Budget 2026: What it means for businesses and the property sector

In line with much of the speculation ahead of the Budget, the Chancellor stopped short of making radical changes to the UK tax system, instead opting for a series of more targeted measures. For corporates, the core corporation tax framework remains broadly unchanged, providing continuity for business and investment planning, albeit with specific measures affecting sectors including energy, banking and gambling. More significant changes were announced for founders and growing businesses, alongside proposals affecting private companies and their shareholders and targeted measures relating to image rights and property.

Founders and growing businesses: New reliefs and expanded share incentives

While the lifetime limit for gains eligible for Business Asset Disposal Relief will be reduced from £1 million to £500,000, the Government has announced proposals for a new Founders' Relief for founders and significant early investors in high-growth, innovative UK companies. The proposed relief would provide a 10% CGT rate on qualifying disposals, subject to a £10 million lifetime limit. The detailed conditions remain subject to consultation, with the relief intended to apply to qualifying disposals from 6 April 2027. These changes are considered in more detail in UK Budget 2026 – a Hippocratic approach.

The Government has also announced further changes to tax-advantaged employee share schemes. CSOP has been rebranded as 'EMI2', with its individual option limit increasing from £60,000 to £120,000, its maximum exercise period increasing from 10 to 15 years and the interaction with the EMI individual limit being removed from 6 April 2027. The EMI regime will also be simplified, including through the removal of the separate requirement to notify HMRC of individual EMI option grants.

The Government has also confirmed that it intends to legislate to reform non-compete clauses in employment contracts, with the aim of making it easier for growing businesses to recruit experienced employees and for individuals to move between businesses or establish businesses of their own. The detailed approach has yet to be settled, with a further consultation on restrictive practices and the Government's detailed position expected in early 2027.

Private companies: Changes to distributions and returns of capital

The Budget also includes proposals to reform the taxation of company distributions and repayments of capital. These could affect a range of transactions involving private companies and their shareholders, including returns of capital and certain arrangements involving holding companies and non-UK companies. While the proposals remain subject to consultation, they could have wider implications for private company structuring and the extraction of value by shareholders. The proposals, together with the separate company law reforms being considered in relation to distributions and capital maintenance, are discussed in more detail in our recent article 'Taking money out of your company: two consultations founders should watch after the Budget'.

Image rights: Employment tax treatment confirmed

The Government has confirmed that legislation will treat image rights payments related to an employment as taxable employment income, subject to income tax and National Insurance contributions. The measure, originally announced at Budget 2025, has been deferred by a year to 6 April 2028. It will be particularly relevant to the professional sports sector, where image rights arrangements can form part of commercial and remuneration packages. 

Property: Targeted VAT, SDLT and business rates changes

The Budget contains several targeted measures relevant to the property sector. A new VAT zero-rating measure will facilitate sales of land to social housing providers without the need for 'golden brick' preliminary development arrangements.

A specific amendment to the SDLT group relief rules will also address circumstances in which actual de-grouping follows a notional de-grouping arising on the commencement of a liquidation procedure. The wider SDLT regime is otherwise largely unchanged.

The Government has also responded to its consultation on the tax treatment of pre-development costs, an issue of particular relevance to major development projects. The consultation followed continuing uncertainty over the tax treatment of preliminary costs, including design and survey work. The precise outcome, including whether this results in changes to the tax treatment or further guidance, remains to be seen.

Finally, from 1 April 2027, the threshold for 100% Small Business Rate Relief for qualifying retail, hospitality and leisure properties in England will increase from £12,000 to £18,000, with tapered relief extending to properties with rateable values of up to £21,000.

R&D Filings: Some welcome simplification

Good news for companies claiming R&D tax relief. Following the significant overhaul of the substantive R&D tax relief rules in 2024, the government has now turned its attention to the administration of claims. The Budget includes measures aimed at simplifying the claims process by removing the requirement to submit a claim notification form and streamlining the additional information form. 

Corporation tax administration: Looking ahead

More broadly, the Government has launched a call for evidence on modernising corporation tax administration. Although this does not represent an immediate change to the corporate tax regime, it may lead to future changes in the way companies interact with HMRC.