Budget 2026 Key Points
Today (28 October 2026), the Chancellor, John Healey, delivered his first Budget, announcing a mixture of tax increases, business incentives and measures intended to ease the cost of living.
Although the headline rates of Income Tax, National Insurance and VAT remain unchanged, there are some significant changes for landlords, savers, business owners and those considering selling their businesses.
Below is our summary of the key announcements.
Higher taxes on savings and rental income
Following the 2% increases announced in last year's Budget, the government has announced a further 2% increase in the tax rates on savings and property income from 6 April 2027.
The new rates will therefore be:
Basic rate: 24%
Higher rate: 44%
Additional rate: 49%
This represents a 4% increase compared with the rates applying in 2026/27 and will be particularly relevant for landlords and individuals with significant savings income.
The property income rates will apply in England, Wales and Northern Ireland, while the savings income rates will apply UK-wide.
Business Asset Disposal Relief – lifetime limit halved
From 6 April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) will reduce from £1 million to £500,000.
BADR currently allows qualifying business disposals to benefit from a reduced Capital Gains Tax (CGT) rate of 18%.
This is a significant change for business owners considering selling their companies, as gains exceeding the new £500,000 lifetime limit will generally be subject to the normal CGT rates.
Anyone contemplating a business sale should therefore consider the timing and structure of the disposal carefully.
New 10% CGT relief for company founders
In contrast to the reduction in BADR, the government has announced a new Founders' Relief from 6 April 2027.
This will provide a reduced CGT rate of just 10% on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies.
The detailed eligibility conditions are subject to consultation, so this will not necessarily be available to all company founders.
Nevertheless, this could represent a valuable incentive for entrepreneurs building and selling qualifying businesses.
Trading Allowance increased to £3,000
From 6 April 2027, the Trading Allowance will increase from £1,000 to £3,000.
This means individuals with qualifying gross trading or miscellaneous income of no more than £3,000 will generally not have to pay Income Tax on that income or report it through Self Assessment solely because of that income.
The increase will be particularly helpful for individuals with small side businesses or occasional trading income.
For those earning more than £3,000, the allowance can still potentially be claimed as an alternative to deducting actual business expenses.
Cash ISA allowance – planned reduction scrapped
In a reversal of last year's Budget announcement, the government has decided not to reduce the annual Cash ISA allowance.
The allowance will therefore remain at £20,000 for all adults, rather than falling to £12,000 for those aged under 65 from April 2027.
Separately, a new First-Time Buyer ISA will be introduced from April 2029, replacing the Lifetime ISA for new savers. It will offer a 25% government bonus towards a qualifying first home, with a maximum bonus of £20,000.
Existing Lifetime ISA holders will be able to continue using their accounts under the existing rules.
Capital Allowances – further changes
There are further changes to the tax relief available on business investment in plant and machinery.
From 1 April 2027 for Corporation Tax (6 April 2027 for Income Tax), the main rate of writing-down allowances will reduce from 14% to 12%.
However, the new main-rate first-year allowance introduced in January 2026 at 40% will increase to 50% from 1 January 2027.
The Annual Investment Allowance and full expensing rules remain available where the relevant conditions are satisfied.
Company distributions and profit extraction
The government has announced plans to reform the tax treatment of distributions made by companies to their shareholders from April 2028.
The intention is to prevent arrangements that enable shareholders to extract company profits at favourable CGT rates rather than paying Income Tax on dividends, while protecting genuine commercial transactions.
The detailed legislation is still to be developed, but the proposals could have implications for company reorganisations, purchases of own shares and business exits.
Further information is available in the government's distributions reform factsheet.
Business rates relief extended
There is welcome news for smaller retail, hospitality and leisure businesses in England.
From 1 April 2027, the rateable value threshold for 100% Small Business Rates Relief for qualifying properties will increase from £12,000 to £18,000, with tapered relief available up to £21,000.
Pubs, social clubs and most live music venues will also benefit from an increase in business rates relief from 15% to 35%.
