Chancellor John Healey delivered his first Budget on Wednesday 28 October 2026, the first under Prime Minister Andy Burnham. Described by the Chancellor as a Budget built on fiscal discipline, it kept Labour’s manifesto promise not to raise the rates of Income Tax, employee National Insurance or VAT.
However, landlords, savers and business owners will see some significant changes, alongside several welcome reliefs for entrepreneurs, small traders and pensioners. We have reviewed the Chancellor’s speech alongside HM Treasury’s published documentation, and summarised the key announcements most likely to affect you, your family and your business.
(Reading Time: Approx. 15 minutes)
Topics Discussed:
- The key personal tax changes announced in Autumn Budget 2026, including higher tax on property and savings income, ISAs, pensioners, mileage rates and the trading allowance.
- A complete overview of the tax rate changes and reforms announced or upcoming, including Capital Gains Tax, Business Asset Disposal Relief, company distributions and capital allowances.
The Economic Backdrop
The Chancellor had limited room for manoeuvre. Higher borrowing costs have added around £14 billion to the government’s debt interest bill this year, and the government now spends £1 in every £13 on debt interest. The fiscal headroom against the government’s borrowing rule now stands at £15 billion in 2029/30, rising to £22 billion in 2030/31.
As a result, this was a Budget of targeted measures rather than sweeping reform. The conservative leader Kemi Badenoch discussed that the country listening to the Budget will thinking to themselves: “Is that it?” As wages rise, more people will continue to be drawn into paying tax, or paying it at a higher rate, without any change to headline rates.
Key Tax Rate Changes and Reforms at a Glance
In the weeks before the Budget there was widespread speculation that Capital Gains Tax would rise and that Business Asset Disposal Relief would be cut or abolished. Below, we bring together each rate change announced today, alongside reforms already legislated that take effect over the coming years.
Property Income Tax
Rental profits in England and Northern Ireland were already due to be taxed at 22%, 42% and 47% from 6 April 2027. These rates will now increase by a further two percentage points from the same date, indicating rates of 24%, 44% and 49%.
Savings Income Tax
Savings income across the UK was also due to be taxed at 22%, 42% and 47% from 6 April 2027. The same further two percentage point increase applies from that date, indicating rates of 24%, 44% and 49%.
Dividend Tax
Dividend tax rates rose to 10.75%, 35.75% and 39.35% in April 2026. There is no further change to these rates.
Income Tax on Earnings
The rates of 20%, 40% and 45% are unchanged. The Personal Allowance and higher rate threshold remain frozen until April 2031.
Capital Gains Tax Main Rates
The main rates of 18% and 24% are unchanged, despite widespread speculation of an increase.
Company Distributions
From 6 April 2028, certain ways of extracting value from a company that are currently taxed as capital gains will instead be taxed as dividend income. Genuine changes of ownership, family succession and demergers will retain Capital Gains Tax treatment.
Business Asset Disposal Relief Rate
The BADR rate rose from 14% in 2025/26 to 18% from 6 April 2026. There is no further change to the rate.
Business Asset Disposal Relief Lifetime Limit
The lifetime limit is being halved from £1 million to £500,000 for disposals from 6 April 2027.
Founders’ Relief
A new 10% Capital Gains Tax rate will apply to qualifying gains of up to £10 million over a lifetime for founders and early investors of high-growth, innovative companies. It takes effect from 6 April 2027, subject to a technical consultation.
Main Rate First-Year Allowance
The first-year allowance on new main rate plant and machinery increases from 40% to 50% for expenditure incurred on or after 1 January 2027.
Main Pool Writing-Down Allowance
The main rate writing-down allowance falls from 14% to 12%. This applies from 1 April 2027 for companies and 6 April 2027 for unincorporated businesses.
Full Expensing
Full expensing for companies on qualifying plant and machinery is retained.
Trading Allowance
The trading allowance will be tripled from £1,000 to £3,000 per tax year from 6 April 2027.
