Breathing Space or Holding Pattern? What the UK's Latest Tax and Regulatory Changes Mean for Markets and Cross-Border Business
By Dr Clifford Frank, Senior Partner, LEXeFISCAL LLP
When John Healey rose to deliver his first Budget on 28 October, I was less interested in the headlines than in the plumbing. For BPCC members, many of whom run businesses, invest or hold capital across the UK–Poland corridor, the measures that matter are rarely those announced to applause. They are the technical changes to reliefs, rates and reporting that quietly reshape the after-tax return on capital. Having advised on UK tax for more than four decades, I want to set out the five changes I believe are worth acting upon now.
1. Income from capital is the preferred target
The clearest message of the last two Budgets is that income from wealth, rather than income from work, will bear the strain. Dividend tax rates rose by two percentage points from 6 April 2026, to 10.75% and 35.75%. Finance Act 2026 had already raised the rates on savings and property income by two points from April 2027; the Chancellor has now added a further two points, so that from 6 April 2027 the savings rates will be 24%, 44% and 49% across the UK, with the same property rates in England, Wales and Northern Ireland. With the personal allowance and higher rate threshold frozen until April 2031, fiscal drag will do the rest. Sole traders and landlords with qualifying income above £50,000 are also now within Making Tax Digital for Income Tax, with the threshold falling to £30,000 from April 2027.
My practical advice is to review how capital is held before April 2027, not after. Landlords holding property personally should revisit whether a corporate structure now makes sense, bearing in mind the capital gains tax and stamp duty land tax costs of incorporation. Investors should use their full £20,000 ISA allowance, and I welcome the decision not to proceed with the planned cut in the cash ISA limit to £12,000. Couples may also consider rebalancing income-producing assets so that both personal allowances and basic rate bands are used, provided any transfer is a genuine outright gift.
2. Exit planning now has a deadline
For owner-managers, the most consequential measure is the halving of the Business Asset Disposal Relief lifetime limit from £1 million to £500,000 for disposals on or after 6 April 2027. Qualifying gains within the limit will still be taxed at 18%, against the 24% rate that applies to higher rate taxpayers.
A simple example illustrates the point. Take a higher rate taxpayer with no previous claims who realises a qualifying gain of £1 million, ignoring the annual exempt amount. A disposal before 6 April 2027 attracts capital gains tax of £180,000. After that date, the first £500,000 is taxed at 18% (£90,000) and the balance at 24% (£120,000), a total of £210,000. The cost of waiting is £30,000. Anyone relying on this should check the final legislation for anti-forestalling rules on contracts that straddle the change, as were applied to the recent rate increases.
The Budget also announced a new Founders' Relief, applying a 10% rate to qualifying disposals of shares on or after 6 April 2027, up to a lifetime limit of £10 million of gains. It is aimed at founders and significant early investors in high-growth, innovative UK companies, and its conditions on shareholdings, residence and company growth remain the subject of a technical consultation closing on 30 November 2026, so I would caution against assuming eligibility. Anyone contemplating a sale within eighteen months should model both routes now, but artificial arrangements to crystallise gains early invite scrutiny; commercial substance must come first.
3. Banks are paying for the breathing space
The bank corporation tax surcharge will rise from 3% to 6% for 15 months, from 1 January 2027 to 31 March 2028, before returning to 3%. It applies to banking profits above the £100 million surcharge allowance. I would expect some of the cost to find its way into lending margins, and treasurers renegotiating facilities over the coming year should allow for that.
4. Market infrastructure is being modernised
Two developments matter for capital markets. First, the government will legislate in Finance Bill 2026-27 for the Securities Transfer Tax, a single, self-assessed tax that will replace stamp duty and stamp duty reserve tax on shares from late 2027. The Budget documents present this as a modernisation; nothing in them announces a cut in the 0.5% principal charge. Even so, documentation, compliance processes and custodian systems will need to change.
Secondly, the FCA opened its authorisation gateway for cryptoasset firms on 30 September 2026, and the application period closes on 28 February 2027. The new regime comes into force on 25 October 2027. Existing firms that apply within the window can continue to provide their services while their application is assessed; those that do not apply in time face having to run off their UK business. For fintech groups with Polish development teams and UK customers, this is a hard deadline that should already be in the board diary.
5. Cross-border groups face greater transparency
For UK–Polish groups, the direction of travel is clear. For accounting periods beginning on or after 1 January 2027, multinationals within the UK transfer pricing rules are expected to file a new International Controlled Transactions Schedule, giving HMRC standardised data for risk assessment; small and medium-sized enterprises remain exempt from transfer pricing. The Budget also published a roadmap for mandatory VAT e-invoicing from 1 April 2029, although cross-border supplies fall outside the requirement. My advice is to ensure that intercompany agreements, benchmarking studies and any reliance on the 2006 UK–Poland double taxation convention, as modified by the Multilateral Instrument, are documented to a standard that would withstand an enquiry, because HMRC will soon have the data to ask the questions.
What I take from all this
The Chancellor described his Budget as offering breathing space. I would describe it rather as a holding pattern: no change to the rates of tax on earnings or dividends, and none to the main rates of capital gains tax, but a steady tightening of reliefs, higher tax on savings and rental income, and a determined push towards transparency. The opportunity lies in the window before April 2027. Those who review structures, model exits and prepare systems now will be far better placed than those who wait for Royal Assent.
As always, the right answer depends on the facts. Good planning begins with the law, not with clever ideas, which is why I have always believed in thinking inside the law before thinking outside the box.
If you would like to discuss this further, contact us
Dr Clifford John Frank, LLM(Tax) PhD HDipICA ATT
Senior Partner
LEXeFISCAL LLP
33 Cavendish Square, London
Tel: +44 (0)20 8092 2111
Website: www.lexefiscal.com
Disclaimer
This article is for general information only and does not constitute legal or tax advice. Tax law is complex and subject to change. Specific advice should be obtained for your particular circumstances.
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