Autumn Budget 2026

FTI CONSULTING COMMENT:

EMI is widely regarded as one of the most favourable share schemes available, and the Government has recognised the importance of employee share ownership in helping growing businesses attract, retain and reward employees. This can only be a good thing for the economy.

Since the expansion of the company eligibility limits in the 2025 Autumn Budget, the lack of expansion to employee limits felt like a missed opportunity. That, alongside the previous £60,000 limit for CSOP, left a significant gap for companies once they had outgrown EMI.

The increase in the CSOP individual share option limit to £120,000, together with the removal of the interaction between EMI and CSOP limits is welcome. Across both incentives, employees will be able to hold options worth up to £370,000 (up from £250,000) providing greater scope for meaningful equity participation amongst employees as businesses grow. The alignment between EMI and CSOP in the lifetime of an option to 15 years further reflects the longer growth cycles of successful business.

The Government’s rebrand of CSOP to EMI2, whilst leaving the underlying legislative changes unchanged, is intended to help streamline the administration and operation of tax-advantaged share schemes. Nevertheless, the EMI2 branding risks creating confusion between two legally distinct regimes, with EMI continuing to have its own requirements and EMI2 continuing to operate under the existing CSOP legislative framework.

FTI CONSULTING COMMENT:

This will be welcome news for employers and employees alike. Providing a longer exercise window will reduce the risk of employees losing EMI tax advantages.

We will need to wait and see if the legislation will allow existing EMI Option exercise windows (which typically allow exercise in the case of a disqualifying event, but only within 90 days) to be amended without causing any tax issues, such as an unintended cancellation and regrant of existing EMI options.

Following the other changes announced in the 2025 Budget, including increases to the limits, extending the potential life of EMI Options and moving grant notification to an annual reporting processes, shows the Government is keen to retain and, where possible, increase the attractiveness of EMI Options.

FTI CONSULTING COMMENT:

Although mandatory payrolling has previously been announced, the two-stage implementation will add complexity to a measure originally intended to simplify benefits reporting. During the transitional period, some BiKs will need to be taxed through payroll whilst others will continue to be reported on Forms P11D or payrolled voluntarily. Employers will need robust processes to operate both systems correctly.

The complexity of having to simultaneously operate and reconcile two parallel reporting systems should not be underestimated. Reward, HR and payroll providers will need to work more closely together to maintain data quality, ensure payroll compliance and minimise inaccuracies that result in either under or over taxation.

FTI Consulting Comment: There is an interesting tension at the heart of the 2026 Budget. Whilst the Government started the year seeking views on how to encourage entrepreneurship and investment in the UK, a further reduction in the BADR limit seems at odds with this.

In 2008, a successful entrepreneur had a reduced tax rate on up to £10 million of gains under BADR’s predecessor, Entrepreneurs’ Relief. Now there will be a £500,000 lifetime limit and the maximum lifetime tax saving at the prevailing rates will be just £30,000.

The further reduction in the BADR limit raises questions about how it fits with the Government’s wider ambition to encourage entrepreneurship and investment, alongside the introduction of the more targeted Founders’ Relief which is more restrictive.

FTI Consulting Comment:

Against the backdrop of the reduction in BADR, the new Founders’ Relief will be welcome, but the 25% ownership threshold, five-year holding period and demanding growth tests are likely to restrict its benefit to a relatively narrow population of founders, with many other successful business owners instead facing the reduced BADR lifetime limit.

The timetable of around six months to implement looks tight, so founders and early investors should test their eligibility now and consider responding to the consultation.

FTI Consulting Comment: It remains common for private companies to buy back leavers’ shares and whilst the Government says it does not intend to undermine EMI, EMI2 or other tax advantaged schemes such as Share Incentive Plans (“SIPs”) or Save As You Earn (“SAYE”), it will remain to be seen in the legislation whether such schemes are unintentionally caught by the new rules.

The Government announced that they will seek a further consultation on the proposed reforms, including on draft legislation following their initial technical consultation launched in the summer. We are pleased to see HMRC’s engagement on these matters, particularly around simplifying a particularly complex area of taxation.

Nevertheless, the 2% increase in savings and property income tax, whilst leaving dividend tax rates unchanged, feels particularly punitive for savers.

FTI CONSULTING COMMENT:

There are few significant new Corporation Tax measures, with the budget largely confirming the introduction of previously announced changes or setting out plans for new or further consultations. There is a current compliance pause on processing withholding tax disclosures and related issues, therefore it is appreciated that HMRC will be issuing new guidance shortly in this area.

FTI CONSULTING COMMENT:

The increased FYA is encouraging but will have a limited impact whilst appearing to come at the expense of a further reduction to the annual relief enjoyed by many.

Businesses with large brought-forward main pools will feel the reduction most, alongside those businesses that are unable to utilise an FYA in full. Impacted businesses should model the effect of the reduction on their future cashflow projections.

FTI CONSULTING COMMENT:

The removal of the Claim Notification Form and simplification of the Additional Information Form are beneficial changes which should reduce the administrative burden associated with making R&D claims.

It is particularly encouraging that the government has recognised areas of the legislation which are creating practical difficulties.

• For claims made on or after 1 April 2027, companies will no longer need to submit a claim notification form before claiming R&D relief.
• From autumn 2027, the additional information form that supports R&D claims will be simplified through secondary legislation.

