The UK government has published draft legislation for the Finance Bill 2025-26, launching a public consultation on a series of significant tax reforms. The proposals reflect an effort to modernise the tax system, improve compliance, and simplify processes for businesses and individuals.
Headline measures include a major Inheritance Tax (IHT) overhaul aimed at streamlining reliefs and thresholds, and refinements to the Making Tax Digital for Income Tax Self Assessment (MTD for ITSA) regime, designed to ease reporting burdens on small businesses and sole traders. Penalty reforms are also proposed, introducing a more proportionate system to encourage compliance without punishing minor infractions excessively.
The draft also addresses tax adviser regulation, aiming to increase oversight and curb aggressive avoidance practices. Additionally, reforms to the treatment of carried interest are intended to align its tax handling with broader fairness objectives, particularly in the private equity sector.
Each proposal is accompanied by a Tax Information and Impact Note (TIIN), draft legislation, and explanatory notes to clarify the intended outcomes and operational impacts.
The consultation runs until 15 September 2025, after which Chancellor Rachel Reeves will finalise the Finance Bill’s contents, shaping the government’s fiscal agenda for the coming year.
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