Mileage Rates
The approved mileage rate for cars and vans increases to 55p per mile for the first 10,000 business miles from 6 April 2026. The rate for miles above 10,000 increases to 35p from 6 April 2027.
Cash ISA Allowance
The planned reduction to £12,000 for savers under 65 has been scrapped. The full £20,000 allowance can continue to be held in cash from 6 April 2027.
Bank Surcharge
The Bank Corporation Tax Surcharge will temporarily rise from 3% to 6% for 15 months from 1 January 2027.
Capital Gains Tax Rates Left Unchanged
Capital Gains Tax was one of the most widely tipped targets for a rise, with commentators suggesting it could be aligned more closely with Income Tax. The Chancellor resisted this, and the main rates remain at 18% for basic rate taxpayers and 24% for higher and additional rate taxpayers. The annual exempt amount remains at £3,000.
Other reported options, including an exit charge for individuals leaving the UK, removing the uplift in base cost on death and restricting Private Residence Relief on higher value homes, did not feature in the Budget.
However, business owners should note the reform of the distributions framework from 6 April 2028. The government intends to reduce opportunities for shareholders to structure how they take profits or value out of a company to obtain Capital Gains Tax treatment where dividend treatment is considered more appropriate. Some transactions that are currently untaxed may also be brought within the dividend regime.
HM Treasury expects this measure to raise around £800 million a year, and further detail on how it will work is due to be published by the end of the year. Anyone planning a share buyback, a capital reduction or a similar transaction should take advice well in advance of April 2028.
Business Asset Disposal Relief Rate and Limit
The change announced to BADR today is to the lifetime limit, which is being halved from £1 million to £500,000 for disposals made on or after 6 April 2027. Gains above the new limit will be taxed at the main Capital Gains Tax rates.
To put this into context, at the current rates a higher rate taxpayer qualifying for BADR saves 6% (24% less 18%) on qualifying gains. On the full £1 million limit this was worth up to £60,000. On a £500,000 limit, the maximum saving falls to £30,000. Business owners who are close to a sale and have unused BADR above £500,000 may therefore wish to consider whether completing before 6 April 2027 is achievable and commercially sensible.
The new Founders’ Relief works differently. A 10% rate on up to £10 million of lifetime gains, compared with the 24% higher rate, could be worth up to £1.4 million.
However, the qualifying conditions are demanding. According to HM Treasury, individuals must hold at least 25% of the company at the start of trading, and the company must meet minimum turnover and employment thresholds and satisfy two of three growth and innovation tests. The full design will be set out in a technical consultation.
Capital Allowances and Writing-Down Allowances
Full expensing for companies has been retained, providing a 100% deduction on qualifying main rate plant and machinery. The main rate first-year allowance, introduced at 40% from January 2026, will rise to 50% for expenditure incurred on or after 1 January 2027. This applies to both companies and unincorporated businesses and includes plant and machinery for leasing, but excludes second-hand assets and cars.
The main pool writing-down allowance, which fell from 18% to 14% in April 2026, will be reduced again to 12% from 1 April 2027 for companies and 6 April 2027 for Income Tax payers. This means that relief on existing pool balances, and on expenditure that does not qualify for the Annual Investment Allowance or a first-year allowance, will be spread over a longer period. Businesses planning significant capital expenditure should consider the timing of their purchases carefully.
Mortgage Interest Relief for Landlords
Under existing law, Income Tax relief for finance costs on residential lettings was due to be given at 22% from April 2027, in line with the new property basic rate. HM Treasury has confirmed that finance cost relief will continue to be aligned with the property basic rate, so the relief should rise in line with the further two percentage point increase.
Reforms Already Legislated and Still to Come
Several significant changes announced at earlier Budgets remain on course:
- Inheritance Tax on pensions. Most unused pension funds and death benefits will fall within an estate for Inheritance Tax from 6 April 2027.
