This summary reflects the Budget announced on 28 October 2026 and is stated as at 30 October 2026. Many of the measures still need legislation in the Finance Bill, and Founders’ Relief is under consultation, so the dates and conditions may change. Take advice on your own circumstances before acting.
The Budget leaves the headline rates of income tax, National Insurance and VAT unchanged and keeps the main rate of corporation tax at 25%, so the day-to-day tax position of most trading businesses changes little. The measures most owners will want to look at first concern the sale of a business and the tax on income from property and savings. Our full 18-page briefing for clients, including tax tables for 2026/27 and 2027/28, is free to download below.
Selling a business: BADR and Founders’ Relief
Business Asset Disposal Relief (BADR) charges capital gains tax at 18% on gains from selling a qualifying business, or shares in a qualifying trading company, up to a lifetime limit. That limit is to fall from £1 million to £500,000 for disposals made on or after 6 April 2027, and gains above it will be taxed at the ordinary rates of 18% and 24%. Special provisions are to apply to contracts entered into before 6 April 2027 that have not completed by that date.
For an owner with a £1 million qualifying gain, the tax rises from £180,000 on a disposal before 6 April 2027 to £210,000 on or after that date, an increase of £30,000. That is the most the lower limit can add to one individual’s tax at current rates, assuming none of the limit has already been used.
The proposed Founders’ Relief would charge capital gains tax at 10% on up to £10 million of lifetime gains for qualifying founders of high-growth companies and certain early investors, from 6 April 2027. The proposed conditions include a turnover of at least £10 million and at least 15 full-time employees, plus rapid growth or substantial R&D spending, so most established owner-managed companies would not qualify. The consultation closes on 30 November 2026.
If you are discussing a sale or a transfer to the next generation, the date on which a binding contract is signed now matters, and we would recommend reviewing share ownership and the relief conditions before heads of terms are agreed.
Property income, savings and dividends
Income tax rates on earnings are unchanged, but the rates on rental profits and savings income are to rise by a further two percentage points from 6 April 2027, on top of the increase announced in 2025.
| Income | 2026/27 (basic, higher, additional) | From 6 April 2027 |
|---|---|---|
| Property income (England, Wales and Northern Ireland) | 20%, 40%, 45% | 24%, 44%, 49% |
| Savings income (UK-wide) | 20%, 40%, 45% | 24%, 44%, 49% |
| Dividends (UK-wide) | 10.75%, 35.75%, 39.35% | No change announced |
A higher-rate landlord with £20,000 of taxable rental profit pays £8,000 of tax in 2026/27 and £8,800 from 2027/28. The higher rates do not on their own make it worthwhile to move properties into a company, because the finance costs, capital gains tax, stamp duty land tax and the tax on drawing profits out all need to be weighed together.
The government also intends to reform how distributions from companies to shareholders are taxed from April 2028, with draft legislation expected in 2027. Owners considering a company purchase of their own shares, a reorganisation or a demerger should take advice before then.
Employers: minimum wage, mileage and payroll
| Hourly rate | From 1 April 2026 | From 1 April 2027 |
|---|---|---|
| National Living Wage, age 21 and over | £12.71 | £13.21 |
| National Minimum Wage, age 18 to 20 | £10.85 | £11.27 |
| Age 16 to 17 and eligible apprentices | £8.00 | £8.31 |
The tax-free mileage rate of 55p a mile for the first 10,000 business miles, which has applied since 6 April 2026, is now permanent, and the rate above 10,000 miles rises from 25p to 35p from 6 April 2027. Employers will also have to report and tax company cars, vans, fuel and medical benefits through payroll from 6 April 2027, with the remaining benefits in kind following from April 2028. There is no change to the headline rates of National Insurance.
Capital allowances and R&D
The main-rate first-year allowance rises from 40% to 50% for expenditure on or after 1 January 2027, while the main-rate writing-down allowance falls from 14% to 12% from April 2027. The £1 million Annual Investment Allowance and full expensing for companies are unchanged, and for most purchases they will still give more relief than the first-year allowance. The advance Claim Notification Form for R&D claims is removed from 1 April 2027. If you are planning a significant purchase around January or April 2027, it is worth including it in your tax forecast before the order is placed.
