Tax, compliance and shifting challenges and opportunities: Our 2026 lookahead for Investors and Entrepreneurs
A lookback at 2025
With a busy January drawing to a close, now seems as good a time as any to reflect on 2025 and gaze into our crystal ball, once again, to consider what the next year may bring for UK entrepreneurs and those who invest in UK businesses.
2025 was a great year for our dedicated international team of experts who supported our investor and entrepreneur clients through plenty of opportunities and challenges. Despite uncertainty reigning in H2 2025, with the rumour mill in overdrive and expectations of another painful Budget, private capital remained active – albeit with timelines tweaked. Some of our highlights from the year include:
- Instructions on sale of sub from a family (employee and private trust and individual owned) holding co requiring a wholescale review of the tax position pre and post-sale complicated by the dilution of business property relief from inheritance tax April 2026, with mitigation planning to reflect all.
- Advising the majority sellers of long-standing client, Portas Consulting, on the sale of the company to CAA Sports, a division of Creative Artists Agency, a major LA-headquartered entertainment and sports agency.
- Advising the shareholders of family business, Colpac Limited, on its sale to Sabert Corporation.
- Advising FIRST, a global leader in event marketing and brand experiences, and its shareholders on the sale of the group to Encore, a global leader in event production and technology.
- Providing expert insights and advising clients, including family investment companies, on the upcoming changes to business property relief, and launching a thought-leadership campaign, “From Check-in to Check-out: Investing in Hotels for Family Offices,” offering family offices invaluable insights and strategies to help them navigate the multifaceted UK hotels industry.
- Obtaining outstanding recognition in the Chambers High Net Worth 2025, with Band 1 rankings across nine categories, including Private Wealth Law, for all three of our UK offices and internationally and Family Offices & Funds Structuring in Switzerland.
Now we turn to 2026, which will see a myriad of changes impacting investors and entrepreneurs, and their business and personal interests.
2025 Budget fall-out
Despite being relatively benign compared to the previous year, and a general consensus that it “could’ve been worse,” the 2025 Budget will still have wide-ranging ramifications for investors and their businesses into 2026, which we summarise below.
Corporation Tax
From April 2026, the Government has signalled a decrease in the main rate of writing‑down allowances by four percentage points to 14%, balanced in part by a new first‑year allowance from 1 January 2026 of 40% for main‑rate assets, intended to incentivise investment and growth.
Capital Gains Tax (CGT)
The Government halved the CGT relief available on disposals to employee ownership trusts (EOTs), cutting relief from 100% to 50%, with effect from 26 November 2025. 2024 saw an increase in transactions involving EOTs, underscoring the appeal of aligning succession with employee ownership. The reduction in relief, alongside other tweaks to EOT rules, may temper that trend. For more on these changes click here - Employee Ownership Trusts - Government reduces capital gains tax relief on employee ownership trusts in 2025 Budget.
Enterprise Management Incentive (EMI)
EMI eligibility limits have been amended, effectively expanding the EMI scheme, a UK tax-advantaged share option scheme for smaller, high-growth companies. If properly structured, the scheme enables employees to exercise options without incurring income tax or NICs, with gains typically taxed at lower rates under the capital gains tax regime. For more on the changes to the EMI eligibility limits click here - Autumn Budget: Expansion of the EMI eligibility limits.
Enterprise Investment Scheme (EIS)
Starting from 6 April 2026, several significant reforms will apply to the Enterprise Investment Scheme (EIS) as part of the government’s wider restructuring of the UK’s venture capital schemes. The gross asset thresholds for qualifying companies will rise to £30 million before, and £35 million after, the relevant share issue. Annual investment limits will increase to £10 million (or £20 million for knowledge‑intensive companies), while the lifetime cap will double to £24 million (or £40 million for KICs). These changes sit within a broader package that also affects Venture Capital Trusts (VCTs), including a reduction in VCT income tax relief from 30% to 20% on new subscriptions from the same date. The government describes the reforms as intended to widen access to growth capital for early‑stage and scaling companies while ensuring incentives remain targeted and sustainable.
Share exchanges and reorganisations
“Paper for paper” transactions can benefit from tax rollover treatment to avoid CGT (for individuals) or Corporation Tax (for companies) being charged on consideration which takes the form of shares or loan notes. Such rollover relief covers a number of transactions, including company sales (where the purchasing company issues its own shares as consideration for the deal) and corporate group reorganisations. Often, advance clearance (known as a “section 138” clearance) is sought from HMRC, whereby HMRC confirms it will not use its counteraction power in respect of such relief in relation to a particular transaction. As part of the 2025 Budget, HMRC’s counteraction power has been amended to better respond to tax avoidance measures, with the new version applying to transactions taking place on or after 26 November 2025. For more on the changes to HMRC’s counteraction powers and how this will impact future share exchanges and reorganisations click here - Budget 2025 – Changes to anti-avoidance for share exchanges and reorganisation rules – what this means for your transactions.
