Opening with promising to deliver a Budget for working people (who knows what they mean by working people after their manifesto!) and businesses big and small, the Chancellor John Healey delivered the 2026 Autumn Budget on 28 October 2026. Although it touches on various areas of the tax system, it held back on any major surprises.
As ever, the devil will be in the detail of some of the changes, but below are some of the headline announcements.
Income Tax
The Chancellor confirmed that the main rates of Income Tax remain unchanged:
- Basic rate: 20%
- Higher rate: 40%
- Additional rate: 45%
Tax thresholds remain frozen, meaning more people will pay tax, and be pushed into higher tax brackets.
The higher rate threshold will start on income over £50,270, with 45% tax on income exceeding £125,140.
As a reminder, the tax-free personal allowance is reduced by £1 for every £2 of income over £100,000. This results in an effective tax rate of 60% on earnings between £100,000 and £125,140.
Pensioner Tax Protection
A new Pension Tax Allowance will be introduced from April 2027 to ensure pensioners whose only income is the full State Pension do not pay Income Tax as State Pension levels rise above the frozen Personal Allowance.
From the tax year beginning 6 April 2027, the full annual value of the new State Pension will increase to £13,037. Pensioners will be entitled to the increased allowance in the following way:
- If your total income is below the Personal Allowance (£12,570) you are not liable for any tax.
- If your total income is between £12,570 and £13,037, you will receive the full Pension Tax Allowance (worth up to £94).
- If your total income is between £13,037 and £13,319, you will receive some Pension Tax Allowance and pay less income tax than you otherwise would. For every £3 over £13,037, you lose £1 of the additional pension allowance.
- If your total income is £13,319 or more, you will not receive any Pension Tax Allowance.
Trading Allowance Increase
The tax-free trading allowance for individuals with small trading income will increase from £1,000 to £3,000 from 6 April 2027. This will benefit side businesses, freelancers and those with occasional trading income (eBay traders, etc).
Savings and Property Income
From 6 April 2027, separate rates of Income Tax on savings and property income will increase:
| Income Type | Basic Rate | Higher Rate | Additional Rate | |
| Savings Income | 24% | 44% | 49% | |
| Property Income | 24% | 44% | 49% |
This represents a 2 percentage point increase compared with previously planned rates.
National Insurance
No changes were announced to employee National Insurance contribution rates in this Budget. The Chancellor reiterated the government's commitment not to increase employee NIC rates.
Thresholds were largely untouched, however the Class 1 NIC lower earnings limit and the Class 2 NIC small profits threshold were increased by inflation to £6,916 and £7,355 respectively.
Weekly amounts payable for Class 2 NIC and Class 3 NIC were also increased by inflation to £3.80pw and £19.05pw respectively.
Capital Gains Tax (CGT)
Contrary to widespread speculation before Budget Day, here were no changes to the mainstream CGT rates, which remain:
- 18% for basic rate taxpayers
- 24% for higher and additional rate taxpayers
Business Asset Disposal Relief (BADR)
A significant change for business owners was announced:
- The lifetime BADR limit will reduce from £1 million to £500,000.
- Qualifying gains within the limit will continue to benefit from reduced tax rates of 18%, rather than 24%.
This is another blow to entrepreneurs and business owners potentially selling the business. Considering BADR (previously entrepreneur's relief) was previously limited to £10m gains, and 10% tax, the additional tax burden now is significant.
New Founders' Relief
The Government announced a new Founders' Relief for qualifying disposals after 6 April 2027. This will provide:
- 10% CGT rate
- On qualifying lifetime gains of up to £10m.
Qualifying conditions include:
- Invested early or started in company with sustained high growth.
- Activities subject to UK corporation tax.
- Individual held at least 25% of the ordinary share capital, when the company was formed.
- Held the shares for 5 years prior to sale.
- Company must have turnover of at least £10m in accounting period prior to disposal.
- Have at least 15 full time staff
- Be a trading company without substantial non-trading activities.
Further consultation and detailed legislation will follow. However, although the headlines sound great, and will no doubt benefit some, the numbers who will benefit will likely be small.
Have the government given a good headline to cushion the blow when reducing BADR??
Inheritance Tax (IHT)
No major new IHT regime changes were announced in this Budget.
However, previously announced reforms remain on track, including:
- Most unused pension funds and certain death benefits becoming subject to IHT from April 2027.
- Anti-avoidance measures relating to trust liabilities.
Business owners and wealthy families should continue reviewing succession and estate plans ahead of these changes, also bearing in mind the BPR and APR limits.
Stamp Duty Land Tax (SDLT)
No significant residential SDLT changes were announced.
The Budget included technical SDLT legislation relating to Local Government Pension Scheme investments and lease arrangements, rather than broad changes affecting most property purchasers.
