The tax planning window: practical steps for Midlands’ businesses post-budget

The Autumn Budget 2025 brought tax changes for businesses. The most significant won’t arrive until 2027 and beyond, giving forward-thinking firms a window to prepare.

Mike Tuhme (pictured), partner and Tax lead for KPMG in the Midlands, outlines how businesses in the region can use that window as a strategic planning opportunity.

At KPMG, we work with a wonderfully diverse mix of companies in the Midlands with ambitious startups right through to established PLCs. The tax changes coming over the next few years will impact every sector in that range, from manufacturing businesses to tech startups.  

Remuneration strategies 

Employment costs have increased with the National Living Wage rising to £12.71 and the application of employer National Insurance at 15% to salary sacrifice into pensions. From April 2029, pension contributions made through salary sacrifice above £2,000 annually will be subject to both employer’s and employee’s National Insurance. For businesses across the region – from life sciences to agriculture – this will shift the economics of pay and benefits structures, making it a good time to revisit remuneration strategies, consider the effectiveness of salary sacrifice schemes and engage with employees. 

Companies now have four years to model different approaches and design reward packages that work better under the new rules - whether that’s through enhanced employer pension contributions, different benefit structures or entirely fresh approaches.  

New capital allowances  

The capital allowances landscape has shifted in two directions. The writing down allowance rate drops from 18 per cent to 14 per cent from April 2026, affecting businesses with large historic asset pools. But the counterbalance is a new 40% first year allowance for leased assets and unincorporated businesses (effective from January 2026).  

For the Midlands equipment-intensive sectors like manufacturing, automotive and logistics, this creates real opportunity to accelerate tax relief and improve cash flow, as well as opening up new financing opportunities. 

Businesses claiming these enhanced reliefs as they invest will see immediate benefits. Companies planning significant capital investment should factor the new allowances into their financial decisions now. 

Building systems for the future 

Three major compliance changes are coming between 2027 and 2029, creating an opportunity for firms to upgrade their systems. 

From April 2029, every VAT invoice will need to be electronic. Businesses still running paper-based or hybrid systems face a significant transition. Done well, introducing e-invoicing is a chance to streamline financial operations significantly, but dealing with post invoice adjustments could be challenging. 

Companies within the transfer pricing rules in the UK with cross-border related party transactions will need to file a new International Controlled Transactions Schedule as part of their CT600, with first filings due in 2028 for accounting periods beginning on or after 1 January 2027. This affects businesses in the Midlands that are operating internationally or within multinational groups. Audit your transfer pricing documentation now to avoid the time and cost of enquiries later. 

From April 2027, most employee benefits will need to run through payroll. Forward-thinking businesses are already planning to trial voluntary payrolling from 2026 with small groups to identify issues while there’s still time to fix them.  

Enhanced incentives for growing companies 

A real positive for the region’s many fantastic start-ups and scale-ups is the expanded access to Enterprise Management Incentives. More companies now qualify for the tax-advantaged share scheme, which provides genuine advantage in competitive recruitment markets. Changes to share values and holding periods benefit existing schemes too. 

Similarly, Venture Capital Trust and Enterprise Investment Scheme reliefs remain valuable tools for attracting investment, with increased company size limits – great news for the region. Businesses approaching funding rounds should make full use of expanded reliefs. 

Where focus should be now 

The common thread for all of these changes is preparation time. Businesses that treat them as strategic opportunities rather than compliance exercises will be most successful.