- Making Tax Digital. From April 2027, sole traders and landlords with qualifying income over £30,000 will need to keep digital records and send quarterly updates to HMRC. Late submission penalties for quarterly updates will not be charged during the 2027/28 tax year for those joining from April 2027, although penalties for missing the annual return deadline will still apply.
- High Value Council Tax Surcharge. An annual surcharge will apply to homes in England worth £2 million or more from April 2028.
- Agricultural and Business Property Relief. The £1 million allowance for 100% relief, in force since April 2026, continues to apply.
1. Landlords and Savers Face a Further 2% Increase
The most significant revenue raiser for individuals affects income from property and savings. Under legislation already in place, from 6 April 2027 rental profits in England and Northern Ireland, and savings income across the UK, were due to be taxed at 22%, 42% and 47% rather than 20%, 40% and 45%.
The Chancellor has now announced that these rates will increase by a further two percentage points from 6 April 2027. Based on the rates already in law, this points to rates of 24%, 44% and 49%. There is no change to the tax on dividends or on employment income.
The Chancellor stated that 88% of people will pay no more tax on their savings income, largely because the Personal Savings Allowance shelters interest for most savers. For landlords, however, this is a meaningful increase. Combined with Making Tax Digital for Income Tax and HMRC’s continued focus on undeclared rental income, now is a sensible time to review how your property portfolio is held and whether your current structure remains the most tax efficient. Landlords in England should also note a new £65 fee for registering rental properties, due from 15 December 2026.
2. Cash ISA Cut Scrapped and a New Starter ISA
The planned reduction in the Cash ISA allowance to £12,000 for savers under 65, due from April 2027, will no longer go ahead. Savers will continue to be able to place the full £20,000 annual ISA allowance in cash if they wish.
The Chancellor also confirmed that the government will work with the industry to create a new Starter ISA aimed at encouraging first-time investors. In addition, a new First Time Buyer ISA will replace the Lifetime ISA for new savers from 6 April 2029. With the tax rate on savings income set to rise, making full use of your ISA allowance each year becomes even more valuable.
3. Business Asset Disposal Relief Halved, but a New Founders’ Relief
Business Asset Disposal Relief (BADR) allows qualifying business owners to pay a reduced rate of Capital Gains Tax when selling their business. The lifetime limit is being halved from £1 million to £500,000 from 6 April 2027. The Chancellor said this would mean no change for three in four claimants.
In a significant new measure, the Chancellor announced a Founders’ Relief from 6 April 2027, providing a 10% Capital Gains Tax rate on lifetime gains of up to £10 million for qualifying founders and early investors of high-growth, innovative companies. Gains above that level will be taxed at the normal Capital Gains Tax rates, which remain unchanged at 18% and 24%.
If you are considering selling your business, or part of it, in the next few years, it is important to take advice before taking any action, particularly with the BADR change taking effect from April 2027.
4. Trading Allowance Tripled and Higher Mileage Rates
The trading allowance, which applies to trading and certain miscellaneous income, will be tripled from £1,000 to £3,000 per tax year from 6 April 2027. This is good news for those with side businesses, online sellers and other small self-employed individuals, many of whom may no longer need to report this income or pay tax on it.
The approved mileage rates for cars and vans are also increasing, to 55p per mile for the first 10,000 business miles from 6 April 2026 and to 35p per mile above that from 6 April 2027. This benefits employees, sole traders and partners who use their own vehicles for business travel.
The Chancellor also announced a new Young Entrepreneurs Allowance, designed to cover a year of living costs for young business founders.
5. New Pension Tax Allowance for Pensioners
The State Pension is expected to rise by 3.9% from April 2027, which would take the full new State Pension to around £13,036 a year and above the £12,570 Personal Allowance.
To prevent pensioners being drawn into Income Tax for the first time, the Chancellor confirmed a new Pension Tax Allowance. From 6 April 2027 until 5 April 2030, pensioners whose total income does not exceed the full new State Pension will pay no Income Tax, with the allowance tapered away as income rises above that level.
