What the professional tax bodies suggest for Budget 2026

The UK’s professional tax and accounting bodies have made a number of suggestions to HM Treasury for the upcoming budget. 

Whether the invited representations will be taken on board by the Chancellor, John Healey, in his first budget on 28 October 2026, remains to be seen.

The Association of Taxation Technicians (ATT)

The ATT published six suggestions, including on Inheritance Tax (IHT) simplification, Making Tax Digital (MTD) penalties and HMRC-approved mileage rates.
Inheritance Tax

The ATT recommended a simplification of the IHT regime for a fairer system for those affected. It argued that the Nil Rate Band (NRB) and the Residence Nil Rate Band (RNRB) should be merged into one single enhanced NRB. As unused pensions come into scope for IHT from April 2027, the ATT felt this change would avoid more families having to 'grapple' with the complexities of the RNRB.

It said that pension property should be treated as a separate component of the estate when testing for the 36% reduced rate, to avoid discouraging gifting to charity on death. This would protect those who have already planned to make gifts under the existing rules and give more flexibility to those who want to make charitable gifts to reduce IHT on their pension assets only.

Employment and mileage rates

On employment, the ATT advocated further consultations on options to introduce a single common statutory framework for UK employment status. This would have a statutory underpinning similar to the Statutory Residence Test (SRT), clarifying the treatment for most arrangements while being consistent for tax and employment rights purposes. 

Once a framework is in place, the ATT recommended that the HMRC Check Employment Status for Tax (CEST) tool should be overhauled and replaced with a tool reflecting the new test. The government should also consider whether employment tribunal decisions should apply for tax purposes, and vice versa.

The ATT argued that mileage rates for cars, motorbikes and bicycles should be increased to reflect the current costs of running and maintaining a personal vehicle and be reviewed annually. It suggested a rate of at least 60p per mile for a car or van.

Party time

The tax exemption for annual parties and social functions should be increased, said the ATT, allowing employers to organise social events without incurring a tax liability. The exemption has remained at £150 per head (including VAT) since April 2003.

It should be increased to at least £280 per head (including VAT) to reflect higher costs and inflation. 

Likewise, the limit on trivial benefits should be increased, as it has not changed since April 2016. The £50 trivial benefits limit should be increased to £70. The £300 annual cap on benefits provided to directors and their households/families should increase to £425.

Relief should also apply where an employer reimburses an employee for a purchase that would have qualified had the employer paid for it directly, including where the employee reimbursed is not the recipient of the benefit.

Making Tax Digital

The existing late-filing penalty easement for MTD should be extended to the one million lower-income taxpayers who are joining the system for the first time in 2027-28. An extension to the soft landing for penalties would give these newcomers time to get to grips with the complexity of MTD without worrying about penalties. 

The Chartered Institute of Taxation (CIOT)

The CIOT made a single submission recommending six targeted legislative changes to the new IHT rules for pensions. It has concerns that time is running out to fix administrative hurdles that the new rules face before they take effect on 6 April 2027. 

Where pension funds are discovered after HMRC have issued a certificate of discharge, the CIOT wants the estate rate of tax to be paid by the pension beneficiaries and pension administrators should notify HMRC of such payments. This would avoid having to recalculate the tax on the rest of the estate. 

Loss relief should also be available for pension assets where the scheme administrator sells the assets within 12 months of death, and should any tax need to be paid, the IHT instalment payment provisions should be available.

It also wants the interaction between the charitable giving rules and the reduced rate of IHT to be reformed.

Once pension wealth is included in estates, some estates will no longer satisfy the 10% rule needed to obtain the reduced rate of 36%. Conversely, percentage-based legacies may produce larger charitable gifts than intended, at the expense of residuary beneficiaries.

The CIOT recommends a separate component for pension assets. It also considered the six-month payment deadline as unrealistic and unreasonable and recommended extending it to 12 months.

Family companies and IHT

The CIOT also wants families to be helped to fund IHT liabilities in family companies. The Agricultural Property Relief and Business Property Relief changes have brought more family companies into the scope of IHT, with assets often tied up in family companies. 

To avoid the sale of businesses to cover these liabilities, the undue hardship condition for a company purchase of its own shares should be removed. The current legislation only allows capital treatment on a company's purchase of its own shares used to fund IHT where the personal representatives would otherwise face undue hardship.

The Institution of Chartered Accountants in England & Wales (ICAEW)

The ICAEW representations were aimed at turning around the public finances, kickstarting growth and unlocking investment based on tax reform.

It wanted tax administration fixed by prioritising quality and modifying the tax dispute resolution system. This involves requiring HMRC to provide an accessible, reliable and effective service to taxpayers and agents. A recent report from the Administrative Burdens Advisory Board (ABAB) found that 31.4% of respondents remarked that their experience of dealing with HMRC had worsened in the past year.

Again, the issue of MTD for Income Tax arose for the ICAEW. Like the ATT, it wanted to extend the soft landing for penalties for each population of mandated taxpayers. It also wanted to delay the adoption of MTD for the £30,000 threshold until a full review of the initial rollout was done.

Growth suggestions

It called for taxes to be reformed to promote growth, including a radical reform of business rates to reduce costs for businesses. This includes moving towards a simplified VAT system with a wider base, fewer exemptions and a lower single rate. 

The ICAEW wants the tax 'cliff edges' to be fixed, as currently they discourage people from working more or growing their businesses. 

Again, it found the current employment status rules needed clarifying to help businesses comply with both tax and employment law. 

Other suggestions included ruling out further increases in employment taxes during this Parliament and targeted tax relief on pre-development costs to attract more infrastructure investment. An expansion of HMRC’s current advance tax certainty service to cover more projects would help.

It again warned government to be cautious about using Capital Gains Tax to raise revenue, as further changes could deter investment in businesses, particularly Small to Medium-sized Enterprises (SMEs).

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