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The Chancellor delivered Budget 2026 on 28 October 2026. The headline Corporation Tax rate stays capped at 25%, but capital allowances, VAT and payroll all change over the next three years. This note picks out the measures that matter most to UK companies owned from Pakistan or the Gulf, and to overseas businesses that sell services into the UK. Most of them will be legislated in the Finance Bill 2026-27.
Companies and Corporation Tax
| Measure | What changes | From |
|---|---|---|
| Main rate | Capped at 25% under the Corporate Tax Roadmap, with full expensing maintained | No change |
| Main rate first-year allowance | Rises from 40% to 50% | Expenditure on or after 1 January 2027 |
| Main rate writing down allowance | Cut by two percentage points, to 12% | 1 April 2027 (Corporation Tax); 6 April 2027 (Income Tax) |
| Overseas branches | The exemption for profits and losses of a UK company's foreign permanent establishments becomes mandatory, and losses are restricted on transition | Accounting periods beginning on or after 1 January 2027 |
| R&D claims | The Claim Notification Form is removed | 1 April 2027 |
The government has also opened a consultation on simplifying Corporation Tax for business investment and a call for evidence on modernising Corporation Tax administration. A UK company with a branch in Pakistan or the Gulf should model the permanent establishment change now, as branch losses will no longer reduce its UK tax.
VAT: services bought from overseas
Today, when an overseas business supplies services to a UK business, the UK customer accounts for any VAT under the reverse charge. If the customer is not VAT registered, no VAT is paid on the supply at all. From 1 April 2027, the reverse charge will apply only where the UK customer is registered for VAT. Where it is not, the overseas supplier must charge UK VAT and account for it to HMRC.
This matters to Pakistani and Gulf IT, software, design and outsourcing firms with small UK clients. A business based outside the UK must register for UK VAT, whatever its turnover, if it makes supplies in the UK on which it has to account for VAT. In return, HMRC says the test becomes simpler: a supplier will only need to check whether its customer has a UK VAT number.
VAT: other changes
- E-invoicing from 1 April 2029: VAT invoices between VAT-registered businesses must be issued as e-invoices, using the Peppol network. See our guide to the UK e-invoicing roadmap.
- Direct debit from April 2029: businesses must set up a direct debit instruction for VAT and PAYE return liabilities. Other payment methods remain available before a cut-off date, and the direct debit collects any unpaid balance.
- Online marketplaces from October 2027: platforms will collect VAT on sales by UK VAT-registered businesses and by other UK businesses selling £90,000 or more a year through that platform.
Employers and payroll
| Measure | What changes | From |
|---|---|---|
| National Living Wage | Up 3.9% to £13.21 an hour; £11.27 for 18 to 20-year-olds; £8.31 for 16 to 17-year-olds and eligible apprentices; accommodation offset £11.53 a day | 1 April 2027 |
| Tax-free mileage rates | 55p a mile for the first 10,000 business miles made permanent; the rate above 10,000 miles rises from 25p to 35p | 55p from 6 April 2026; 35p from 6 April 2027 |
| Benefits in kind | Company cars, vans, fuel and medical benefits must be reported and taxed through payroll in real time; most other benefits follow, except employer loans and accommodation | 6 April 2027; other benefits 6 April 2028 |
| Share options | CSOP is renamed EMI2, its individual limit doubles from £60,000 to £120,000 and the exercise period extends to 15 years | 6 April 2027 |
HMRC's registration service for voluntary payrolling of benefits reopens on 5 November 2026, which gives employers a chance to move before the mandatory start.
Owners, landlords and entrepreneurs
- Property income: the income tax rates on property income rise by 2 percentage points to 24%, 44% and 49% from 6 April 2027 in England, Wales and Northern Ireland. This affects overseas Pakistanis and Gulf residents with UK rental property.
- Savings income: the savings rates rise to 24%, 44% and 49% across the UK from 6 April 2027.
- Business Asset Disposal Relief: the lifetime limit for the reduced 18% Capital Gains Tax rate falls from £1 million to £500,000 for disposals from 6 April 2027.
- Founders' Relief: a new 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies from 6 April 2027, subject to a technical consultation.
- Trading allowance: rises from £1,000 to £3,000 from 6 April 2027.
- Making Tax Digital for Income Tax: those joining in April 2027 will not get penalty points for late submission of their first four quarterly updates for 2027-28.
What to do now
- Review the timing of plant and machinery spending around 1 January 2027 (50% first-year allowance) and April 2027 (12% writing down allowance)
- If you sell services into the UK from Pakistan or the Gulf, list your UK customers that are not VAT registered and plan for charging UK VAT from 1 April 2027
- Collect and check UK customers' VAT numbers as part of onboarding
- UK companies with overseas branches: model the mandatory exemption for accounting periods from 1 January 2027
- Budget for the April 2027 wage rates, and set up payroll software to report benefits in kind in real time
- Landlords: plan for the higher property income rates from 6 April 2027
- Start planning for e-invoicing, using our roadmap guide
For the wider compliance picture, see our guide to running a UK company from Pakistan or the Gulf and our note on the Employment Rights Act 2025.
Official sources
- HM Treasury — Budget 2026, 28 October 2026
- HMRC — Reform of the business to business reverse charge for supplies of services from overseas, 28 October 2026
- HMRC — Register for VAT (businesses based outside the UK)
- HMRC — Corporation Tax: reform of the foreign permanent establishment exemption
- HMRC — Mandatory reporting of benefits in kind in Real Time Information from April 2027
- HMRC and Department for Business and Trade — Roadmap for e-invoicing implementation, 28 October 2026
Frequently asked questions
Did UK Budget 2026 change the Corporation Tax rate?
No. The government kept the headline rate capped at 25% under its Corporate Tax Roadmap. It did change capital allowances: the main first-year allowance rises to 50% for spending from 1 January 2027, and the main writing down allowance falls to 12% from April 2027.
Do overseas suppliers of services now have to charge UK VAT?
From 1 April 2027, yes, where the UK business customer is not VAT registered. The reverse charge will then apply only to customers registered for UK VAT. For other UK business customers, the overseas supplier must charge VAT and account for it to HMRC.
What is the UK National Living Wage from April 2027?
£13.21 an hour from 1 April 2027, a 3.9% increase. The National Minimum Wage rises to £11.27 for 18 to 20-year-olds and £8.31 for 16 to 17-year-olds and eligible apprentices.
This guide is general information based on the law as we understand it on the date shown, not advice for your situation. Tax rules change often — please speak to us before acting on it. See our disclaimer.