Category: Resources

The UK economy in 2026 is stronger than many expected. Retail sales rose sharply in January. Export demand improved. The Government recorded a significant monthly surplus in public finances.

At the same time, unemployment remains elevated in certain regions. Business tax pressures are still present. Growth forecasts remain modest.

So what is really happening? And what should businesses do now?

At Apex Accountants, we look beyond headlines. Below, we break down the facts, explain the drivers, and outline practical actions for UK businesses.

Snapshot: What the latest data shows

Here is a summary of the key figures reported for early 2026:

Indicator	Latest Figure	What It Means
Retail sales growth (January)	+1.8%	Strongest monthly rise in over a year
December retail growth	+0.4%	Shows upward momentum
UK Composite PMI (February)	53.9	Activity expanding (above 50)
Public sector surplus (January)	£30.4bn	Highest January surplus on record
Self-assessment receipts	£29.4bn	£3.6bn higher than previous year
London unemployment rate	7.6%	Above national average (5.2%)

The numbers show economic momentum in spending and exports. However, the labour market remains under pressure in some areas.

Retail sales rebound: What it means for businesses

Retail volumes rose by 1.8% in January. This is significant. It suggests consumers returned to spending after a cautious end to 2025.

Why spending increased

Several factors contributed:

• Post-holiday promotions and discounting
• Slight easing in inflation pressures
• Wage growth stabilising real income
• Increased online purchasing

Non-store retail activity performed strongly. Jewellery and discretionary goods saw notable demand.

What this means for business owners

Retail growth can improve cash flow in the short term. However, this does not mean consumer confidence is fully restored.

Businesses should:

• Monitor sales trends monthly
• Review stock management carefully
• Avoid over-expansion based on one strong month
• Maintain tight cost control

Spending is improving. But it remains selective.

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Exports and private sector growth: A positive signal

The UK composite PMI reading of 53.9 indicates expansion. Any reading above 50 shows growth.

Export orders increased at the fastest pace since 2021. This supports manufacturers and internationally focused businesses.

What is driving export growth?

• Improved global demand conditions
• Competitive pricing from sterling movements
• Services sector resilience

The services sector remains the largest driver of UK economic activity. Hospitality, finance, healthcare and leisure contributed to growth.

Strategic takeaway

If your business trades internationally:

• Review export pricing structures
• Consider currency exposure management
• Assess new market opportunities

Export demand recovery can provide growth opportunities. However, global conditions remain uncertain.

Public finances surplus explained

January recorded a £30.4 billion public sector surplus. This means government receipts exceeded spending for the month.

This was largely due to:

• Strong self-assessment tax receipts
• Income tax threshold freezes
• Lower debt interest payments

Self-assessment receipts reached £29.4 billion. This was significantly higher than the previous year.

Why this matters for taxpayers

A surplus does not mean tax cuts are imminent. In fact:

• Income tax thresholds remain frozen
• Fiscal headroom is still tight
• Government borrowing levels remain historically high

Businesses and individuals should not assume immediate tax relief.

Labour market concerns: A key risk factor

While spending and exports improved, employment data presents challenges.

London’s unemployment rate has risen to 7.6%. Youth unemployment stands significantly higher.

Sectors affected include:

• Hospitality
• Retail
• Entry-level services

This creates a mixed economic environment. Strong spending data does not remove labour market pressures.

Practical actions for business owners

Economic data provides direction. But strategy matters more. Here is what we advise clients at Apex Accountants:

Cash flow first

• Review cash flow forecasts monthly
• Build contingency reserves
• Plan for tax liabilities early

Tax planning

• Assess self-assessment and corporation tax exposure
• Use available reliefs properly
• Review dividend strategy

Cost control

• Audit fixed costs
• Renegotiate supplier contracts
• Monitor payroll growth carefully

Growth decisions

• Avoid reacting to one month’s data
• Base expansion on sustainable revenue
• Stress-test projections

Short-term improvement does not remove long-term risks.

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Sector outlook summary

Sector	Current Outlook	Risk Level
Retail	Improving but cautious	Medium
Hospitality	Demand rising, labour pressure	Medium–High
Manufacturing	Export boost positive	Medium
Professional services	Stable	Low–Medium
SMEs overall	Growth modest	Medium

This environment rewards careful planning. Overconfidence can create problems.

How We Help Businesses in UK

At Apex Accountants, we support businesses through economic shifts with practical financial guidance.

Our services include:

• Corporation tax planning
• Self-assessment tax advice
• VAT compliance and strategy
• Management reporting
• Cash flow forecasting
• Virtual CFO services
• Business growth strategy
• Budgeting and forecasting

We focus on clarity, reduce risk, and help you make informed decisions.

Economic data changes every month. Strong financial structure protects your business in both good and challenging periods.

Conclusion

Early 2026 has started with encouraging signals. Retail spending has improved. Export demand has strengthened. Public finances showed a strong January surplus.

However, unemployment pressures remain. Growth forecasts are still modest. Tax burdens remain elevated.

The UK economy is stabilising. It is not booming.

For business owners, the message is clear:

• Stay disciplined
• Plan ahead
• Monitor cash closely
• Optimise your tax position

Economic momentum can support opportunity. But financial control determines long-term success.

If you would like tailored advice on how current economic conditions affect your business, contact Apex Accountants today and book a consultation.

FAQs About UK Economy in 2026

Based on current UK search trends and client discussions, common questions include:

1. Is the UK economy recovering in 2026?

There are signs of short-term improvement. Retail and exports are stronger. However, growth is expected to remain modest overall.

