Legislation Day (‘L-Day’) 2026: Key Takeaways from the Draft Finance Bill 2026-2027 for Businesses

On 13 July 2026, the Government published draft legislation for the Finance Bill 2026-27 as part of what has become known as 'L-Day'.  The annual release of draft tax legislation is a significant milestone in the fiscal calendar, providing businesses and advisers with an early indication of the Government's tax policy priorities ahead of the Autumn Budget.

This year's package of measures continues the Government's focus on modernising the tax system, strengthening compliance and aligning UK tax legislation with international developments. 

While the draft legislation covers a wide range of areas, there are three developments in particular that corporate groups and businesses should have on their radar:

1. The introduction of a new Securities Transfer Tax

2. Reform of the foreign permanent establishment exemption

3. Further Pillar Two developments

1. A New Securities Transfer Tax

One of the most notable measures is the proposed introduction of a Securities Transfer Tax (STT), which is intended to replace the existing Stamp Duty and Stamp Duty Reserve Tax (SDRT) regimes for transfers of shares and certain securities.  This long overdue update follows on from an initial consultation launched in 2018 and follow-on consultation in 2023.

The reform sits within the Government's wider agenda to modernise tax administration.  The current stamp tax system relies heavily on processes that were outdated and designed for paper share transfers, whereas the proposed STT aims to create a more streamlined and digitally administered regime.

The draft legislation generally reflects the proposals from the 2023 consultation. There are 106 pages of new legislation to work through so the devil will be in the detail but, on an initial read, many of the same principles, exemptions and reliefs still apply. 

Key points include:

• The Government intends to introduce STT in 2027 (exact date to be confirmed), subject to the outcome of consultation and the legislative process.

• The new regime is expected to simplify the administration of taxes on share transfers and reduce reliance on paper-based procedures with stamp duty to be administered through an online portal.

• Transitional arrangements are expected to support businesses as they move from the existing framework to the new regime.

• Many of the reliefs commonly relied upon in commercial transactions appear set to be retained, including those relating to corporate reorganisations, share-for-share exchanges, certain joint venture arrangements and mortgage-related transactions. 

For businesses involved in M&A activity, intra-group restructurings or other corporate transactions, the development of the STT regime will be a change to look forward to that will hopefully result in a more streamlined process for stamping.  It will certainly be a welcome change to advisers who will no longer need to refer to legislation from 1891!

2. Reform of the Foreign Permanent Establishment Exemption

The Government has also published draft legislation reforming the UK's foreign permanent establishment (PE) exemption.

Currently, UK-resident companies may elect for profits and losses attributable to their foreign permanent establishments to be excluded from the UK corporation tax net.  Under the proposed reforms, that elective regime would be replaced with a mandatory exemption, meaning that foreign PE profits and losses would automatically fall outside UK corporation tax.

The Government's objective is to reinforce the UK's territorial approach to corporation tax and prevent overseas costs from being used to reduce UK taxable profits.

The proposed changes include:

• Replacing the current elective foreign branch exemption with a mandatory exemption that applies by default.

• Repealing the existing loss clawback provisions and introducing transitional rules to address historic foreign PE losses.

• Introducing anti-avoidance measures intended to preserve the integrity of the regime.

• Applying the new rules to corporation tax accounting periods beginning on or after 1 January 2027.

Groups with overseas branch operations should consider the potential impact of the changes and assess whether existing structures, historic losses and future tax profiles could be affected.

3. Further Pillar Two Developments

The draft legislation also contains further measures designed to keep the UK's Pillar Two framework aligned with developments at OECD level.

In particular, the legislation proposes the implementation of the OECD's side-by-side package, together with a number of technical amendments to the UK's Multinational Top-up Tax and Domestic Top-up Tax rules.

Although many large multinational groups are still adapting to the practical challenges of Pillar Two compliance, the legislative framework continues to evolve as international guidance develops.  The latest measures are intended to provide greater alignment with OECD administrative guidance and address technical issues identified since the UK's original adoption of the regime.

For multinational groups within the scope of Pillar Two, these changes are likely to remain among the most significant international tax developments affecting UK operations.

Looking Ahead

As ever, L-Day offers an early indication of the Government's legislative intention for the upcoming Finance Act, but it is not the final word. The draft measures are now subject to technical consultation, with stakeholders invited to participate in the consultation that runs until 7 September 2026.

While the detail of some measures may change before Finance Bill 2026-27 is introduced, the policy direction seems to be towards the continued modernisation of tax administration, refinement of the UK's international tax framework and targeted reforms to existing regimes.

Businesses should use the consultation period as an opportunity to assess how the proposed changes could affect their operations and to engage with the legislative process, where appropriate.  While L-Day generally provides an overview of what is on the horizon for UK tax policy, the change of Prime Minister this week may mean there is greater room for speculation about what may come in the Autumn Budget. 

Co-authored by Lucy Mostyn