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Preparing for Pillar Two Regulations: What UK Multinationals Should Do Now
The UK has updated its Pillar Two top-up tax guidance with additions to territories and qualifying taxes—this article helps multinationals navigate implications under the new rules.
By NomadicTax Research Team • 5-8 min read • November 23, 2025
## What’s Pillar Two All About?
Pillar Two, part of the OECD’s global tax reform, aims to ensure large multinational corporations pay a **minimum global tax rate** by applying top-up taxes in jurisdictions where profits are taxed lower than this rate. It includes rules like Income Inclusion Rules (IIRs), Qualifying Domestic Minimum Top-up Taxes (QDMTTs), and Accredited QDMTTs. ([gov.uk](https://www.gov.uk/government/publications/pillar-two-top-up-taxes-relevant-territories-and-taxes-notice-2?utm_source=openai))
## UK’s Latest Updates in Notice 2
On **15 October 2025**, HMRC updated their *Notice 2 — Pillar Two top-up taxes relevant territories and taxes*. Key changes include additions to both the list of Pillar Two territories and the qualifying domestic top-up taxes. Countries added include **Brazil**, **Gibraltar**, **Isle of Man**, **Japan**, **Singapore**, and others for various categories of qualifying or accredited top-up taxes. ([taxscape.deloitte.com](https://taxscape.deloitte.com/updates/monthly-tax-update/monthly-tax-update---november-2025.aspx?utm_source=openai))
These updates are legally binding under the Multinational Top-up Tax Regulations 2025 (SI 2025/406), which specify which jurisdictions qualify and when the rules apply. ([gov.uk](https://www.gov.uk/government/publications/pillar-two-top-up-taxes-relevant-territories-and-taxes-notice-2?utm_source=openai))
## Implications for Multinationals in Practice
- If your multinational group operates in these newly added territories, you may be **subject to Multinational Top-up Tax (MTT)** under the IIR. Advance your data collection and reporting processes. ([gov.uk](https://www.gov.uk/government/publications/pillar-two-top-up-taxes-relevant-territories-and-taxes-notice-2?utm_source=openai))
- If your home jurisdiction has or plans to implement a **Domestic Minimum Top-up Tax**, review the legislation to understand whether it counts as a qualifying or accredited top-up tax under UK law. ([gov.uk](https://www.gov.uk/government/publications/pillar-two-top-up-taxes-relevant-territories-and-taxes-notice-2/notice-2-pillar-two-top-up-taxes-relevant-territories-and-taxes?utm_source=openai))
- Be aware of **safe harbour elections**—for accredited QDMTTs, certain streamlined compliance options are available. Review qualification carefully. ([gov.uk](https://www.gov.uk/government/publications/pillar-two-top-up-taxes-relevant-territories-and-taxes-notice-2?utm_source=openai))
## Steps to Take Now
1. **Map your international footprint**: Identify which territories you operate in and whether they are now included in Notice 2.
2. **Review your global effective tax rates** in each jurisdiction to check for potential top-up liability.
3. **Digest the Regulations** (SI 2025/406) and incorporate required changes into your fiscal planning.
4. **Update your tax projections**: top-up tax obligations could materially impact after-tax profitability.
5. **Talk to your tax advisors**, especially if operating in any newly designated jurisdictions.
## Example Scenario
- **A UK-based parent company** with subsidiaries in **Brazil** and **Singapore**: Both are now listed as having qualifying domestic minimum top-up taxes. The UK parent must ensure its group’s consolidated figures account for the differential rate and calculate any MTT due. Delays or omissions could lead to costly adjustments or non-compliance risks. ([gov.uk](https://www.gov.uk/government/publications/pillar-two-top-up-taxes-relevant-territories-and-taxes-notice-2?utm_source=openai))
By staying informed and preparing early, multinationals can avoid surprises when Pillar Two obligations begin to bite. The costs of non-compliance under Pillar Two extend beyond monetary penalties—they include reputational risks and audit exposure. Act now to align reporting, system capabilities, and planning.