BDO has called on the UK chancellor to simplify the corporation tax regime in Budget 2026, which is due to take place on 28 October.
The call comes as corporation tax receipts increased by 4% year-on-year (YoY) to a record £100.4bn ($132.9bn) in 2025–26, according to HMRC.
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The total, up from £96.9bn a year earlier, comprised £95.1bn in mainstream corporation tax, along with revenue from the bank levy, bank surcharge, residential property developer tax, energy profits levy and electricity generator levy.
The financial and insurance sector made the largest contribution, generating £25.3bn in 2025–26.
Wholesale and retail trade was the second-largest contributor with £9.5bn, equivalent to 10% of total corporation tax receipts. Professional, scientific and technical activities ranked third, contributing £8.6bn.
Corporation tax receipts increased YoY in 13 of the 20 industry sectors, while seven recorded declines.
The financial and insurance sector posted the largest increase, with corporation tax liabilities rising by £3.6bn, or 17%.
BDO tax partner Jonathan Hickman said: “The rise in corporation tax receipts in recent years has been mirrored by an increase in complexity.
“The UK’s current system combines a main rate, a small profits rate and a marginal relief regime. The result is a structure that is administratively burdensome and creates additional complexity as businesses move between the small profits rate and main rate regimes.”
He called for the chancellor to simplify the system in Budget 2026 through a phased move to a single 21% corporation tax rate, which BDO argues would sit just below the EU average.
Hickman added: “This would make the UK more internationally competitive, create a system that is easier to understand and operate, and relieve businesses of the need to work out an increasingly complicated set of calculations as profits increase.
“Phasing in a lower rate could also encourage businesses to front-load their investments and may give the economy a short-term boost.”