Stamp Duty Reserve Tax Holiday
The Government introduced a time limited stamp duty reserve tax holiday on secondary trading in shares of companies newly listed on UK markets - suspending the 0.5% charge for a defined period of 3 years following admission after 27 November 2025. This has the potential to be a meaningful lever for improving liquidity and valuation support, when taken in the context of other reforms to enhance London’s competitiveness as a listing venue, including changes to the UK prospectus regime, which we consider below.
Permanent establishment (PE)
The Government is updating the statutory definition of a permanent establishment so that it aligns with the 2017 OECD Model Tax Convention. This change, for chargeable periods beginning on or after 1 January 2026, incorporates the post‑BEPS revisions to Article 5, including the expanded dependent agent PE rules, the narrowing of exemptions for preparatory and auxiliary activities, and the introduction of anti‑fragmentation provisions. As a result, agency, commissionaire, and similar operating structures will need to be reassessed to ensure they remain robust under the updated domestic rules. The Government will also revise the UK’s domestic profit attribution rules for permanent establishments to reflect the OECD’s authorised approach, meaning that existing methodologies for allocating profits to UK branches will need to be reviewed and potentially updated.
Investment Manager Exemption (IME)
The Government is pressing ahead with significant reforms to the Investment Manager Exemption (i.e. rules that allow/encourage non-resident investors to appoint UK based representatives without triggering UK taxation for themselves, provided certain conditions are met). As part of these changes, for chargeable periods beginning on or after 1 January 2026, the Finance Bill 2026 provides for the repeal of Condition D (commonly known as the “20% rule”) relating to a non-resident’s entitlement to investment income. This reflects the view that the test is impractical in modern investment structures and is not a reliable indicator of independence. The associated charging provision, which currently applies where Condition D is not met, will also be removed as it becomes redundant once the 20% rule is abolished. These amendments are intended to simplify the IME framework and ensure that the independence requirement is assessed in a more meaningful and commercially realistic way.
Carried interest
From 6 April 2026, a new statutory regime will tax carried interest received by investment managers as trading profits. For ‘qualifying’ carried interest, only 72.5% of the profit will be taxed as trading income, with the remainder retaining capital treatment, determined by a statutory average holding‑period calculation. These changes will require managers to reassess existing carried‑interest arrangements, ensure that fund documentation and distribution mechanics remain aligned with the new rules, and strengthen tracking of investment holding periods to support the statutory calculations and avoid unintended tax outcomes.
Dividend tax rates
Also from April 2026, tax on dividend income will increase by 2%, with the ordinary rate rising to 10.75%, and the upper rate to 35.75%. The additional rate will remain unchanged at 39.35%.
2026 Outlook
2026 is due to bring meaningful changes across company administration and transparency, corporate criminal liability, capital markets access, and tax. Identity verification and stronger filing standards at Companies House, and new fraud‑related corporate liability, will raise compliance expectations and operational scrutiny. At the same time, PISCES and the new public offers regime widen the options for intermittent liquidity and primary capital raising, while Business Property Relief tightens. This outlook explains what is changing, when it matters, and what actions founders and investors should consider prioritising in the year ahead.
Business Property Relief (BPR)
For years BPR has been a vital tool for entrepreneurs, investors and their families, allowing valuable business assets to pass between generations without the burden of Inheritance Tax (IHT). Under current rules, BPR provides 100% relief on qualifying business interests (including shares in privately owned trading businesses) meaning they can be passed on without an IHT charge.
From 6 April 2026, only the first £2.5m (index linked in line with CPI from 2030) of assets will qualify for full relief (the allowance), with any excess only receiving 50% - albeit shares designated as unquoted (i.e. that are not listed on a recognised stock exchange), including shares on AIM, will qualify for BPR at a flat 50% rather than 100%, irrespective of the £2.5m allowance. On death BPR qualifying-assets will therefore be taxed at an effective rate of 20% IHT over and above the allowance. Trusts holding BPR-qualifying assets will be subject to an effective rate of 3% IHT every ten years and when assets leave the Trust over and above the allowance and subject to complicated rules around related settlements. The allowance will also be used up by any gifts (outright or into trust) in the seven years before death and applies to all relevant business or agricultural interests.
Although in recent welcome news the allowance was increased from an initial £1m and it was confirmed that the allowance will be transferable between spouses, the new rules still mean business owners need to rethink how they protect their businesses and how their families will fund IHT. If they haven’t already done so, business owners should start reviewing their options now - stress-test succession plans, obtain valuations and model the impact of the changes to quantify and plan for the IHT exposure.
For more on what you could be doing to protect your assets from IHT see BPR: Why the £2.5 million allowance still demands action before April.
Companies House identity verification and filing reforms
Identity verification and stronger filing standards are being phased in under the Economic Crime and Corporate Transparency Act. There are now tighter requirements for directors, persons with significant control, and authorised filers to complete identity verification with Companies House, together with stricter rules on registered office addresses and a mandatory registered email address for each company. Filing reforms will move towards fuller, more standardised accounts for small companies and micro‑entities, and enhanced tagging. In terms of practical actions, those who invest in and control UK companies ought to map who must verify, update incorporation and onboarding checklists, strengthen internal controls over filings and deadlines, and prepare for greater transparency of financial information that stakeholders will use in diligence and credit decisions.