2. Will taxes increase again?

There are no confirmed new increases at present. However, threshold freezes continue to increase effective tax burdens.

3. Should businesses expand now?

Expansion decisions should be based on cash flow strength and sector-specific performance. Caution remains important.

4. Is inflation still a risk?

Inflation has eased from peak levels. However, cost pressures remain for energy, wages and supply chains.

The Autumn 2025 Budget confirmed major changes to Individual Savings Accounts (ISAs) aimed at pushing savers out of low-yield cash and into investments. From 6 April 2027 the annual cash ISA allowance for under‑65s will fall from £20,000 to £12,000. To stop savers simply shuffling funds between accounts, new draft regulations propose anti‑avoidance measures. For example, transfers from stocks and shares ISAs into cash ISAs would be blocked, and “cash‑like” asset tests would determine what investments are allowed in a stocks and shares ISA. Crucially, HMRC has signalled it will charge a tax rate on ISA cash interest earned on cash held inside a stocks-and-shares or Innovative Finance ISA. In effect, these ISA cash rules would revive the pre-2014 rule where idle cash in a stocks and shares ISA was taxed at 20%. The new cap and anti-avoidance rules explicitly apply to savers under 65; over-65s retain a £20,000 ISA cash limit.

• New cash ISA limit (from April 2027): £12,000 per year for under‑65s (Over-65s stay at £20,000).
• Transfer restrictions: No transfers from stocks-and-shares or IF ISAs into cash ISAs.
• “Cash‑like” tests: Criteria will define which assets (e.g. short-term bonds or money-market funds) count as too cash-like to hold in a stocks-and-shares ISA.
• Interest charge: Any interest paid on cash held in a stocks-and-shares ISA would be taxed, likely at a flat rate around 20%.

These rules were announced in HMRC’s November 2025 tax-free savings newsletter and are subject to industry consultation on the draft legislation. The government’s goal is to encourage long-term investing by making cash ISAs comparatively less attractive. However, the proposals have sparked concern from financial firms, and recent industry-HMRC talks suggest the plans may be softened in response.

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Industry Feedback and Potential Softening of ISA Cash Rules

Many investment platforms and asset managers warned that the draft ISA rules were overly complex and could deter savers. For example, AJ Bell’s CFO Michael Summersgill cautioned that taxing idle cash in a stocks-and-shares ISA would “punish retail investors for using the stocks and shares ISA the way it was designed”. He noted that money flows in and out of these ISAs routinely (contributions, dividends, withdrawals) and urged the Chancellor to avoid “horrendous complexity” in the ISA regime. Others pointed out that no ISA can truly be “cash-free” – even routine operations use cash – and that aggressive bans on cash-like assets could undermine savers’ flexibility.

After these warnings, HMRC officials held detailed discussions with industry groups. According to sources, the tone of negotiations has shifted. Platforms report a growing sense that HMRC might ease the hardest measures on cash and cash-like investments. 

One leading investment platform said it was “cautiously optimistic” that HMRC will favour a principles-based approach rather than rigid rules. Another provider remarked they were “a lot more confident [HMRC is] coming around than we were this time two weeks ago”. In other words, talks have opened the door to compromise on both the proposed interest levy and on how “cash-like” is defined.

Indeed, industry participants expect final rules only after further consultation and technical refinements. HMRC has promised a full public consultation on the draft ISA Regulations ahead of implementation. As one government spokesperson told accountants, the aim is to prevent “easy circumvention” of the new cash limit, but HMRC is “listening to concerns and engaging collaboratively” with providers. This suggests some flexibility: the final framework may include targeted safeguards and guidance, rather than inflexible bans.

Related Articles

• The Impact of UK Budget 2025 Changes to ISA and Savings Tax Rules on Women’s Financial Security
• What You Need to Know About New Charges for ISA Savers

Key Industry Concerns Regarding New ISA Cash Limits

Interest charge level: 

The proposed tax rate on ISA cash interest is still undetermined. Industry papers have speculated on flat rates around 20% or even 22%. (AJ Bell and others initially feared a 22% flat rate on such interest.) HMRC has not confirmed a rate, but a common assumption is 20%, mirroring the old regime.

Cash-like definitions: 

What counts as “cash-like” is a grey area. Money market funds, short-dated gilts or corporate bonds could be deemed cash-like. Building societies are pushing for tighter rules here, arguing cash-rich MMFs harm bank funding. Conversely, platforms note that small cash buffers and money-market holdings help investors ease into equities. Freetrade’s Alex Campbell calls cash-like funds “a perfect stepping stone into investing” for novices. The Treasury Committee has already asked pointed questions about what counts as cash-like, and HMRC will clarify these criteria in the consultation.

Complexity and investor impact: 

There is broad concern that restrictive ISA changes could deter savers. Tom Selby of AJ Bell warned a “heavy-handed approach” to anti-avoidance “will undermine stocks-and-shares ISAs” at a time when the government wants more retail investment. Justin White of Kaldi argued that discouraging use of cash and cash-like assets in ISAs might confuse new investors, defeating the policy’s aim to close the investment gap. In short, providers fear that discouraging safe cash buffers could backfire unless carefully balanced with investor education and flexibility.