Business Rates
One of the most significant Budget measures for some small businesses was support through business rates reform.
Small Business Rate Relief (SBRR)
From 1 April 2027:
| Current Threshold | New Threshold |
| 100% relief up to RV £12,000 | 100% relief up to RV £18,000 |
| Tapered relief to RV £15,000 | Tapered relief to RV £21,000 |
This expansion is expected to significantly reduce business rates bills for many small retailers, hospitality businesses and leisure operators.
Additional Business Rates Support
The Government also announced:
- A two-year real-terms business rates freeze for many retail, hospitality and leisure businesses.
- Extended transitional support arrangements.
- Enhanced relief for pubs, social clubs and live music venues.
Savings and Investments
ISA Changes
Thankfully, especially considering the increase to tax on savings mentioned above, the proposed reduction in the Cash ISA allowance was abandoned.
The Cash ISA subscription limit will therefore remain at:
- £20,000 per year
This represents a significant U-turn from previous proposals to reduce the allowance.
The Government also launched consultation on new savings products aimed at encouraging retail investment.
Enterprise Management Incentives (EMI)
The Budget included simplification measures for EMI share option schemes.
The Government announced:
- Simplification of the EMI option grant process.
- Further alignment with other employee share incentive schemes.
- Measures intended to reduce administrative burdens for growth companies.
These reforms are aimed at making EMI schemes easier to operate and more attractive for entrepreneurial businesses.
From 28 October 2026, the Company Share Option Plan (CSOP) will be known as EMI2. The scheme will retain the CSOP name in legislation.
From April 2027:
- the individual EMI2 limit will double from £60,000 to £120,000
- the interaction between EMI and EMI2 will also be removed, allowing the schemes to operate independently of each other
- the maximum period for exercising EMI2 options whilst retaining tax advantages will increase from 10 years to 15 years
Full details can be found: https://www.gov.uk/government/publications/enterprise-management-incentives-emi-and-enterprise-management-incentives-2-emi2/enterprise-management-incentives-emi-and-emi-2
Self Assessment and Tax Administration
While there were no fundamental changes to Self Assessment filing deadlines, the Government announced ongoing measures to modernise tax administration and HMRC compliance processes.
The Chancellor confirmed that as from April 2029, income tax due on non PAYE income (e.g. self employed profits, rental income, etc usually paid via self assessment), will be payable more regularly than the current payments on account in January and July each year.
The original plan was for the payments to be collected via the PAYE system where possible, however, thankfully the government has listened to concerns about this approach. As a result, the default option will be automated in-year payments (e.g. Direct Debit), with the option for taxpayers to opt-in to payments through PAYE if eligible and applicable. HMRC states that this approach will provide flexibility for taxpayers, whilst retaining the benefits of smaller, more regular payments closer to the point at which income is earned. This may create extra work for tax payers, although will likely be aligned with MTD?
Automated in-year payments will apply to all Self Assessment taxpayers who are liable to make Payments on Account.
Full details will follow in due course, including how often that payments will be required, though we expect these to be quarterly.
National Minimum Wage Increases
The rates change on 1 April every year.
| 21 and over | 18 to 20 | Under 18 | Apprentice | |
| April 2026 | £12.71 | £10.85 | £8 | £8 |
| April 2027 | £13.21 | £11.27 | £8.31 | £8.31 |
Welfare and Cost of Living Measures
The Budget included several support measures:
Energy Support
- £100 one-off energy payment for around 20 million households.
- Domestic electricity VAT maintained at 0% until July 2027.
- Gas standing charges to be abolished, with implementation details still to follow.
Fuel Duty
The temporary 5p per litre fuel duty cut is extended until 1 July 2027, alongside a further freeze in fuel duty rates.
Carer's Allowance
The Government announced plans to replace the current earnings cliff-edge with a taper system from 2030, addressing a long-standing criticism of the welfare system.
Other Business Measures
Mileage Allowances
The tax-free mileage allowance will become:
- 55p per mile for the first 10,000 business miles (this was from April 2026)
- 35p per mile thereafter (from 1 April 2027)
This represents an increase for individuals using their own vehicles for work.
Key Takeaways
For most taxpayers, the headline rates of Income Tax, VAT and employee National Insurance remain unchanged. However, the Budget contains several targeted changes that will matter to business owners and investors, including:
- Increased Small Business Rate Relief thresholds.
- ISA allowance retained at £20,000.
- New Founders' Relief.
- Reduction in the BADR lifetime limit.
- Higher taxation of savings and property income from April 2027.
- EMI share scheme simplification.
- Increased trading allowance.
- National Living Wage increase to £13.21 per hour.
- Continued energy and fuel duty support.