Headline tax rates are unchanged, but the Budget sets out a series of changes for financial services firms between April 2027 and April 2029. Here is what firms need to know.
Chancellor John Healey delivered his first Budget on 28 October 2026. Corporation tax, capital gains tax and carried interest tax rates are unchanged. The Budget does, however, confirm the government’s direction: a lower regulatory burden, a larger role for digital finance and more support for private capital.
Several measures will be consulted on before they become law. Firms that engage early will have the best chance of shaping the detail.
KEY TAKEAWAYS.
- The government intends to cut the burden of the Senior Managers and Certification Regime (SM&CR) by 50%, and a Regulation for Growth Bill will give regulators more flexibility.
- Eligible stablecoins will be taxed more like money from April 2027.
- Private capital faces changes to Business Asset Disposal Relief (BADR), the distributions framework and the timing of tax on carried interest.
- Income tax on savings and property income will rise by a further two percentage points.
- None of this changes firms’ financial crime obligations.
THE KEY MEASURES AT A GLANCE
| Measure | Most relevant to | Takes effect |
|---|---|---|
| Regulation for Growth Bill and target to reduce regulatory burden | All financial services | Timing to be confirmed |
| SM&CR burden to be reduced by 50% | All financial services | Detail awaited |
| BADR limit halved to £500,000; new Founders’ Relief at 10% on up to £10 million | Private capital, wealth management | April 2027 (BADR) |
| Changes to the distributions framework | Private capital | April 2028 |
| Payment on Account reform, affecting carried interest | Private capital | April 2029 |
| New statutory tax regime for foreign sovereign investors | Asset management, private capital | January 2029 |
| British Business Bank capacity increased by £5bn to £30.6bn | Private capital, lenders, scale-ups | Announced |
| Income tax on savings and property income up a further 2 points; cash ISA allowance kept at £20,000 | Wealth management | April 2027 (tax rates) |
| Eligible stablecoins taxed more like money | Payments, digital assets | April 2027 |
| New rules for cryptoasset loans and liquidity pools | Digital assets | April 2027 |
| Use of HMRC data within Open Finance to be explored | Payments, Open Banking, lenders | Under review |
| Bank Corporation Tax Surcharge raised from 3% to 6% | Banking | 1 January 2027 to 31 March 2028 |
ACROSS FINANCIAL SERVICES.
The cross-sector measures aim to reduce the cost of regulation and give regulators more flexibility.
REGULATION FOR GROWTH BILL.
The proposed Bill would give regulators greater scope to test and adapt rules for innovative products, alongside a target to reduce regulatory burden. Changes to regulatory reporting follow earlier government commitments to reduce the administrative cost of regulation. How proportionality and accountability are balanced will depend on the detail of the Bill.
SM&CR REFORM.
The government intends to reduce the burden of SM&CR by 50%. No detail has yet been published on which requirements will change. Until it is, existing responsibilities maps, certification processes and conduct rules continue to apply.
AI AND CYBER RESILIENCE.
The Budget includes additional investment in AI security, vulnerability management and cyber resilience. This is consistent with increasing supervisory attention on AI-related risk and operational resilience.
FISCAL CONTEXT.
The Budget was set against weak growth forecasts and a ten-year gilt yield that recently reached 5.4%. Larger decisions on tax and spending have been deferred to the Prime Minister’s Ten-Year Plan and the Spending Review in late 2027, and further revenue-raising measures before the end of this Parliament are likely. Other measures include the phased payrolling of benefits in kind from April 2027 and the replacement of the Company Share Option Plan with EMI2.
ASSET MANAGEMENT AND PRIVATE CAPITAL.
There are no changes to capital gains tax or carried interest taxation, and no new exit tax. The main changes for the sector take effect between April 2027 and April 2029.
FOUNDERS’ RELIEF AND BADR.
A new CGT Founders’ Relief will apply a 10% rate to up to £10 million of gains for qualifying founders. Separately, the BADR lifetime limit will be halved to £500,000 from April 2027. The qualifying conditions for Founders’ Relief have not yet been published.
DISTRIBUTIONS FRAMEWORK, APRIL 2028.
Changes to the rules on how company owners extract profits will take effect from April 2028, with implications for UK shareholders and the private capital industry. A technical consultation will precede the legislation.
CARRIED INTEREST, APRIL 2029.
Reform of the Payment on Account rules for Income Tax Self-Assessment will bring payment dates forward. The tax rate on carried interest is unchanged, but recipients will pay earlier.