Potential Compromises and Safeguards

Given these reactions, HMRC is reportedly considering softer measures. For example, rather than an automatic tax hit, regulators may rely on platforms to monitor excessive cash balances and encourage customers to invest more. One compromise under discussion would let providers set proportionate cash thresholds and flag idle balances, instead of blanket bans. Providers could also agree not to offer artificially high interest rates on ISA cash, removing the arbitrage that the tax charge seeks to close. IG Group’s Michael Healy notes platforms already track ISA cash levels and could distinguish normal “transactional” cash from long-term parked cash.

On money market funds, HMRC may opt for targeted restrictions rather than an outright ban. A source said regulators now recognise that banning MMFs “outright could do more harm than good for investors”. Safeguards might include limiting high-interest MMFs or classifying them as cash-like, rather than excluding all such funds. Importantly, any transitional cash (e.g., pending investment) is expected to be carved out of the tax levy.

On transfers, HMRC appears set on the no-transfer rule as a hard line but might clarify exceptions. For instance, existing ISAs opened before the change may be grandfathered, and normal intra-ISA transfers (e.g., cash ISA to cash ISA) will still work. The government has emphasised it will provide “clear guidance before the changes come into effect”, so providers and savers can prepare.

At a glance, the likely outcome is a framework where savers can still hold some cash in investment ISAs, but large, long-term cash positions lose their tax advantage. A practical compromise could involve:

• Platforms automatically channel large cash balances into equity or bond investments, unless the saver specifically opts out.
• Caps on ISA interest rates (to stop promotional “top-up” offers that gamers could exploit).
• A clear definition of minimal cash allowed (e.g., a few per cent of the portfolio for liquidity).
• Detailed guidance or FAQs from HMRC on scenarios like dividends, pending trades, or modest emergency buffers.

While details await legislation, platforms are already modelling responses. Firms preparing now will adapt their ISA account structures and customer communications before April 2027.

From an investor’s standpoint, it’s wise to:

1. Maximise the remaining cash ISA allowance: With the £20,000 limit intact until 2027, many advisers suggest using the full cash ISA cap now if you value tax-free cash.
2. Review your ISA asset mix: Plan how much to park in equities vs cash. If you rely on ISAs for cash income, consider alternative wrappers (e.g. bonds outside ISAs or simply accepting tax on savings).
3. Stay informed: Watch for HMRC updates and consult your financial adviser. ISA rules are technical, and professional advice can help navigate compliance.

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How We Help Our Clients Navigate The Proposed ISA Changes

At Apex Accountants, we’re monitoring these ISA developments closely to help clients adapt. Our services include:

• ISA Review & Planning: We analyse your current ISA holdings and cash allocations, advising on tax-efficient strategies under the new rules.
• Investment Structuring: We help clients balance cash and equity exposures, taking into account any “cash-like” restrictions.
• Tax Compliance: Our team ensures all reporting (including interest receipts) is handled correctly in line with HMRC guidance.
• Regulatory Updates: We keep you informed of any changes to ISA regulations, so you’re never caught by surprise.
• Consultation Support: For businesses or investors, we can liaise with you on technical questions or draft responses to HMRC consultations.

Our experts simplify complex tax news into actionable advice. If you’re concerned about how the ISA reforms might affect your savings or investments, contact Apex Accountants for a consultation. We’ll help you make the most of the current ISA rules and prepare for the changes ahead.

Conclusion

In summary, the UK government’s ISA reforms aim to steer savers toward investment accounts, but the strongest measures (like high cash-interest taxes and strict cash-like tests) may be trimmed after industry feedback. Official drafts will follow in due course, with HMRC indicating a collaborative approach. Savers should keep an eye on developments: the broad direction is clear, but final rules may be more flexible than first feared. For now, focus on making the most of existing ISA allowances and seek professional advice to stay compliant. As always, Apex Accountants will update clients on any final ISA legislation and advise on the best strategies to protect and grow your savings.

FAQ: Key Questions for Savers

1. Will interest on cash in my Stocks & Shares ISA be taxed? 

Under the draft rules, any interest earned on cash held in a stocks-and-shares or IF ISA would lose its tax-free status. The government’s current plan is a flat charge of about 20% on that interest. No double taxation is intended – you would pay this special ISA charge instead of normal savings tax.

2. What counts as a “cash-like” investment? 

HMRC will define cash-like assets in the consultation. Likely candidates include money market funds, short-dated gilts/bonds or other very low-risk funds. The intention is to stop people using such assets to skirt the £12k cash limit. We expect guidance to clarify this well before April 2027.

3. Can I still move money between ISAs? 

Cash-to-cash ISA transfers remain allowed. However, transfers from a stocks & shares or IF ISA into a cash ISA would be blocked under the new rules. All other ISA-to-ISA transfers (e.g. between cash ISAs, or within stocks & shares ISAs) should still work normally.

4. What if I need emergency cash? 

The proposals don’t ban holding any cash in investment ISAs, they target excessive cash balances. HMRC is aware that savers need some liquidity. Early guidance suggests small cash buffers (for example, unsettled trades or dividend income waiting to reinvest) may be exempt from the interest charge.

5. When will these changes happen? 

The new rules are set to apply from 6 April 2027. HMRC will consult on the draft legislation before then. Expect technical details to emerge throughout 2026. It’s prudent to plan for the changes, but final outcomes could be milder than originally drafted.

The High Value Council Tax Surcharge, often referred to as a “mansion tax”, is a new annual charge on owners of residential properties in England valued at £2 million or more based on 2026 valuations. It was announced in the 2025 Budget and is expected to come into effect from April 2028. As part of the preparation for this policy, HMRC is hiring valuation agents to support the assessment of high-value properties and identify those that fall within scope. The charge will apply to property owners rather than occupiers and will be payable alongside standard Council Tax. Social housing will be excluded from the scope of this surcharge.

