Policy paper

Tax update 2026: simplification, modernisation and fairness summary

Updated 23 June 2026

The government has announced a package of tax and customs measures to reduce administrative burdens, improve certainty, fairness, and customer experience. 

The measures support legitimate high street businesses to compete on a level playing field, and help economic growth by simplifying processes, improving guidance and modernising HMRC systems and services. It aims to make it easier for individuals and businesses to get their tax and customs right first time, while also putting steps in place to tackle those who seek to bypass the rules, strengthening the effectiveness of the tax and customs systems. 

Simplifying and modernising the tax system

VAT treatment of land intended for social housing 

The government has published a consultation on the introduction of a new zero rate of VAT for the sale of land intended for the construction of social housing. The consultation is seeking views on how the current VAT rules work and how a new zero rate would support the delivery of social housing, helping reduce barriers to building new homes and supporting more households into safe and decent homes. The consultation will also help ensure any new tax relief remains fair and affordable.

Review and uprating of Benchmark Scale Rates (BSR) and Overseas Scale Rates (OSR) 

BSR and OSR are optional flat rates that employers can use to reimburse employees for the cost of meals and other travel expenses when they travel for work in the UK (BSR), and for accommodation and meals when they travel overseas (OSR), without having to check every receipt. In response to stakeholder feedback, and following engagement with industry, the government has announced a review of BSR and OSR. BSR will be reviewed with consideration to the current costs of travel, and the review will look to understand if there is scope to simplify OSR with more alignment between both BSR and OSR. 

More Timely Payments for Income Tax Self Assessment (ITSA) 

The government has published a consultation seeking views on implementing more timely payments in ITSA, including reforms for ITSA customers with Pay as You Earn (PAYE) income who will be required to pay more of their forecasted Self Assessment liabilities in-year through PAYE from April 2029. The government is also consulting, and on the potential for more timely payments for other Self Assessment taxpayers by reforming Payments on Account. Spreading tax payments through the year into smaller, regular payments will help reduce tax debt and avoid taxpayers having to pay larger, infrequent and sometimes unexpected bills. 

Call for evidence on PAYE Settlement Agreements (PSAs)

The government has published a call for evidence on PSAs seeking to improve understanding of how PSAs operate in practice, including how employers interpret the rules and where there may be complexity or uncertainty. The evidence gathered will allow an informed view of whether any changes are needed, with the aim of addressing unclear boundaries and inconsistent use and helping to reduce administrative burdens for employers and advisers. 

Consultation on modernising the distributions framework

The government has published a consultation to explore modernising the rules that determine whether a payment to a company’s non-corporate shareholders falls within the distributions regime. This is to ensure the rules operate as intended and minimise distortions, without undermining commercial practice. The government is consulting because of the complexity of this area of the tax system, which in many cases has not been reformed since 1965, and the need to have a clear view of potential impacts before deciding whether to proceed.

Call for evidence on voluntary National Insurance contributions 

The government has published a call for evidence on voluntary National Insurance contributions to better understand how the system operates in practice and where improvements could be made. The evidence gathered through this process will help to inform the government’s wider thinking around voluntary National Insurance contributions and any future decisions about administrative and policy reform.

Digitising the option to tax process 

The government will introduce new digital channels for submitting option to tax notifications and revocations, replacing existing paper-based processes. This change will make it easier for businesses and agents to manage VAT option to tax notifications, improving accuracy, reducing processing times and removing reliance on paper forms. It will incorporate industry requirements, including bulk uploads, for option to tax notifications, revocations and VAT registration cancellations. It will also support a more efficient and secure digital experience for taxpayers. These channels will be live before the end of 2026. 

Consultation on the tax treatment of members of US Limited Liability Companies and other reverse hybrids 

The government published a consultation on 10 June 2026 on new proposals to remove double taxation from investments in certain types of overseas entity (including US Limited Liability Companies) which can result in effective tax rates above 75%. This proposal addresses an unintended mismatch resulting in high and unfair tax rates and is part of the wider government work to develop the UK’s offer for globally mobile talent. 

First Time Buyer Individual Savings Account (ISA) consultation 

As announced at Budget 2025, the government has published a consultation on the implementation of a new, simpler ISA product to support first time buyers to buy a home. The consultation sets out the policy design of the new product and seeks views on technical elements, such as ISA manager requirements and how the product should interact with other ISA types. Once available, this new product will be offered in place of the Lifetime ISA. However, it will remain possible to open a Lifetime ISA until the new product becomes available and for account holders to continue to save into their Lifetime ISA in line with the existing rules indefinitely. 

