether a payment to a company's non-corporate shareholders falls within the distributions regime with the stated purpose being to "ensure the rules operate as intended and minimise distortions, without undermining commercial practice."

The consultation seeks views on proposals to update seven parts of the distribution rules for individual shareholders. These are:

1. Capital on shares — addressing the uplift in value of share premium of a holding company inserted over a continuing business
2. Demergers — because a large number of non-statutory demergers rely on the above uplift, how best to liberalize the statutory demerger provisions if the non-statutory route is no longer practical
3. Foreign distributions — alignment of the income tax treatment of distributions from non-UK resident companies with those from UK companies
4. Debt and distributions — clarifying when extractions ought to be better charged under the loans-to-participators regime rather than as a distribution
5. Loans from non-UK "close" companies — addressing tax-free loans from foreign companies that would be close if they were UK resident
6. Purchase of own shares rules — bringing enhanced clarity and reducing the reliance on subjective tests
7. Transactions in securities rules — modernizing the current rules

The proposals are not intended to affect corporate shareholders directly. However, some of what is being proposed could have significant unintended effects on corporate groups and the investment industry.

Implications

Although major tax announcements may be reserved for the Autumn Budget (expected in October), early indications of the Government's approach to fiscal policy and taxation are likely to emerge from statements by the Prime Minister, his newly appointed Chancellor and HM Treasury over the coming weeks. In the meantime, businesses should continue to assess the implications of the draft legislation and ongoing consultations, in addition to considering whether to engage with the consultation processes where relevant. Multinational groups with UK operations should pay particular attention to developments affecting investment, business taxation and the UK's broader competitiveness agenda.