Key facts include:

• Threshold and Bands: Properties valued £2.0m–2.5m pay £2,500 per year; £2.5m–3.5m pay £3,500; £3.5m–5.0m pay £5,000; and homes over £5m pay £7,500 (based on 2026 valuations). These charges will rise each year with CPI inflation from 2029‑30 onwards.
• Scope: Fewer than 1% of homes in England will pay this surcharge. The Valuation Office Agency (VOA) will run a targeted valuation exercise during 2026 to identify all properties above £2m. Existing Council Tax will continue unchanged; the surcharge revenue goes to the Treasury (though collected by local councils).
• Frequency: Once identified, affected homes will be re-valued on a rolling basis every 5 years. A public consultation on details (reliefs, appeals, ownership rules etc.) was held early 2026. Further consultations will cover support for those who struggle to pay, reliefs/exemptions, and complex ownership arrangements.

Also Read: The Problems with the Mansion Tax: A Closer Look at Design Issues and Criticisms

Why Is HMRC Hiring Valuation Agents?

HMRC is recruiting up to 1,000 new valuation officers in anticipation of this surcharge. About a third of these roles will help implement the high-value surcharge, with the rest covering other priorities (such as customs checks on goods). The VOA (responsible for council tax banding) is being merged into HMRC in April 2026, and will use these extra staff to carry out property revaluations.

According to Treasury officials, these hires will peak in 2027–28 and 2028–29 to handle the extra workload. VOA Chief Executive Jonathan Russell told MPs that the agency plans to use “professional valuers” and additional support staff to assess homes potentially in scope. In fact, the VOA has said it will review not just homes over £2m, but also many houses from about £1.5m upwards, to make sure nothing is missed.

The Treasury’s own analysis suggests roughly 150,000–200,000 properties could be caught by the surcharge. For example, any house that might now be worth over £2m (and even up to £5m) is likely to be rechecked. These figures come from VOA estimates and parliamentary evidence; current Council Tax band data shows under 1% of homes are above £2m, but the broader review up to £5m (and including £1.5m+) expands the pool to about 0.5–0.7% of properties.

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What This Means for Homeowners

Who pays: 

Only owners of qualifying homes pay the surcharge – not tenants or lodgers. That means any mortgage or equity-share owner on the title at the valuation date (2026) would be liable.

Where it applies: 

Only homes in England are affected. Northern Ireland, Scotland and Wales use different systems. Social housing (council and housing association homes) is explicitly exempt.

How payments work: 

The new charges will be collected by local councils alongside normal Council Tax, but funds go to central government. Owners will get an annual bill. The surcharge is in addition to existing Council Tax, not a replacement.

Valuation and appeals: 

The VOA will use up-to-date market data (2026 values) and property attributes (size, location, features) to assess each home. In most cases the initial valuations will be done by officials (a “desk-based” valuation using sales data and maps). However, homeowners can challenge their surcharge valuation through a formal appeals process, details of which will be set out in new legislation. Affected owners should keep property records (purchases, improvements, planning info) handy.

Timeline: 

VOA valuations are expected to start in late 2026 or early 2027, so that bills can be ready for 2028. HMRC has not confirmed exactly when each house will be reviewed, but Jonathan Russell told MPs the review of high-value homes will begin this year (2026). Revaluations will then follow every five years for properties over the threshold.

Also Read: Mansion Tax in UK to Affect 200,000 Homes Starting in 2028

How We Help Deal With Mansion Tax

Apex Accountants can help high-value homeowners and professionals prepare for the new surcharge:

• Property Review: Analyse your property portfolio. If any home may be near £2m (or held by company/ trust), we check the likely 2026 value.
• Tax Planning: Advise on timing sales/purchases. Build the surcharge into financial planning. Model the annual cost and cash flow.
• Ownership Structuring: Guide on whether to own property in a company, trust, joint names or a partnership. We will stay up-to-date on the government’s consultation outcomes for complex ownership.
• Valuation Support: Help provide information to the VOA valuers. Ensure improvements and unique features of your property are documented to justify value.
• Appeals Assistance: If you believe an assessment is too high, we can work with you (and a surveyor if needed) to submit evidence and appeal the valuation.

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Conclusion

The new high-value Council Tax surcharge is now law, with detailed rules to follow a public consultation. From 2028 on, owners of homes worth £2m+ (and some up to £5m) will pay an extra annual tax. HMRC’s VOA is already preparing for this by recruiting specialist valuers and planning assessments for up to 200,000 homes. For those potentially affected, early preparation is key – understanding the bands and possible reliefs and keeping good records will make the transition smoother.

In the UK private rented sector, the big structural shift is no longer just “landlords selling up” or “rents rising”. It is how landlords are buying and holding property: increasingly through limited companies rather than personal names. This trend is particularly evident in the UK buy-to-let market, where tax and financing pressures are reshaping how investors structure their portfolios.

The newest incorporation figures point to a market that is still accelerating. Hamptons (using Companies House records) reports that:

• 66,587 new buy-to-let companies were formed in 2025, a new annual record. That is 8% higher than 2024 and 363% higher than a decade earlier. 
• The pace continued into 2026, with 5,922 new buy-to-let limited companies created in January 2026, 11% higher than January 2025. 
• By the end of 2025, there were around 443,272 active buy-to-let companies on the register—nearly five times the 2016 figure quoted in the same analysis. 