ISA Reform

The government is confirming the anticircumvention rules to support reforms to ISAs announced at Budget 2025 as part of the government’s wider strategy to develop a retail investment culture. To prevent circumvention of the lower Cash ISA limit, the rules will introduce a 22% charge on interest paid on cash holdings held in Stocks & Shares and Innovative Finance ISAs (non Cash ISAs), prevent transfers from non Cash ISAs into Cash ISAs for the under 65s, and prevent holding 100% Money Market Funds in non Cash ISAs. Further details will be published in the next HMRC Tax Free Savings newsletter. 

Help to Save 

Following consultation and stakeholder engagement, the government has confirmed that the reformed Help to Save scheme will be delivered through a multi‑provider model. Financial institutions, including banks, building societies and credit unions, will be able to offer Help to Save accounts directly to eligible customers, improving access and visibility by embedding the scheme within the mainstream savings market. 

The government has also published a Summary of Responses to the delivery consultation published at Autumn Budget 2024, setting out stakeholder views and the rationale for this approach.

Supplementary Data for VAT Returns

The government will explore whether better use of VAT data that businesses already hold in their digital accounting systems could help HMRC work more efficiently. This work will consider how data already held within the businesses’ digital accounting systems for audit purposes could be used to support compliance and improve the effectiveness of the tax system. Engagement with stakeholders will inform any future decisions. 

Discount expenditure credit income from Corporation Tax Quarterly Instalment Payment (QIP) profit thresholds

The government plans to introduce secondary legislation to amend the definition of augmented profits for Corporation Tax QIP. From April 2027, Research & Development Expenditure Credits, Audio-Visual Expenditure Credits, and Video Games Expenditure Credits will no longer be included when determining whether a company is within the QIP regime. This will prevent companies from being brought into QIP solely as a result of receiving these credits. The change will reduce administrative burdens and ease cashflow pressures for affected companies.

Consultation on removing National Insurance contributions debt from the scope of the Limitation Act 1980 and aligning processes with other forms of taxation 

The government will consult on proposals to remove National Insurance contributions debt from the scope of the Limitation Act 1980 and to align National Insurance contributions recovery processes more closely with other forms of taxation. The changes will simplify the tax system by ensuring greater consistency in how debts are treated across taxes, reducing complexity and administrative costs associated with current recovery processes. The consultation, expected in summer 2026, will seek views on how best to modernise and streamline those arrangements whilst maintaining appropriate safeguards. 

Regularising certain existing National Insurance contributions easements for internationally mobile individuals

The government will formalise an existing National Insurance contributions practice for non-resident directors who attend a small number of board meetings in the UK but are based in countries without a social security agreement. Under this measure, non-resident directors will be able to carry out limited UK duties without incurring a National Insurance contributions liability, providing clarity and certainty for employers and internationally mobile individuals. This will clarify the tax treatment of globally mobile directors to ensure a consistent application of the rules. 

There is currently a National Insurance contributions easement that allows certain employees posted abroad by their employer to work in a country with no social security agreement to return to the UK for short periods without them needing to pay additional Class 1 National Insurance contributions. The government is considering its approach to this practice and will work with stakeholders on providing further clarity about this in due course. 

Inheritance Tax reporting requirements for non-taxpaying trusts 

The government will simplify Inheritance Tax reporting requirements for certain non-taxpaying trust transfers and trust events. These changes will remove the requirement for some trustees and individuals to submit Inheritance Tax accounts where no tax is due, reducing administrative burdens. This measure will provide greater clarity and efficiency in the reporting process. The government will lay regulations to make this change effective from 6 April 2027. 

Start a Small Business - Customer Journey review 

The government will undertake a comprehensive review of the end-to-end customer journey for small businesses. This review will examine how businesses interact with HMRC across their lifecycle, from starting up to ongoing compliance, with the aim of identifying key pain points and opportunities to simplify guidance, improve services and support compliance. This will help ensure small businesses can more easily understand and meet their tax obligations. 

Simplifying and modernising the customs system 

Call for evidence on Customs Modernisation 

The government has published a call for evidence to capture industry views on trade digitalisation and the opportunities and challenges this poses for the future of the UK customs regime. This will explore key elements of the UK customs regime in the context of technological and regulatory change, to ensure HMRC continue to understand evolving trade practices and needs to enable the best support for international trade into and out of the UK.