Other qualifying retail, hospitality and leisure properties will have their business rates increases capped at inflation for two years, subject to certain exceptions.
Business mileage rates increased
The government has confirmed that the increased tax-free mileage allowance of 55p per mile for the first 10,000 business miles, introduced from April 2026, will be permanent.
From 6 April 2027, the rate for business mileage exceeding 10,000 miles will also increase from 25p to 35p per mile.
This will benefit employees using their own cars for business travel, as well as self-employed individuals claiming simplified mileage expenses.
The existing 5p-per-litre fuel duty reduction has also been extended until 1 July 2027, alongside a further deferral of the planned inflationary increase.
National Minimum Wage increases
From 1 April 2027, the National Living Wage and National Minimum Wage rates will increase by 3.9%.
The new hourly rates will be:
Age 21 and over: £13.21
Age 18–20: £11.27
Age 16–17 and eligible apprentices: £8.31
Employers will need to factor these increases into payroll costs and budgeting for the 2027/28 tax year.
New Pension Tax Allowance
A new Pension Tax Allowance will be introduced from 6 April 2027, designed to prevent pensioners with modest incomes from becoming liable to Income Tax simply because of increases in the State Pension.
Pensioners with total income no greater than the full new State Pension (expected to be £13,037 in 2027/28) will benefit from an automatic tax reduction, with a tapered reduction available for those whose income is slightly higher.
The allowance is initially intended to apply until April 2030.
The government has also confirmed that the existing State Pension Triple Lock will be maintained through April 2029, before being adjusted from April 2030.
Making Tax Digital and Self Assessment changes
There are several announcements regarding the administration of tax.
Those required to join Making Tax Digital for Income Tax from April 2027 will not receive late submission penalty points for their first four quarterly updates, although the updates will still need to be submitted.
More significantly, from April 2029, taxpayers who currently make Self Assessment payments on account will be required to make smaller, more frequent payments throughout the tax year.
This could represent a significant change to how self-employed individuals, landlords and other Self Assessment taxpayers manage their tax payments.
The government has also confirmed plans for mandatory electronic VAT invoicing from April 2029, together with new requirements for businesses to establish Direct Debit arrangements for VAT and PAYE liabilities.
Energy bills and other support
The temporary 0% VAT rate on qualifying domestic electricity, introduced on 1 October 2026, will be extended for a further three months until 1 July 2027.
The government has also announced a £100 Household Energy Payment for eligible properties in council tax bands A–D in England, with payments expected from January 2027 and corresponding funding for the devolved administrations.
There are also plans to extend parental pay to eligible self-employed fathers, partners and adopters from April 2029.
What hasn't changed
Despite the various announcements, there have been no further increases to the headline rates of:
Income Tax on earnings;
National Insurance contributions;
VAT; or
Corporation Tax.
The main Corporation Tax rate remains at 25%, with the small profits rate at 19%.
The personal allowance also remains frozen at £12,570, meaning that increases in salaries and pensions will continue to bring more individuals into the tax system or higher tax bands.
The existing dividend tax changes announced in Budget 2025 also remain in place.
The big picture
The Chancellor has sought to balance additional tax revenue from savings, property income and business disposals with incentives for investment, business growth and support for household costs.
The Office for Budget Responsibility now forecasts economic growth of 1.2% in 2026, slowing to 1.0% in 2027, reflecting continued pressures from higher energy prices and borrowing costs.
For TN Accountancy's clients, some of the most significant announcements are likely to be the higher tax rates on rental income and savings, the reduction in Business Asset Disposal Relief, and the proposed changes to how company profits can be extracted.
Many of the measures will not take effect until April 2027 or later, and some remain subject to consultation or legislation. Nevertheless, there are several areas where advance tax planning could make a significant difference.
The full Budget documentation is available on the GOV.UK website.
Contact us
Please contact us to find out how the above applies in your circumstances and how we can help you.
Please note that the above is for general information only and does not constitute financial or tax advice. You should not rely on this information to make or refrain from making any decisions. You should always obtain independent professional advice in respect of your own situation.