For information on the mansion tax impact on your property, read: Analysing the Impact of Mansion Tax on the Prime Property Market in UK

The Shift Towards Corporate Ownership in the UK Buy-to-Let Market

This is not a niche move by “mega landlords”. It is now the dominant route for many new investor purchases. Hamptons says around three-quarters of new buy-to-let purchases are being made through limited companies, and trade reporting puts it as high as around four-fifths. 

On ownership, the shift is visible in land title data too. Across England and Wales, 755,042 property titles are now held by buy-to-let companies, up from 272,964 around a decade earlier. Hamptons estimates that this corresponds to roughly 1.5 million rental homes held inside limited company structures. 

At the same time, investors are actually a slightly smaller slice of overall home purchases than a year ago. Hamptons puts investors’ share at 10.8% of purchases in 2025, down from 11.9% in 2024. The takeaway is simple: fewer purchases are “landlord purchases” overall, but a larger share of landlord purchases are corporate. 

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Why Landlords Are Incorporating Now

From an accountancy standpoint, the surge is not mysterious. It is the combined effect of tax rules, fiscal drag, borrowing costs, and upcoming regulation.

Mortgage Interest Relief Changes

Mortgage interest relief rules changed the baseline. Since April 2017, tax relief for finance costs on residential property for individuals has been restricted and was fully in place by April 2020.

In practice:

• Individual landlords can no longer deduct mortgage interest fully from rental income
• Relief is now limited to the basic rate via a tax reduction

For landlords with significant borrowing, this creates pressure:

• Taxable income may appear higher than actual cash profit
• Some landlords are pushed into higher tax bands

This has made the traditional personal ownership model less tax efficient.

Fiscal Drag and Frozen Tax Thresholds

Frozen income tax thresholds are quietly increasing tax burdens.

• Personal allowance: £12,570
• Higher-rate threshold: £50,270

These thresholds have been frozen for several years.

When income rises but thresholds stay the same:

• More landlords move into the 40% tax band
• Overall tax liability increases without real growth in profits

This effect is widely referred to as fiscal drag.

Corporation Tax Advantage

Limited companies are taxed differently.

• 19% corporation tax on profits up to £50,000
• 25% corporation tax on profits above £250,000
• Marginal relief applies between these limits

Compared with:

• 40% income tax for higher-rate individual landlords

This creates a strong incentive to operate through a company, especially for landlords with larger portfolios or higher incomes.

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Impact of Rising Borrowing Costs

Higher mortgage rates have also played a role.

• Individual landlords face restricted interest relief
• Company landlords can still deduct full finance costs

This means:

• Companies often show lower taxable profits
• Cash flow can be more manageable under a company structure

For leveraged investors, this difference is significant.

Dividend Tax Changes from April 2026

Tax efficiency does not end at corporation tax.

Many landlords take profits out of their company through dividends. However, changes from April 2026 will affect this:

• Ordinary rate increases from 8.75% to 10.75%
• Upper rate increases from 33.75% to 35.75%
• Additional rate remains at 39.35%

This means:

• Taking profits out becomes more expensive
• Retaining profits within the company becomes more attractive

Reinvest vs Withdraw Strategy

The right structure now depends heavily on how profits are used.

• If profits are reinvested, a company structure can remain efficient
• If profits are withdrawn regularly, the tax advantage may reduce

There is no single “best” option. Each landlord’s position must be reviewed individually.

For insights on reducing tax through capital allowances, read our article: How to Claim Capital Allowances on Commercial Property in the UK.

Limited Company Versus Personal Name: The Tax Reality

At Apex Accountants, we see the same misconception again and again: “A limited company always reduces tax.” It can, but only when the numbers and the landlord’s goals line up. 

Here is the clean way to think about it.

If you hold buy-to-let personally:

• Rental profit is subject to income tax. For many landlords in Great Britain, the relevant bands are 20%, 40% and 45%, with the personal allowance tapering away above £100,000 and reaching zero at £125,140. 
• Mortgage interest relief is restricted for individuals, phased in from 2017 and fully implemented from 2020. 
• When you sell an investment property, capital gains tax applies for individuals. From April 2025 onwards, residential property gains are taxed at 18% (basic-rate band) and 24% (higher/additional-rate band). 

If you hold a buy-to-let limited company:

• Rental profit is subject to corporation tax (19%/25% with marginal relief, depending on profit levels). 
• Mortgage interest is generally treated as a business expense in computing taxable profits. This is the practical contrast that keeps coming up in landlord incorporation commentary following the finance cost restriction for individuals. 
• Tax does not stop at corporation tax if you want the money personally. If you extract profits, dividend tax rules apply (and the headline rates increase from April 2026 as noted above). 

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What usually makes the buy-to-let limited company route work best

• You are a higher-rate taxpayer (or close to it) because of employment income plus rents, and your borrowing costs are meaningful. 
• You plan to leave profits inside the company to repay debt or fund the next purchase, rather than drawing everything each year. 
• You want a structure that supports co-investment more cleanly. Hamptons-linked reporting highlights a growing share of buy-to-let companies with multiple shareholders. 

When personal ownership can still be better

• Your total income keeps you firmly in basic rate, and your borrowing is modest. (The finance-cost restriction tends to bite hardest at higher-rate levels.) 
• You rely on rental profits for day-to-day living costs. In that case, the “second layer” tax on extraction becomes more relevant—especially with dividend rate rises. 
• Your portfolio is small enough that the compliance cost and admin time outweigh the marginal tax gains. Hamptons also flags Companies House filing fees rising faster than inflation in recent years. 