Digitalisation and AI Customs Pilots 

The government will take further steps to test and scale successful innovations within the customs system, building on recent customs digitalisation pilots, with US Customs and Border Protection testing new digital trusted trader credentials, and with industry partners testing how Electronic Trade Documents (ETDs) can be harnessed to meet customs requirements. These include:

• commencing iterative design and delivery of services allowing HMRC to process ETDs for customs applications, supporting businesses adopting fully digitalised trade processes by ensuring UK customs is better tailored to their needs

• HMRC participating in the next phase of the Department for Business and Trade’s Digital Trade Corridors programme, which is showing how ETDs can streamline business processes, to test how ETDs can be used within the UK customs system for example for documentary checks

• further testing and development of applications of digital verifiable credentials within the UK customs regime, in line with ambitions to evolve customs processes to leverage the opportunities provided by digital technologies

• testing how AI can support customs caseworkers to undertake real-time border documentary checks, with the aim of improving border flow and strengthen compliance outcomes

Improving the Quality of Customs Intermediaries 

The government will take steps to improve the quality and standard of customs intermediaries. This includes introducing a customs intermediary standard which was published on 3 June 2026, subsequently developing a voluntary certification scheme for the Standard, and a commitment to publish a consultation on new mandatory registration for intermediaries. These reforms aim to raise standards across the sector, improve trust in intermediaries and support businesses in navigating customs processes. 

Digital ATA Carnets 

The government introduced digital ATA Carnets on 1 June 2026, making the UK one of the first countries to adopt them alongside the EU, Switzerland and Norway. Digital ATA Carnets will replace paper-based systems used for the temporary movement of goods internationally among approximately 90 countries and territories. This is modernising the carnet process and reducing administrative burdens for businesses. The move to digital carnets aligns the UK with international developments and supports smooth cross-border trade, making it easier for businesses and touring artists to move goods between the UK and other countries temporarily without payment of import duties.

Changes to the Duty Reimbursement Scheme for Northern Ireland goods 

The government introduced the Customs (Northern Ireland) (EU Exit) (Amendment) Regulations 2026 to facilitate enhancements to the Duty Reimbursement Scheme, which allows businesses to reclaim ‘at risk’ duty paid on goods brought into Northern Ireland. 

These changes were implemented on 26 May 2026 and will support the government’s commitments outlined in its response to the Independent Review of the Windsor Framework and are designed to address feedback from businesses regarding the scheme’s operation. The improvements are designed to enhance access to the scheme by addressing concerns arising from businesses moving certain types of goods, particularly manufacturers, and easing the financial impacts of claiming where evidence of the final destination of goods takes time to materialise. 

Voluntary Disclosure Policy 

The government will develop and publish a voluntary disclosure framework for customs by the end of 2026. This framework will encourage businesses to make timely and unprompted disclosures of errors, improving compliance while reducing administrative burdens. It will also support more efficient use of HMRC resources by enabling issues to be resolved more quickly. 

Intention to publish a call for evidence on access to tariff inversion and the economic condition for inward processing 

The government intends to publish a call for evidence later in 2026 on tariff inversion and its operation within the inward processing regime. This will consider how rules on the calculation of import duty when processed goods leave the inward processing procedure affect UK businesses.

Online Tariff Tool developments 

The government will continue to develop the Online Tariff Tool to provide a more modern, user-friendly digital service for traders. This forms part of a two-year programme to transform the Online Tariff Tool from a static reference tool into a smarter, journey-based service that supports businesses throughout the import and export process. Enhancements will include improved user features and the integration of AI tools to make tariff information easier to access, understand and use, helping to reduce administrative burdens and improve compliance. 

Strengthening fairness and helping customers get their tax and customs right 

Reforming the customs treatment of low value imports 

The government will accelerate the delivery of the new low value import customs arrangements by 6 months to October 2028 at the latest. The government intends to ensure all goods are adequately controlled while balancing the need to promote fair competition between high street and online retailers and giving businesses involved in the sales and movement of low value goods time to prepare for the changes and avoid border disruption To give businesses as much certainty as possible about the new arrangements, the government will publish a consultation response shortly and introduce legislation for the reforms in Finance Bill 2026-27.

Online Marketplace Liability 

The government has published a consultation seeking views on the proposed extension of the VAT online marketplace liability rules to UK based businesses. The proposed reforms intend to tackle VAT non-compliance from overseas and UK based businesses which can distort competition and place compliant businesses, both online and on the high street, at a disadvantage. The government intends to minimise impacts on genuine UK businesses not required to pay VAT, and is seeking views on options to do so.

Electronic Sales Suppression Software Standards (ESS) 

The government has published a consultation on the introduction of software standards for the Electronic and Mobile Point of Sale (EPOS/MPOS) Sector to explore how best to embed standards across the latest products and innovations. This consultation seeks views from businesses, software developers and wider stakeholders on measures designed to prevent electronic sales suppression and support fair competition on the high street. The government aims to ensure any future approach minimises burdens on compliant businesses, and believes that strengthened controls, such as modern encryption and record standardisation in the EPOS sector, have the potential to dramatically reduce the incidence of ESS or ‘till fraud’. 

