HM Revenue and Customs (HMRC) is going ahead with some big changes to how shareholders in UK companies get taxed. On 28 October 2026, the government said it will take forward all seven of its proposed reforms to company distributions.
If you own a limited company, this could change how you take profits out, sell your shares, or restructure the business. The new rules are planned for April 2028. That sounds far off, but it’s worth looking at your plans now.
Why Is HMRC Changing the Rules?
The rules on company distributions haven’t had a proper overhaul since 1965. HMRC thinks they don’t match how businesses run today.
The main concern is a gap in how profits get taxed. Some deals let shareholders receive money as capital rather than income. Capital Gains Tax rates can be lower than dividend tax rates, so the shareholder may pay less tax.
The government says the reforms will make the rules clearer and fairer. It also wants to protect genuine commercial deals along the way.
What Changes Is HMRC Planning?
There are seven areas of reform. The main ones are:
- Share buybacks: New conditions will decide when you can get capital tax treatment after selling shares back to your company.
- Capital repayments: Updated rules will cover how companies return share capital to shareholders.
- Corporate demergers: Revised rules will make the tax treatment clearer when a business splits into separate companies, which often overlaps with group structuring decisions.
- Overseas distributions: Payments from foreign companies will line up more closely with UK rules, which matters for anyone with international and offshore interests.
- Loans to shareholders: Reforms will explain how company loans and distributions fit together.
- Overseas company loans: New rules will deal with loans and temporary withdrawals involving non-UK companies.
- Anti-avoidance measures: Updated rules will target schemes that turn company profits into capital payments to save tax.
These proposals aren’t final. The government plans to refine them after more consultation.
Who Will Be Affected by the Reforms?
Mostly individual shareholders, especially people who own or run a limited company.
You might also be affected if you’re an SME owner planning retirement, a shareholder leaving a family business, or part of a company thinking about a restructure, so it’s worth connecting this with your wider succession planning.
Take a buyback. If you sell shares back to your company, you may have to meet the new conditions to keep capital tax treatment. If your deal falls short, your tax bill could go up.
When Will the New Rules Take Effect?
They aren’t law yet. HMRC will publish draft legislation for technical consultation in 2027. The government wants the new rules in place from April 2028.
Until then, today’s tax rules still apply. And since the proposals could still change, try not to rush into any decision based on them.
What Should UK Company Owners Do Now?
April 2028 is a way off, but if you have a big deal on the horizon, take a look at your position now.
Here’s where to start:
- Review any plans for share buybacks or a business exit.
- Check how the current income and capital tax rules apply to you.
- Think through any restructuring you’re planning.
- Get tax advice before you make major changes.
Skip this, and you could face tax costs you didn’t see coming or end up changing your plans late in the day.
How LANOP Can Help
Reforms like these are a good reminder to plan your tax before you make business decisions, not after.
LANOP Business & Tax Advisors works with UK company owners on corporate tax planning, restructuring, and financial decisions. Our team can look at where you stand today, explain what’s being proposed, and help you weigh up your options under the current rules.
Thinking about a share buyback, a business exit, or a restructure? Contact LANOP to book a free consultation and talk through your tax position before you make your next move.