FOREIGN SOVEREIGN INVESTORS, JANUARY 2029.
A new statutory tax regime for foreign sovereign investors will apply from January 2029.
BRITISH BUSINESS BANK.
The British Business Bank will receive an additional £5bn, increasing its total financial capacity to £30.6bn. This will fund a £6.5bn expansion of the Growth Guarantee Scheme, £1.4bn of new commercial equity commitments, £165 million for community lenders and £450 million for a new Venture Debt product.
PAYMENTS, FINTECH AND DIGITAL ASSETS.
The Budget contains no major payments measures. It does change the tax treatment of stablecoins and cryptoassets, and proposes a wider role for Open Finance.
STABLECOINS, APRIL 2027.
Eligible stablecoins will be treated more like money for capital gains tax, income tax and corporation tax purposes. HMRC has confirmed a full CGT exemption for individuals. Unbacked algorithmic stablecoins are excluded, and HMRC will publish guidance on which stablecoins are eligible.
Under the current rules, each transfer of a stablecoin can be a taxable disposal, which limits its use for payments. New rules for cryptoasset loans and liquidity pools also apply from April 2027, with qualifying transfers treated on a “no gain, no loss” basis until an economic disposal.
OPEN FINANCE AND HMRC DATA.
The government will explore the use of HMRC data within Open Finance. This would extend Open Finance beyond the scope of Open Banking and could support new services in tax, affordability assessment and financial management.
REGULATION FOR GROWTH.
The proposed powers for regulators to test and adapt rules for innovative products are relevant to firms bringing new business models to market.
TOKENISATION.
The government reaffirmed the DIGIT pilot for a digitally native gilt, which was announced before the Budget.
VENTURE DEBT.
The British Business Bank’s new £450 million Venture Debt product will give scale-ups access to finance without issuing further equity.
WEALTH MANAGEMENT, CONSUMER CREDIT AND INSURANCE.
WEALTH MANAGEMENT.
Income tax rates on savings and property income will rise by a further two percentage points from April 2027. The cash ISA allowance stays at £20,000, reversing a planned cut, and the government will explore an incentive for first-time stocks and shares ISA investors.
CONSUMER CREDIT AND LENDING.
There are no measures aimed specifically at consumer credit. HMRC data in Open Finance could support affordability assessments, and the British Business Bank funding includes a £6.5bn expansion of the Growth Guarantee Scheme and £165 million for community lenders.
INSURANCE.
There are no tax measures aimed specifically at insurers or intermediaries, and the Budget does not mention Insurance Premium Tax. The lower BADR limit will affect owners of brokers and managing general agents planning an exit.
FINANCIAL CRIME CONSIDERATIONS.
A lower regulatory burden does not change firms’ financial crime obligations. The government’s Fraud Strategy 2026 to 2029 commits over £250 million to tackling fraud, and the failure to prevent fraud offence has applied to large organisations since 1 September 2025.
- SM&CR reform. Whatever changes are made to the regime, firms will still need clear ownership of financial crime risk, with named individuals accountable for key decisions.
- Stablecoin payments. If the tax changes lead to greater use of stablecoins for payments, exposure to money laundering, sanctions evasion and fraud will increase with volumes. Transaction monitoring, Travel Rule compliance and wallet screening will need to keep pace. The FCA’s cryptoasset authorisation regime is due to come into force in October 2027.
- Open Finance data. Access to HMRC data could improve customer due diligence and affordability checks. It could also be targeted for identity fraud and account takeover, so consent management, access controls and fraud monitoring will need to be in place from the outset.
- Tax-driven restructuring. The BADR change, Founders’ Relief and the 2028 distributions changes may lead clients to restructure their affairs. Wealth and asset managers should keep in mind the corporate offence of failure to prevent the facilitation of tax evasion.
- British Business Bank funding. Fund managers receiving British Business Bank capital should expect due diligence on their governance, investor onboarding and financial crime controls.
HOW COSEGIC CAN HELP.
Cosegic combines regulatory compliance expertise with FINTRAIL’s financial crime expertise. We can support firms to:
- build the Budget dates into a regulatory change plan;
- prepare responses to the consultations on SM&CR, the Regulation for Growth Bill and the distributions framework;
- review governance arrangements and responsibilities maps ahead of SM&CR reform;
- assess AML, sanctions and fraud controls for stablecoin, cryptoasset and Open Finance products.
To discuss what the Budget means for your firm, contact our team at [email protected].