Costs, Traps and Compliance That Many Landlords Underestimate

The incorporation trend is clear. However, it is not frictionless. Many landlords focus on tax savings, but the real risks often sit in three areas: transferring properties, ongoing costs, and regulatory changes that affect income.

Transferring Properties into a Company

Moving property into a limited company is not a simple administrative step.

In most cases, HMRC treats transfers between connected parties at market value. This applies even where no money changes hands.

In practice, this can trigger two immediate tax exposures. The individual may face Capital Gains Tax on the disposal, while the company may be liable for Stamp Duty Land Tax based on the market value. In addition, higher rates for additional properties often apply.

These combined costs can be substantial and need to be calculated carefully before any transfer.

Incorporation Relief and Practical Limitations

In certain cases, Incorporation Relief can defer Capital Gains Tax. This applies when a business is transferred as a going concern in exchange for shares.

However, the key issue is whether a buy-to-let portfolio qualifies as a “business”. This is a fact-sensitive area. HMRC looks at the level of activity, not just ownership of properties.

For many landlords, the answer is not straightforward. This is why tax modelling and proper documentation are essential before proceeding.

Rising Company Running Costs

The idea that property companies are cheap to run is becoming outdated.

Companies House fees have increased, with incorporation fees doubling and confirmation statement fees rising. These changes reflect wider regulatory reforms and identity verification requirements.

Alongside these, landlords must factor in accountancy fees, annual filings, and ongoing compliance. Over time, these costs can become significant, especially for smaller portfolios.

Get practical guidance on managing SPV finances in Cloud-Based Bookkeeping for SPVs for Property in the UK.

SDLT Rules for Company Purchases

Stamp Duty Land Tax rules are stricter for companies than for individuals.

Companies purchasing residential property generally pay higher rates. In some cases, particularly for higher-value properties, a rate of up to 17% can apply.

Recent changes have also removed some planning opportunities. Multiple Dwellings Relief was withdrawn from June 2024, and large acquisitions are now treated differently under non-residential rules.

This makes upfront cost planning even more important when acquiring property through a company.

Changing Tenant Law and Rent Controls

Regulation is also changing how landlords manage their income.

Under the Renters’ Rights reforms, rent increases will follow a single, more structured process. In most cases, rent can only be increased once a year, with at least two months’ notice, using the statutory procedure.

Tenants will also have the right to challenge increases through the First-tier Tribunal. The tribunal will assess whether the rent reflects the market level, and landlords will not be able to backdate higher rents following a challenge.

These changes are designed to make rent setting more transparent, but they also introduce new constraints for landlords.

Impact on Cashflow and Rent Strategy

These regulatory changes have direct implications for cashflow.

Landlords now need to be more precise when setting rents. Increases must reflect market conditions from the outset, as adjustments later may be challenged.

Recent market data reflects this shift. Newly-let rents have slightly declined, while renewal rents have continued to rise, although at a slower pace. This suggests that landlords are becoming more cautious and aligning rents more closely with market levels.

Why Landlord Tax Planning Matters More Than Ever

Incorporation can still be effective in the right circumstances. However, it is not a simple decision based on headline tax rates.

You need to consider the full picture, including transfer costs, ongoing compliance, financing, and how you plan to use the income.

Without careful planning, the structure can create unexpected tax charges or reduce overall efficiency. A detailed review is essential before making any changes.

How Apex Accountants Can Help

At Apex Accountants, we approach landlord incorporation and portfolio structuring as a numbers-led exercise. Not a trend-led one.

Our day-to-day work in this space typically includes:

• Personal vs limited company modelling

We run side-by-side forecasts using current income tax thresholds, corporation tax bands, and the post-2017 finance cost rules. 

• Incorporation planning for existing portfolios

We assess exposure to SDLT and capital gains calculations, and we review whether reliefs like Incorporation Relief are even in scope given HMRC’s conditions. 

• Company compliance built for property businesses

Confirmation statements, statutory accounts, director/shareholder housekeeping, and practical support around the continuing Companies House reforms and fee changes. 

• Rent and tenancy change readiness

We help landlords understand how rent-setting and cashflow could shift under the Renters’ Rights framework, particularly around annual rent increases and the tribunal challenge process. 

• Ongoing landlord tax planning support

Self Assessment for individuals, corporation tax for property companies, and profit extraction planning in light of the upcoming dividend tax rate changes. 

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Conclusion

The headline numbers tell the story: 2025 set a record for buy-to-let company formations, and January 2026 suggests the trend is not cooling. The drivers are structural. Restricted finance cost relief for individuals, frozen thresholds pulling more landlords into higher-rate tax, and the gap between personal and corporate tax treatments are all influencing decisions.

But “incorporate” is not a universal answer. It is a strategy with trade-offs. There can be SDLT and capital gains implications when transferring existing properties, higher ongoing admin costs, and a second layer of tax when profits are extracted. From April 2026, dividend tax rates will increase, which makes planning even more important.

You can contact Apex Accountants to discuss your position and get clear, tailored advice on the most suitable structure for your circumstances.

As the UK economy adjusts to ongoing global challenges, tax policy remains a key area of focus. Chancellor Rachel Reeves recently stated that the UK is in a strong fiscal position, which may potentially alleviate the need for further tax hikes in the near future. This statement regarding the UK government tax position has generated significant attention, as businesses, individuals, and economists are eager to understand what this means for the UK’s economic recovery and future tax policy.

