HMRC has published a Tax Update 2026 related to the simplification, modernisation and fairness of the tax and customs system. Whilst there may be some modernisation, there does not seem to be much simplification.
Key measures include:
- A consultation on the introduction of a new zero rate of VAT for the sale of land intended for the construction of social housing.
- A review and uprating of Benchmark Scale Rates and Overseas Scale Rates, 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 and for accommodation and meals when they travel overseas.
- A consultation on implementing more timely payments of income tax, including reforms for those with PAYE income who will be required to pay more of their forecasted self assessment liabilities in-year through PAYE from April 2029. Other self assessment taxpayers may be required to spread tax payments through the year into smaller, regular payments.
- Steps to simplify and modernise PSAs.
- A consultation to explore modernising the rules that determine whether a payment to a company’s non-corporate shareholders falls within the distributions regime.
- Improving the option to tax process by replacing paper-based routes with a new digital channel.
- A consultation on the tax treatment of members of US Limited Liability Companies and other reverse hybrids.
- A consultation on proposals to remove NIC debt from the scope of the Limitation Act 1980 and to align NIC recovery processes more closely with other forms of taxation.
- A consultation on the implementation of a new, simpler ISA product to support first time buyers to buy a home.
The government has also announced measures aimed at simplifying and modernising the customs system and also a consultation on proposals to extend existing powers to enable recovery of lower value tax debts.
To prevent circumvention of the lower Cash ISA limit, from April 2027 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.