Business rates for retail, hospitality and leisure
From 1 April 2027, small business rates relief for qualifying retail, hospitality and leisure properties in England gives full relief up to a rateable value of £18,000 (up from £12,000) and tapered relief up to £21,000 (up from £15,000). Increases in bills for other qualifying properties are to be capped at inflation in 2027/28 and 2028/29, and relief for pubs, social clubs and live music venues rises from 15% to 35%. Valuation Tribunal appeal fees are abolished for the 2026 list. If your rateable value is close to the new thresholds, it is worth checking it before April 2027.
VAT changes
The standard rate of VAT and the £90,000 registration threshold are unchanged, but three measures change how VAT works for many smaller businesses:
- Mandatory electronic VAT invoicing begins on 1 April 2029. A PDF invoice is unlikely to meet the new requirement, so check that your invoicing software will support it.
- From 1 October 2027, online marketplaces will collect VAT on sales made through them by VAT-registered UK sellers and by other UK sellers with £90,000 or more of sales a year on that platform.
- From April 2027, overseas suppliers will charge UK VAT to UK businesses that are not VAT registered. A business that is not registered and spends £12,000 a year on overseas software and advertising would pay £2,400 more, which it cannot recover.
Paying tax and dealing with HMRC
Most of these changes take effect between 2027 and 2029. From April 2029, self assessment taxpayers who make payments on account will make smaller and more regular payments during the year, and businesses will need direct debits in place for VAT (from 1 April 2029) and PAYE (from 6 April 2029). Those joining Making Tax Digital for income tax in April 2027 will not receive penalty points for late submission of their first four quarterly updates. A duty to correct errors in tax returns begins on 1 April 2028, and from July 2029 HMRC will be able to recover lower-value debts directly from the bank accounts of those who can pay but repeatedly do not. The proposed new reporting of payments by close companies to their shareholders is not going ahead.
Start-ups and share options
The trading allowance rises from £1,000 to £3,000 from 6 April 2027, which will help individuals with small amounts of business income and low costs. The Company Share Option Plan is to be renamed EMI2, its individual limit doubles to £120,000, and it will no longer count towards the EMI limit, so an employee could hold up to £370,000 of options across the two schemes. Companies planning to grant options in 2027 should consider timing around 6 April 2027, when the changes take effect.
ISAs, pensions and estates
Three changes took effect on Budget day or the day after. The rules on trust-related debts for inheritance tax have been tightened from 28 October 2026, pension death benefits paid more than two years after death are no longer taxed for that reason alone, and the Lifetime ISA withdrawal charge for homes above £450,000 falls to 20% from 29 October 2026. The planned cut to the cash ISA limit will not go ahead, so it stays at £20,000. A new Pension Tax Allowance should mean that pensioners whose total income does not exceed the full new State Pension do not pay small amounts of income tax from 6 April 2027.
The Budget makes no change to the inheritance tax nil-rate bands or the agricultural and business property reliefs, and most unused pension funds are still due to come within inheritance tax from 6 April 2027, as announced in 2024. The personal allowance of £12,570 and the main thresholds remain frozen.
Key dates
| Date | Measure |
|---|---|
| 28 October 2026 | Inheritance tax rules on trust liabilities; pension death benefits two-year rule removed |
| 30 November 2026 | Founders’ Relief consultation closes |
| 1 January 2027 | Main-rate first-year allowance rises to 50% |
| 1 April 2027 | New minimum wage rates; business rates changes in England; writing-down allowance falls to 12% for companies |
| 6 April 2027 | BADR limit falls to £500,000; property and savings rates rise to 24%, 44% and 49%; trading allowance £3,000; EMI2; 35p mileage rate above 10,000 miles; payrolling of car, van, fuel and medical benefits |
| 1 October 2027 | Online marketplaces begin collecting VAT for UK sellers |
| April 2028 | Reform of the taxation of company distributions; duty to correct errors in returns |
| April 2029 | Electronic VAT invoicing; direct debits for VAT and PAYE; more regular payments on account |
Download the full briefing
The full briefing covers each of these measures in more detail, with worked illustrations, planning points and tax tables for 2026/27 and 2027/28.
To discuss how the Budget affects you or your business, please contact your usual Jack Ross partner, call us on 0161 832 4451 or send us a message.