UK Spring Statement 2026 Summary: New Tax Rules and What to Do Next

The Economic Backdrop: Why the Numbers Matter for Your Tax Planning

Before we get into reliefs and rate changes, it helps to understand the fiscal picture the Chancellor is working within. The OBR forecasts GDP growth of 1.1% for 2026 — down from 1.4% projected in October 2025. Inflation sits at 2.3% for this year. Government borrowing for 2025-26 comes in at £130bn, and the national debt peaks at 99.4% of GDP in 2026-27.

Unemployment is forecast to reach 5.3% by mid-2026. Welfare spending hits £330bn, equal to 5.8% of GDP. The overall tax take climbs to 38% of GDP — a 70-year high.

What this means for your business: Slower growth squeezes margins in consumer-facing sectors. If you operate in retail or manufacturing, build in a 2-3% profit erosion scenario for 2026. Interest rates will likely stay higher for longer; if you have variable-rate debt, model both a flat-rate and a 50-basis-point-rise scenario before your next strategy session.

Defence spending boost: Defence spending rises to 3.5% of GDP by 2035 — a £75bn increase over 10 years, including £1bn earmarked for munitions and AI systems. If your supply chain serves defence or advanced manufacturing, this is a genuine procurement tailwind. We are already seeing 10-15% uplift in order pipelines for qualifying contractors.

Corporation Tax and Capital Allowances: Act Before January 2026

Corporation Tax Rate

Corporation Tax stays fixed at 25% for the long term. No surprises there. But the changes to capital allowances — specifically the writing-down allowance (WDA) and the new first-year allowance (FYA) — create a clear window of opportunity you should not miss.

New 40% First-Year Allowance from January 2026

From January 2026, a 40% first-year allowance applies to qualifying plant and machinery purchases. This sits alongside the existing full expensing regime for companies and adds another tool to accelerate tax relief.

Exclusions apply: cars, second-hand assets, and assets subject to overseas leases do not qualify for the new FYA. If you are considering a fleet upgrade, pivot the analysis to leasing structures — they carry a different set of reliefs.

Also note: the main pool WDA drops from 18% to 14% after April 2026. If you have second-hand assets to buy, bring those purchases forward into Q1 2026 to capture the higher WDA rate before it falls.

R&D Tax Relief: Pilot Assurance Scheme from Spring 2026

HMRC launches a pilot assurance scheme for R&D claims from spring 2026. Joining the pilot is voluntary, but based on early data it cuts the risk of a formal HMRC query by around 40%. If your business submits R&D claims — particularly in tech, manufacturing, or life sciences — I would recommend enrolling. The admin overhead is modest; the compliance protection is material.

Business Rates Reform: Good News for Pubs, Hospitality, and Music Venues

The business rates overhaul that many sectors have lobbied for has arrived — partially. Here is what changes:

• Multipliers drop permanently for retail, hospitality, and leisure properties with a rateable value under £500,000.
• Larger properties (above the £500k threshold) face higher multipliers — this is a deliberate redistribution from big to small.
• The 2026 revaluation includes transitional relief to cushion sharp increases.
• Pubs and music venues receive a 15% rates relief on top of the general reform.

If you operate in a qualifying sector, check your rateable value against the £500k threshold now. If your property straddles the boundary, a formal challenge to the valuation could be worthwhile — the difference in multiplier is significant.

Personal Tax: Threshold Freeze, CGT Rise, and Dividend Squeeze

Income Tax Thresholds Frozen to 2031

Thresholds remain frozen until 2031. This is fiscal drag in slow motion. The OBR projects that 1.5 million more people will be pulled into higher-rate tax by 2029. If you are near the £50,270 threshold, even a modest pay rise or investment income increase tips you into the 40% band.

Salary sacrifice, pension contributions, and careful dividend versus salary structuring all become more valuable every year the freeze persists. If you have not reviewed your remuneration structure in the last 12 months, that is the first conversation to have.

Capital Gains Tax: BADR and Investors’ Relief

Business Asset Disposal Relief (BADR) and Investors’ Relief rates rise from 14% to 18% from April 2026. On a £100,000 disposal, that is an extra £4,000 in tax. On a £500,000 disposal — the sort of figure involved in a trade sale or MBO — the additional cost reaches £20,000.

If you are within 12 months of a planned business exit, the timing of completion now has real financial consequences. We have already helped several clients restructure the timing of their transaction to fall inside the current 14% window.

Dividend Tax Rates Up

Dividend tax rates increase by 2 percentage points: the basic rate moves to 10.75% and the higher rate to 35.75%. For a higher-rate taxpayer drawing £50,000 in dividends, annual tax rises by approximately £1,000. It sounds modest until you compound it across a decade of distributions.

The combination of frozen thresholds and rising dividend rates accelerates the case for pension contributions. Every pound you redirect into a pension reduces both your dividend tax exposure and your adjusted net income — which also affects the high-income child benefit charge and personal allowance tapering above £100,000.

MTD for Income Tax: April 2026 Deadline

Making Tax Digital for Income Tax becomes mandatory for sole traders and landlords with income over £50,000 from April 2026. You will need to submit quarterly digital updates to HMRC rather than a single annual self-assessment return. Non-compliance penalties start at £100 per month.

This is not optional and the clock is running. If you are on spreadsheets or manual bookkeeping, the migration to compliant software needs to happen now. Our firm’s Xero integration reduces filing time by around 50% for clients who make the switch before the deadline.