Corporate criminal liability: failure to prevent fraud and senior manager attribution
A new “failure to prevent fraud” offence for large organisations, together with a modernised identification doctrine, will shape compliance priorities in 2026. The “failure to prevent” offence captures organisations that do not have reasonable procedures to deter and detect fraud by associated persons for the organisation’s benefit. In parallel, attribution reforms broaden the circumstances in which the acts and mental state of senior managers can be attributed to a company. Founders and investors should review fraud risk assessments, upgrade procedures around sales practices, financial reporting and investor communications, and refresh training and oversight at senior manager level.
Private Intermittent Securities and Capital Exchange System (PISCES)
PISCES is a new type of regulated trading platform that will facilitate the secondary trading of unquoted company shares on an intermittent basis. It is particularly suited to later stage private companies seeking orderly liquidity without a full listing.
A PISCES platform can be operated by certain entities authorised by the Financial Conduct Authority (FCA. Currently, the London Stock Exchange Group and JP Jenkins have both received approval from the FCA to operate a PISCES platform, with Asset Match’s approval expected to be imminent.
PISCES can offer private companies a structured way to provide periodic liquidity for existing shareholders and employees, and to broaden access to professional and other eligible investors, without moving to a public market. Companies retain flexibility, within operator rules and FCA oversight, around the timing of trading events, investor access and price parameters, while operating within a tailored disclosure regime geared to sophisticated participants. It is important to note that PISCES is a secondary market only and is not a capital raising venue. For companies with existing EMI and CSOP contracts, granted prior to 6 April 2028, new legislation permits these to be amended to include a sale on a PISCES platform as a specified “exercise event” without losing the tax advantages the scheme offers. For more on the rationale for and key features of PISCES click here - PISCES Regulations come into force today and for more on the FCA’s PISCES Sourcebook click here - Key aspects of the FCA’s PISCES Sourcebook.
Public Offers and Admissions to Trading Regime
For entrepreneurs looking to the public markets for investment, the upcoming changes to the UK’s prospectus framework is a welcome development, and for founder‑led and PE‑backed businesses it may create a clearer pathway to raise public capital. The existing regime is being overhauled under the Public Offers and Admissions to Trading Regulations 2024 (POATRs), which were enacted in January 2024.
The POATRs established the regulatory framework for a new prospectus regime which was implemented on 19 January 2026. The FCA’s published implementation rules aim to simplify the complex prospectus regime inherited from the EU - reducing the burden on issuers while ensuring that investors continue to receive sufficient information.
IPOs on regulated markets will still require an FCA approved prospectus, but secondary capital raisings will be simpler - the threshold below which no prospectus is required increases from 20% to 75% of existing issued share capital (100% for closed ended funds). The FCA’s rules also streamline admissions processes for further issuances, reduce the minimum prospectus availability period for IPOs to three working days, and introduce a liability framework for protected forward looking statements, alongside targeted climate related disclosures. For AIM and other primary multilateral trading facilities, a new “MTF admission prospectus” will apply to initial admissions and certain reverse takeovers, with operators setting detailed content standards. A complementary public offer platform regime sits alongside these changes for primary offerings outside the public markets, creating a continuum from intermittent secondary liquidity (via PISCES) to supervised primary capital‑raising without a regulated market listing.
These changes complement the significant overhaul of the FCA’s Listing Rules in July 2024, whereby the premium and standard segments were replaced by a single category for equity shares of commercial companies, with more flexible eligibility criteria, greater accommodation of dual class share structures, and a disclosure based approach to significant and related party transactions. The London Stock Exchange is also currently engaging market participants on proposed changes to the AIM Rules for Companies and further formal consultations are expected in H1 2026.
Governance and sustainability disclosures: internal controls and climate‑related reporting
Strengthened governance and sustainability disclosure standards will influence capital allocation and diligence in 2026. Premium‑listed companies must prepare for enhanced statements on the effectiveness of internal controls over reporting for financial years beginning on or after 1 January 2026. The FCA’s sustainability disclosure and anti‑greenwashing regime is embedding across the investment chain, with practical implications for how companies substantiate environmental claims and present transition plans. Founder‑led businesses contemplating a listing, and larger private companies seeking institutional capital, should assess internal control frameworks, uplift data and reporting processes, and ensure climate‑related claims are evidence‑based and consistent across markets.
Future outlook: A fast-changing landscape that demands agility and resilience
In this article, we have highlighted a selection of the upcoming challenges and opportunities that entrepreneurs and investors in UK businesses face in 2026. Despite headwinds, many businesses continue to demonstrate resilience and agility in a fast‑changing landscape. 2026 brings a tighter compliance perimeter, sharper expectations of transparency and control, and a broader menu of liquidity and capital‑raising options. Practical priorities include confirming who must complete Companies House identity checks and by when; uplift fraud prevention; align reporting and governance with listing‑grade expectations; and plan tax and succession steps well ahead of any transaction. With early action and clear accountability, businesses can turn these changes into an advantage, strengthening resilience and valuation as they execute on their strategic goals.
