Tax Planning
How ‘Simplification, Modernisation & Fairness’ Is Rewriting UK Tax Rules in 2026
A landmark HMRC policy update introduces major changes—ranging from research & development credits to dividends, PAYE Settlement Agreements, and international tax fairness—that reshape both business and individual tax landscapes.
By NomadicTax Research Team • 5-8 min read • July 5, 2026
## Overview of Key Policy Shifts
On **23 June 2026**, HMRC released a policy paper titled *“Tax Update 2026: Simplification, Modernisation and Fairness”*, introducing a set of significant reforms aimed at trimming administrative burdens and advancing fairness. Some highlights include:
- **Businesses**: R&D and creative-sector expenditure credits will be **excluded** from Corporation Tax's Quarterly Instalment Payment (QIP) profit thresholds, reducing cash-flow pressures. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
- **Individuals & Trusts**: Modernisation of dividend taxation and new Capital Gains Tax relief for gifts of business assets. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
- **Employment Tax**: Call for evidence on PAYE Settlement Agreements (PSAs) and formalizing National Insurance easements for globally mobile workers. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
- **Indirect & Customs Tax**: Digitalization initiatives including AI pilots, e-invoicing networks, and customs modernisation. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
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## Implications for Different Stakeholders
### For Businesses
- **Cash flow improvements**: Removing R&D and similar credits from QIPs means companies won’t be pushed into paying instalments prematurely, especially when margins are slim.
- **Foreign operations**: A new **foreign branch exemption (FBE)** becomes *mandatory* from **1 January 2027** (with certain oil & gas firms affected earlier from 1 September 2026). Overseas profits and losses will generally be **segregated** and *not* offset against UK profits. ([swgroup.com](https://www.swgroup.com/insights-events/insights/tax-update-june-2026/?utm_source=openai))
### For Individuals & Trusts
- Those who receive **dividend income** or who use trusts should prepare for **tax rate adjustments** and revisions to how distributions are taxed. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
- Easier access to **Capital Gains Tax (CGT) relief** when gifting business-assets could unlock opportunities for transfers and succession planning. ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
### For Globally Mobile Individuals
- Expect increased **documentation and compliance requirements** as HMRC works toward fairer tax outcomes in cases involving reverse hybrids (e.g., U.S. LLCs). ([kpmg.com](https://kpmg.com/us/en/taxnewsflash/news/2026/06/uk-hmrc-tax-customs-simplification-modernization-fairness.html?utm_source=openai))
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## What Businesses & Individuals Should Do Now
- Review whether you will be in the **scope of foreign branch exemption** from Q1 2027. Begin structuring overseas operations accordingly.
- For those expecting income from **dividends or trusts**, run forecasts under both old and new proposed rates. Revisit shareholders’ agreements and trust structures.
- If you qualify for **Land Remediation Relief**, watch for upcoming reforms as recent consultations suggest major design changes are coming. Proactively tracking eligible spend and confirming evidence now may pay off. ([gov.uk](https://www.gov.uk/government/consultations/consultation-on-land-remediation-relief/outcome/land-remediation-relief-summary-of-responses?utm_source=openai))
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## Example Scenarios
| Situation | Before Update | After Update | Actionable Tip |
|---|---|---|---|
| Software company heavily investing in R&D | QIP liabilities tied to overall profits; early instalments required | Credit-expenditures excluded from QIP thresholds | Update cash flow models; possibly delay instalment filings during transition |
| UK-resident business with foreign permanent establishment | Overseas losses may offset UK profits | FBE mandates separation of income/losses for UK Corp Tax | Review tax accounting; consider restructuring to maintain reliefs |
| Owner of business assets planning divestment | Gifted assets could trigger high CGT burden | New reliefs available for business asset gifts | Consult asset valuation and timing now; ensure compliance with CB rules |