This article breaks down the current state of the UK’s tax landscape, explores what the government’s fiscal strategy means for taxpayers and businesses, and offers practical advice on how to navigate these changes.

The UK Economy in 2026: Fiscal Strength and Stability

In January 2026, Chancellor Rachel Reeves gave a much-anticipated update on the UK’s fiscal position at the World Economic Forum in Davos. Reeves expressed confidence that the UK is now in a “strong position” to manage its financial affairs without needing to introduce further tax increases. This follows the substantial tax hikes already enacted to shore up public finances.

The UK government’s strategy has been focused on ensuring fiscal stability, balancing public spending with efforts to manage inflation, reducing the national debt, and fostering economic growth. After years of increasing tax burdens, Reeves indicated that the government’s fiscal policy has built up the necessary resilience to avoid adding extra financial pressure on individuals and businesses for the foreseeable future.

Major Tax Changes in Recent Years

Recently, the UK government has made significant changes to its tax system, focusing on raising revenue to address the aftermath of the COVID-19 pandemic and its associated costs. The tax burden has reached its highest level in decades, with several changes that have affected both businesses and individuals.

Key Tax Measures Introduced in the Last Few Years:

Income Tax and National Insurance Increases: 

The government has implemented tax rate increases, along with the freezing of tax thresholds, which effectively raises taxes without changing rates. These measures have increased the tax burden for many individuals and businesses, particularly those in higher income brackets.

Corporation Tax: 

One of the most notable changes is the corporation tax increase, which saw the standard rate increase from 19% to 25% for larger businesses, effective from April 2023. Although the change has affected companies across the UK, smaller businesses still face a lower tax rate.

Freezing of Tax Thresholds: 

The government has frozen key tax thresholds, including those for Income Tax, Capital Gains Tax (CGT), and Inheritance Tax (IHT). Increased inflation pushes more individuals and businesses into higher tax bands, despite their incomes not significantly rising.

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VAT and Business Rates: 

In addition to income-related taxes, businesses have faced increased VAT compliance requirements and business rate hikes. This has been particularly challenging for sectors such as retail, hospitality, and manufacturing, where rising costs are already a significant concern.

These measures, while aimed at stabilising the UK’s finances, have placed additional financial strain on businesses and individuals. However, they have also contributed to the financial buffer that Chancellor Reeves has mentioned.

The Government’s Strategy for Economic Growth

Chancellor Reeves’ comments about the UK being in a “strong position” are grounded in several key economic strategies that the government has pursued:

1. Fiscal Resilience: 

The UK government has focused on building fiscal resilience by strengthening public finances and preparing for potential economic shocks. Reeves suggests that this resilience may eliminate the need for tax increases for the time being.

2. Debt Reduction and Public Spending:

 One of the government’s primary objectives has been to bring the national debt under control. By increasing taxes and reducing certain forms of public spending, the government has managed to stabilise its finances and prevent further borrowings.

3. Encouraging Investment and Innovation: 

Despite the tax increases, the government has introduced several initiatives aimed at boosting economic growth. These include tax reliefs for research and development (R&D), support for green energy investments, and incentives for tech start-ups.

Challenges for the UK Economy and What It Means for UK Tax Policy

While the government is optimistic about the UK’s economic recovery, challenges remain. The UK faces several risks that could affect future tax policy, including:

• Inflation: Rising inflation continues to erode the purchasing power of households and businesses, increasing pressure on public services and social benefits.
  
• Labour Market Concerns: With tight labour market conditions and a growing skills gap, the UK faces challenges in boosting productivity and meeting workforce demand.
  
• Global Economic Uncertainty: Global economic shifts, such as trade disruptions, energy crises, and geopolitical instability, could affect the UK’s economic stability.
  

The unfolding of these challenges raises the possibility of additional tax increases. However, for now, the government seems committed to maintaining the current trajectory and avoiding further immediate hikes.

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What Does the UK Government Tax Position Mean for Businesses and Taxpayers?

With the UK government signalling that tax rises are unlikely for now, businesses and taxpayers have a bit more certainty in their financial planning. However, businesses, particularly those in sectors hit hardest by the pandemic are still grappling with the impact of existing UK tax policies.

Here’s what businesses and individuals need to consider:

Businesses:

• Continue to prepare for higher corporation tax rates and business rate increases. Many business models have already accounted for these changes, but ongoing costs may still pose challenges.
  
• Take advantage of tax reliefs available, such as R&D credits, green energy incentives, and regional tax benefits.
  
• Work closely with accounting advisors to navigate the complexities of tax compliance and ensure they’re capitalising on available deductions.

Individuals:

• With the freezing of tax bands and rising inflation, many individuals are facing higher effective tax rates. Taxpayers need to plan ahead to manage their tax liabilities.
  
• Take advantage of personal tax reliefs where possible, such as pension contributions or charitable giving.
  
• Stay informed about changes to inheritance tax rules, particularly with regard to frozen allowances.

How Apex Accountants Can Help

At Apex Accountants, we offer expert guidance to help businesses and individuals navigate the complex UK tax system, ensure compliance, and maximise savings. Our services include:

• Tax Planning & Strategy: We help individuals and businesses develop tailored tax strategies to reduce liabilities and optimise tax-efficient investments.
  
• Business Advisory: Our team provides forecasting, budgeting, and advice on tax relief, such as R&D credits, capital allowances, and VAT optimisation.
  
• HMRC Compliance: We manage all compliance-related issues, including tax filings, VAT returns, and payroll services, to ensure your business meets regulatory requirements.
  