FTI Consulting Comment: These measures address concerns widely experienced in the industry regarding the VAT costs borne by pharmaceutical companies when donating medicinal products to patients free of charge, and is likely to be widely welcomed by pharmaceutical companies, healthcare providers and patients alike. Currently, pharmaceutical companies that give medicines away for free can be treated as making a deemed taxable supply with irrecoverable VAT charged at 20% under the business gift rules. These new measures allow the suppliers to keep full VAT recovery on costs.

Businesses operating in the sector should consider whether they can benefit from the new zero rate and whether there is scope to recover any VAT previously overpaid in respect of historical donations of goods.

FTI Consulting Comment: This is a profound change that could have widespread effect.

The cross-border reverse charge mechanism allows overseas suppliers to avoid registering and accounting for UK VAT where the recipient is either UK VAT registered or required to register by virtue of its activities. Currently, this includes businesses that only receive taxable services with a value in excess of the VAT registration threshold.

The change removes this latter requirement, meaning that certain businesses that are not UK VAT registered, potentially including not-for-profit organisations and non-trading holding companies, will no longer be required to register solely as a result of receiving overseas services. Instead, overseas suppliers will be required to register for and charge UK VAT, although no registration threshold will apply, as is the case for non-established businesses generally.

This will shift the VAT compliance burden to overseas suppliers, who will themselves need to verify the UK VAT registration status of their customers. It may also result in additional VAT costs on amounts paid to overseas suppliers, raising questions around recipients' entitlement to recover the VAT charged.

Affected businesses should begin assessing the potential impact on their operations, particularly multinational groups with cross-border holding structures, including investment funds and other investment vehicles.

Further legislation and guidance is expected.

FTI Consulting Comment: This measure extends the relief introduced on 1 October 2026. Affected businesses should ensure that appropriate reporting mechanisms are in place to accommodate the change in legislation, if they have not done so already. This relief applies to households and small businesses that are within the de-minimis electricity usage thresholds and charities. Where a supply is for mixed (qualifying) domestic and (non-qualifying) commercial use, it can be treated entirely as qualifying if at least 60% of the use is qualifying, otherwise an apportionment methodology would need to be applied. Whilst the change will predominately impact energy utilities and their customers, landlords and managing agents who recharge metered electricity may be treated as making the supply themselves, and should check they are charging the correct rate.

To note, the zero rate on energy-saving materials hasn't been extended. It ends on 31 March 2027, when these supplies go back to the reduced rate of 5%. Affected businesses should carefully assess the VAT treatment of projects, deposits and contracts that span that date.

FTI Consulting Comment: This extends the rules that have applied to overseas sellers since 2021. These rules make the online marketplace responsible for collecting and account for VAT to HMRC and closes the loophole where overseas sellers pose as UK businesses to fall outside the current rules. Further guidance is expected to clarify the treatment of imports where UK businesses source goods from overseas, and whether zero-rated deemed supplies from UK sellers to online marketplaces will arise or be disregarded entirely.

FTI Consulting Comment: Merging the two charges should simplify compliance, but the transition needs attention. Share purchase agreements for UK share deals that may complete around the commencement date should cover both regimes in their stamp tax, completion and cost-allocation clauses. Deal teams should also check whether existing reliefs, such as group and reconstruction reliefs, carry across to STT unchanged once the draft legislation is available.

FTI Consulting Comment: The removal of this exemption should only impact transactions in England and Northern Ireland. Given the immediate commencement date, existing structures and proposed transactions may be impacted and should be reviewed.

FTI Consulting Comment:

These measures will be welcome to households struggling with the cost of living. Importers of such items will need to consider whether changes are required to their customs management processes and approach to pricing.

FTI Consulting Comment:

This should significantly simplify sales to housing associations by removing the need for developers to build to “golden brick” stage to secure a zero-rated sale. The change should allow developers to sell bare land to housing associations at the zero rate while retaining input VAT recovery.

FTI Consulting Comment: We have seen an uptick in HMRC scrutiny, audits and enquiries over the past couple of years. With these additional resources, Businesses should expect this to continue.

FTI Consulting Comment: In practice, this moves more of the burden of finding and correcting errors onto taxpayers. Customer Correction Notices give HMRC a lighter-touch alternative to opening a formal enquiry and are likely to be used alongside HMRC's growing use of data. As notices are quicker and less resource-intensive for HMRC to issue than formal enquiries, businesses should expect to be asked to review and explain their positions more frequently, and potentially with little prior warning.

FTI Consulting Comment: At present, payments on account are due on 31 January and 31 July, with a balancing payment the following January. Moving to more regular payments may bring forward when tax is collected and narrow the gap between earning income and paying tax on it. For the self-employed, landlords and individuals with variable investment income, the change may smooth out large tax bills in January, but as tax will be paid more often and potentially earlier, there is risk that in-year payments may go out of step with income fluctuating from month to month.

FTI Consulting Comment: The Government’s proposed reforms to sovereign immunity will be a mixed bag for overseas governments looking to invest in the UK. On one hand, putting the exemption on a legislative basis, as opposed to international law, provides certainty on qualification and income covered which could increase investment in the UK. However, restricting the exemption for investments in UK real estate may cause existing investors to consider rebalancing their capital deployment strategy to territories with regimes that are perceived to be more favourable.

FTI Consulting Comment: This is a welcome step towards resolving a long-standing source of double taxation for UK residents investing through tax-transparent foreign entities. It will be relevant to individuals and businesses with interests in U.S. LLCs and other entities that are treated differently in the UK and abroad.