Pillar 2 — Side-by-Side package and further amendments to Multinational Top-up Tax and Domestic Top-up Tax
Published 13 July 2026
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Who is likely to be affected
Multinational groups with annual global revenues exceeding 750 million euros that have business activities in the UK.
General description of the measure
Multinational Top-up Tax and Domestic Top-up Tax are the UK’s implementation of the Global Anti-Base Erosion (GloBE) rules agreed by the UK and other members of the Organisation for Economic Co-operation and Development (OECD) and G20 Inclusive Framework on Base Erosion and Profit Shifting.
This measure implements the Side-by-Side package into UK legislation in line with the administrative guidance published by the OECD in January 2026. It also makes further amendments identified from stakeholder consultation and that are necessary to ensure the UK legislation remains consistent with the commentary and administrative guidance to the GloBE rules developed by the UK and other members of the Inclusive Framework.
Policy objective
This measure maintains the UK’s implementation of the Pillar 2 Global Minimum Tax, which was developed by the UK and other members of the Inclusive Framework.
The Side-by-Side package is a package of reforms to the Pillar 2 GloBE rules that provides businesses with:
- certainty
- simplification
- protection from retaliatory tax measures
This package, as well as the further technical amendments to Multinational Top-up Tax and Domestic Top-up Tax, ensures that UK legislation remains consistent with the agreed GloBE rules, commentary and administrative guidance.
Background to the measure
On 8 October 2021, over 130 countries in the Inclusive Framework reached agreement on a 2-pillar solution to reform the international tax framework in response to the challenges of digitalisation. The GloBE model rules, commentary and administrative guidance have been published by the OECD pursuant to this agreement.
The agreement was followed by a consultation on the UK implementation of the GloBE rules which closed on 4 April 2022. In Autumn Statement 2022, it was announced that the Multinational Top-up Tax and Domestic Top-up Tax would be introduced for accounting periods beginning on or after 31 December 2023. It was announced on 29 July 2024 that the undertaxed profits rule would be introduced for accounting periods beginning on or after 31 December 2024. Multinational Top-up Tax and Domestic Top-up Tax were introduced in Finance (No. 2) Act 2023.
The Side-by-Side package was developed by the Inclusive Framework following the G7 statement on global minimum taxes, published on 28 June 2025. This package was published by the OECD on 5 January 2026 and a written ministerial statement was made on 7 January 2026. This statement confirmed that the UK will implement the package with effect for accounting periods beginning on or after 1 January 2026.
Detailed proposal
Operative date
The Side-by-Side package will take effect for accounting periods beginning on or after 1 January 2026.
The further amendments in this measure will mainly take effect for accounting periods beginning on or after 31 December 2026.
Current law
Multinational Top-up Tax and Domestic Top-up Tax were introduced in Finance (No.2) Act 2023 and have effect in respect of accounting periods beginning on or after 31 December 2023.
Amendments to these taxes were made in Schedule 12 to Finance Act 2024, Schedule 4 to Finance Act 2025, and Schedule 8 to Finance Act 2026.
The part of Multinational Top-up Tax which forms the undertaxed profits rule was introduced by Finance Act 2025 and has effect for accounting periods beginning on or after 31 December 2024.
Proposed revisions
Parts 3 and 4 of, and Schedules 14 to 18 to, Finance (No.2) Act 2023 will be amended to give effect to the following changes:
- introduction of the side-by-side and ultimate parent entity safe harbours
- introduction of the substance-based tax incentive safe harbour
- introduction of the simplified effective tax rate (ETR) safe harbour
- extension of the transitional safe harbour
- technical amendments to the calculation for determining the reference territory for the international expansion condition
- technical amendment to clarify that ‘discontinued operations’ should be subject to the same treatment as entities which are ‘held for sale’
- technical amendment to ensure that pre-Pillar 2 periods are not included when determining whether a de minimis election can be made
- technical amendments to clarify circumstances when the adjustments for companies in distress can apply
- technical amendments to the cap on cross-border tax allocation for controlled foreign companies, hybrids and flow-throughs that applies for Domestic Top-up Tax purposes
- other minor amendments and corrections
Summary of impacts
Exchequer impact (£ million)
| 2025 to 2026 | 2026 to 2027 | 2027 to 2028 | 2028 to 2029 | 2029 to 2030 | 2030 to 2031 |
|---|---|---|---|---|---|
| -130 | -590 | -645 | -675 | -710 | -740 |
These figures are set out in the March 2026 Economic and Fiscal Outlook, ’Detailed forecast tables: policy’ and have been certified by the Office for Budget Responsibility.
Macroeconomic impact
This measure is not expected to have any significant macroeconomic impacts.
Impact on individuals, households and families
There is expected to be no impact on individuals as this measure only affects businesses.
Equalities impacts
This measure only affects businesses. It is not anticipated that there will be disproportionate impacts on any protected groups.
Administrative impact on business including civil society organisations
This measure will have a negligible impact on an estimated 4,250 businesses. This is because Pillar 2 is based on international agreement. This means the costs and savings of the Side-by-Side package are predominantly attributable to those agreements rather than to UK legislation specifically. This assessment reflects the administrative impact of changes to the UK-specific reporting obligations only.
The amendments in this measure that are not part of the Side-by-Side package aim to ensure that the legislation works as was originally intended and are in line with OECD commentary, have minimal administrative impact.
Businesses may incur negligible one-off costs such as familiarising themselves with the amendments.
Businesses may receive negligible ongoing administrative savings in relation to meeting UK-specific reporting obligations.
Customer experience is expected to remain broadly the same as it does not change how businesses would interact with HMRC.
This measure is not expected to disproportionately impact civil society organisations.
Operational impact (£ million) (HMRC or other)
This measure will be delivered as part of the existing programme that has been established to implement Pillar 2 in the UK, so there are no further operational costs for HMRC.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be monitored through information collected from tax returns.
Further advice
If you have any questions about this change, contact the Pillar 2 Team by email: PillarTwoConsultation@hmtreasury.gov.uk.