• Sector-Specific Expertise: Whether you’re in retail, hospitality, or tech, we offer bespoke services that address industry-specific challenges and opportunities.

Conclusion

As the UK continues to recover from economic disruption, the UK’s fiscal position provides reassurance to businesses and individuals alike. Chancellor Reeves’ remarks suggest that the immediate future will not see further tax rises, but it’s important to stay proactive with tax planning and financial forecasting. At Apex Accountants, we help you stay ahead of the curve by providing the expert advice you need to optimise your financial future.

Contact us today to learn how we can help you navigate the changing tax landscape and make the most of the opportunities ahead.

The recent increase in business rates has placed a heavy financial burden on the UK’s hospitality sector, particularly on hotels and holiday parks. As part of the British government’s latest budget decisions, accommodation providers face significant challenges with sharp increases in their rates bills. More than 130 prominent hospitality businesses, including giants such as Butlin’s, Hilton, and Travelodge, have voiced concerns about the rise and its potential consequences.

Rising Business Rates in UK and Their Effect on Accommodation Providers

In the November 2025 budget, Chancellor Rachel Reeves announced changes to the business rates system that will directly affect hotels, resorts, and holiday parks across the UK. These changes include a phased reduction in the 40% discount currently offered to the hospitality sector, which will expire in April 2026. While the Treasury has introduced a transition relief measure, the long-term impact remains significant. The rising business rates in the UK have put additional pressure on accommodation providers, amplifying the financial challenges faced by the hospitality industry.

Hotels, which are already grappling with increased build costs and regulatory challenges, are now facing a 115% hike in business rates. The average hotel’s rates bill is expected to soar by an estimated £205,000 over the next three years. This sharp increase is putting immense strain on hotel operators, who warn that it will exacerbate the ongoing cost-of-living crisis.

How Business Rates Impact the Hospitality Sector

Business rates are a form of tax based on the value of commercial property, which in this case includes hotels, resorts, and other accommodation providers. These rates are used to fund local services and infrastructure but have been rising steadily due to several factors, including property valuations and governmental budget decisions.

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Immediate Impact: 

Hotels are expected to see their business rates increase by 115% over the next three years. This surge is primarily due to new property valuations for 2026, which will result in higher rates for hospitality businesses.

Rising Operational Costs: 

The increase in business rates comes at a time when many hospitality businesses are already dealing with rising construction and operational costs, including higher wages and material prices.

Employment and Investment Pressure: 

Many accommodation providers are being forced to reconsider their investment and employment strategies. With a heavier tax burden, some hotels may have to scale back their operations, affecting jobs and potentially leading to fewer investments in future expansions.

Potential Solutions and Sector-Specific Challenges

Several leading industry groups, including UKHospitality, have called on the government to extend its support to the entire hospitality sector, not just limited to pubs. The coalition of businesses stresses that the accommodation industry faces unique challenges and requires targeted assistance to navigate the financial strains of rising business rates.

Challenges

Pubs vs. Accommodation: 

While pubs have received additional support, accommodation providers argue that they too need measures to reduce their tax burden. The threat of passing costs onto consumers could worsen the already high levels of inflation and hurt the broader economy.

Hotel Development and Tourism Taxes

The rising costs of hotel development, alongside concerns about new tourism taxes, are also contributing to the uncertainty surrounding the future of the hospitality industry in the UK.

What Needs to Change?

Industry leaders are calling for an all-encompassing support measure from the government to address the financial strains of business rates hikes. While some transitional relief has been introduced, it is not enough to alleviate the pressure faced by hotels and other accommodation providers.

Expanded Support: 

The government must ensure that relief extends to all types of accommodation providers, not just pubs. Without comprehensive support, many businesses could face closure or be forced to raise prices, further impacting the cost-of-living crisis.

Sustainability of Hotel Development: 

As build costs rise, many businesses are reconsidering their plans for new developments. The UK needs to foster a stable environment for hotel investments, which includes tax relief and measures to offset rising business rates.

How We Help Hospitality Sector Amid Busiess Rates Hikes

At Apex Accountants, we understand the challenges faced by the hospitality sector, including the rising cost of business rates. Our team of experts offers tailored solutions for hotels, resorts, and other accommodation providers. Whether you are dealing with business rates hikes, tax planning, or operational financial management, we are here to help you navigate these turbulent times.

• Tax Advisory: Our experts provide bespoke tax advice to help businesses reduce their tax liabilities and optimise their financial position.
  
• Financial Planning: We assist accommodation businesses with long-term financial planning to account for rising operational costs, including business rates.
  
• Compliance and Reporting: We ensure that your business remains fully compliant with UK tax regulations, including new business rates assessments and VAT compliance.
  
• Support for Financial Decisions: Apex Accountants provides comprehensive support to help businesses make informed financial decisions that will enable them to thrive in a challenging economic environment.

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Conclusion

The increase in business rates for the UK hospitality sector represents a critical challenge for hotels and accommodation providers. How business rates impact the hospitality sector is significant, as these rates directly affect operational costs, investment decisions, and pricing strategies. With significant rate hikes expected over the next few years, many businesses face tough decisions regarding their future. The pressure of rising business rates is already making it harder for many to maintain profitability, leading to concerns about scaling operations and potential job losses.However, with the right financial planning and expert support, accommodation businesses can navigate these challenges and continue to thrive. At Apex Accountants, we are committed to helping you manage your financial obligations and ensuring your long-term success. Contact us today to learn more about how we can support your business through these difficult times.