In 2026, the UK tax system continues to stand out as one of the most stable in Europe, despite economic pressures caused by inflation, currency volatility, and the restructuring of post-Brexit trade agreements. The government remains committed to attracting foreign investment and nurturing the innovation sector, while steadily enhancing tax oversight and tightening measures against tax evasion. UK Tax administration is overseen by HM Revenue & Customs (HMRC), the central authority responsible for efficient tax collection, regulatory compliance, and the prevention of tax evasion.
For businesses, the United Kingdom in 2026 offers a well-balanced tax environment, including a competitive Corporate Tax Rate (CIT), incentives for technology companies, and clear regulation that ensures predictability and investor confidence. This overview examines the main UK business taxes applicable in 2026, as well as the key changes influencing tax planning.
Corporate Income Tax in the United Kingdom
The standard CIT rate in the United Kingdom is 25%. Companies with profits below £50,000 are generally subject to a reduced rate of 19%. For companies with profits ranging from £50,000 to £250,000, a marginal sliding scale of rates applies. The UK tax system also offers tax incentives, including the R&D Tax Relief programme, Patent Box, and Investment Allowance schemes, aimed at supporting innovation, technological development, and the modernisation of production facilities.
Tax relief for research and development (R&D) initiatives | Reduction of the tax burden on profits derived from the commercialisation of patent-protected innovations | Accelerated depreciation of purchased equipment |
For companies driving innovationthrough the creation or enhancement of products, processes, or technologies incorporating scientific or technical development. | For companies holding a UK or European patent licence. The company must be actively involved in the development, enhancement, or commercialisation of the patented technology. | For companies interested in acquiring capital equipment and production assets. |
Small and medium businesses can reduce their taxable profit by 186% of R&D spending, enjoying an extra 86% deduction beyond the actual costs. Large companies are entitled to a 20% tax credit. | Companies can enjoy a special 10% tax rate on profits from patents and innovative solutions, instead of the standard 25% | Companies can immediately write off 100% of the cost of capital investments (machines, equipment, computers, vehicles, etc.) up to a limit of £1 million. |
In the UK, no withholding tax (WHT) is applied to dividends for non-residents, so company owners’ income is taxed in their country of tax residence. Resident dividends are taxed on a progressive scale ranging from 8.75% to 39.35%.
VAT in the UK
VAT is an indirect tax levied on most goods and services sold in the United Kingdom, as well as on imports. It operates under the Value Added Tax Act 1994 and a number of regulations adapted following the country’s exit from the EU.
Current VAT rates in the UK for 2026
Type of rate | Value | Application |
Standard | 20 % | The vast majority of goods and services (manufacturing, consultancy, services, equipment rental, etc.) |
Reduced | 5 % | Gas, electricity, child car seats, certain energy-saving goods, residential repair services for pensioners, etc. |
Zero | 0 % | Food, books, newspapers, children’s clothing, domestic transport, exports outside the UK |
Exempt from VAT | is | Education, financial services, housing rental, insurance, and healthcare |
In the UK, companies must register for VAT if their annual turnover exceeds £90,000 or if they import/export goods requiring registration for EU or international trade. Voluntary VAT registration is also available, letting companies reclaim input VAT. Registration is simple and done online through the HMRC.
VAT returns are usually filed quarterly online. The report shows the total VAT collected from sales and the VAT paid to suppliers. The difference is either paid to the treasury or refunded to the company. Businesses with a turnover of up to £150,000 can choose the Flat Rate Scheme, a simplified system where VAT is paid as a fixed percentage of turnover (without the right to claim a refund).
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VAT rules between the UK and the EU
Following the UK’s exit from the EU in 2021, the British VAT system was reformed for import and export operations.
Imports from EU countries are now treated the same as those from any other country, and for online sales, the VAT One Stop Shop (OSS) applies to non-residents selling goods or services to consumers in the UK via marketplaces.
Conversely, if goods are shipped from the UK to consumers in the EU, the British company must register for VAT in the EU. In this case, VAT is paid at the rates of the buyer’s country and reported centrally through the OSS portal.
Other social security and related business taxes in the UK
Companies do not pay a separate capital gains tax, such income is included in profits and taxed at the CIT in the United Kingdom (25%).
If a company has employees, it should note that in the UK employers are responsible for a range of taxes and mandatory contributions. The main social tax is called National Insurance Contributions (NICs), with a standard rate of 13.8% on all earnings above £175 per week. Additionally, the employer must deduct income tax from employees’ salaries according to a progressive scale ranging from 0% to 45%. Employers are also required to provide a pension scheme for their employees.
Overall, the UK tax system in 2026 delivers stability, predictability, and flexibility. It gives businesses clear rules, competitive rates, plenty of incentives for innovation, and transparent, easy-to-navigate administration.
A broad network ofdouble taxation treaties, including, the efficient operation of HMRC, and the digitalization of tax processes make the UK one of the most convenient European jurisdictions for conducting international business and strategic planning.
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