Tackling lower value debts

The government has published a consultation seeking views on proposals to extend existing powers to enable recovery of lower value tax debts. This would apply to customers who can pay but have not responded to multiple contact attempts from HMRC. Each year, over 750,000 such debts, collectively worth more than £2 billion, remain uncollected after 9 months and more than 10 attempts to contact customers to pay what they owe. The proposals would enable HMRC to collect debts directly from customers’ accounts in regular instalments, supported by a comprehensive suite of safeguards to ensure the power is used fairly and proportionately. This measure will help ensure those who can pay their tax debt do so, while maintaining trust and fairness in the tax system.

Requiring Payment of VAT and PAYE by Direct Debit 

At Budget 2025, the government announced its intention to consult on making Direct Debit the mandatory payment method for VAT and PAYE return liabilities, subject to defined exceptions. The consultation has now been published and will also consider whether any enforcement arrangements or incentives would be appropriate. 

Introducing a criminal offence for making reckless untrue statements or declarations in direct tax 

The government has published a consultation on the introduction of a criminal offence of reckless untrue declarations or reckless false statements for direct tax matters, aligning the legal framework with existing offences in indirect tax. The aim is to ensure consistency across tax regimes, to ensure that those who engage in highly culpable serious non-compliance are fairly tried and properly brought to justice.

E-invoicing: core interoperability network announcement 

The government has announced that the electronic procurement system Peppol will be the core interoperability network for e-invoicing in the UK. This will give software developers and taxpayers an indication of the direction of travel for our work towards the e-invoicing mandate in 2029, enabling them to begin planning their product development and rollout of e-invoicing. The government will continue to engage with stakeholders regarding the role of legacy systems which cannot interoperate in the future system. 

Reviewing Employment Expenses within ITSA 

The government will review the circumstances in which customers can make claims for tax relief on non-reimbursed Employment Expenses in ITSA to ensure requirements are effective and proportionate. Currently, employees who incur more than £2,500 of allowable expenses not already reimbursed by their employer must submit a Self Assessment return to claim relief. 

Publishing Details of Deliberate Defaulters Reform 

The government will reform the Publishing Details of Deliberate Defaulters policy. The changes will allow HMRC to publish more information about the deliberate non-compliance that leads to publication of the defaulter’s details and will increase the threshold for publication to £50,000 potential lost revenue. The reforms will also enable the publication of details relating to Personal Liability Notices. These changes aim to improve transparency and increase the policy’s effectiveness as a deterrent to deliberate non-compliance. 

Strengthening the Customs Civil Penalty Framework including for Obligations to Provide Customs Infrastructure 

The government has announced its intention to legislate to strengthen the customs civil penalty framework. This will include reviewing the maximum potential amount for customs civil penalties to further deter non-compliance, particularly for breaches of approval conditions relating to essential customs infrastructure at border locations. 

Disclosure for Compound Settlements 

The government will introduce legislation to strengthen HMRC’s ability to publish details of companies that agree a compound settlement for strategic export and sanctions offences. The new approach will improve transparency and increase consistency between HMRC functions and enforcement outcomes on trade sanction offences across government. 

Policy maintenance package to tackle promoters of tax avoidance 

The government will introduce a small package of measures to amend existing legislation aimed at tackling promoters of tax avoidance. This includes changes to the Promoters of Tax Avoidance Schemes legislation to extend it more fully to cover VAT avoidance schemes and to allow HMRC to publish the details of those subject to a Stop Notice more quickly.

Further tax policy and tax administration announcements 

Package of changes reforming civil tax information and inspection powers (Schedule 36 FA08) and modernising the definitions about computer records 

The government will bring forward a package of reforms to modernise HMRC’s information and inspection powers. This includes updating provisions in Schedule 36 to FA08 and the definitions about computer records in s114 FA08, ensuring HMRC can effectively access and process information in a modern, digital economy. The reforms will improve HMRC’s ability to carry out compliance checks, meet OECD Global Forum standards on information exchange, and respond to technological changes, while a planned technical consultation will help ensure safeguards remain proportionate. 

Capital Gains Tax relief for gifts of business assets 

The government has published draft legislation to modernise Capital Gains Tax gift holdover relief for business assets. The measure will update the rules that restrict the amount of relief available when a company holds assets not used within its trade, restoring how they operated before the introduction of the Substantial Shareholding Exemption and the Intangibles Fixed Assets regime. This will remove distortions that can otherwise arise in the calculation. 

Land Remediation Relief 

The government has published a summary of responses to the consultation on Land Remediation Relief, which closed in September 2025. This provides stakeholders with an update on the evidence gathered, the government’s assessment of the relief’s effectiveness and next steps. The publication offers greater clarity to businesses and sets out how the government is approaching reforming the relief, and the intention for further engagement with the construction and land remediation sectors.