Pensioners who receive significant private or workplace pensions on top of the State Pension will continue to pay tax on their income above the threshold.
The Budget also abolishes the two-year rule for pension and lump sum death benefits where the member died before age 75. For payments made after 28 October 2026, beneficiaries will no longer face an Income Tax charge simply because a payment was made more than two years after the scheme became aware of the death.
Separately, the previously announced inclusion of most unused pension funds and death benefits within an estate for Inheritance Tax purposes from 6 April 2027 remains in place. If you have significant pension savings, now is the time to review your nominations and wider estate plan.
6. Support for Small Businesses and Investment
Several measures will be welcomed by business owners:
- Business rates. From 1 April 2027, the valuation threshold for 100% Small Business Rate Relief for retail, hospitality and leisure properties will rise from £12,000 to £18,000, with the tapered relief threshold rising from £15,000 to £21,000. Pubs, social clubs and live music venues will see their business rates relief increase to 35%.
- Capital allowances. Full expensing is retained and the main first-year allowance rises to 50% from 1 January 2027, although the main pool writing-down allowance falls to 12%, as set out in our rate changes section above.
- EMI2. The Company Share Option Plan (CSOP) will be renamed Enterprise Management Incentives 2 (EMI2). From 6 April 2027, the individual option limit doubles from £60,000 to £120,000, the maximum exercise period increases from 10 to 15 years, and individuals will be able to use both the £250,000 EMI limit and the £120,000 EMI2 limit in full.
- Minimum wage. The National Living Wage and National Minimum Wage will rise by 3.9%, taking the National Living Wage above £13 an hour for the first time and benefiting around 2.3 million workers. Employers should factor this into their payroll budgets for 2027/28.
7. Banks Pay More and HMRC Gets Tougher
The Bank Corporation Tax Surcharge will temporarily rise from 3% to 6% for 15 months from 1 January 2027, to help fund support with household energy bills.
HMRC is receiving £485 million over five years to recruit an additional 670 compliance officers by 2029/30, alongside further investment in debt management. It will also gain a new power to recover lower value tax debts directly from the bank accounts of those who can afford to pay but repeatedly fail to do so. Recovery will be made through automated monthly instalments and will apply to debts of up to £5,000 for individuals and £10,000 for companies. The power will be introduced from July 2029 for VAT and PAYE debts, April 2030 for Self-Assessment debts and April 2031 for Corporation Tax debts, with safeguards to ensure deductions are affordable. Diligence on your self-assessment tax return payments must remain high.
8. Changes to How Tax Is Paid and Reported
The Budget also sets out several longer-term changes to how taxpayers interact with HMRC:
- Payments on account. From the 2029/30 tax year, Self-Assessment taxpayers who currently make payments on account will be required to make automated payments towards their current year liability, bringing payment closer to when income is earned. Those with sufficient PAYE income may choose to pay through their tax code.
- Direct Debits for VAT and PAYE. From April 2029, businesses that do not already pay by Direct Debit will need to set up a mandate so that unpaid VAT and PAYE liabilities can be collected after the due date.
- E-invoicing. From April 2029, all VAT-registered businesses will be required to issue VAT invoices in a specified electronic format for business-to-business and business-to-government transactions.
- Online marketplaces. From 1 October 2027, online marketplaces will collect and remit VAT on sales by UK sellers who are VAT registered, or whose sales on a platform exceed £90,000.
- Direct Debits for VAT and PAYE. From April 2029, businesses that do not already pay by Direct Debit will need to set up a mandate so that unpaid VAT and PAYE liabilities can be collected after the due date.
- Payrolling benefits in kind. Mandatory payrolling of company cars, vans, fuel and medical benefits is delayed to 6 April 2027, with remaining benefits following from 6 April 2028.
- Employment expenses. From 6 April 2028, employees who only file a Self-Assessment return to claim employment expenses will be able to claim through the PAYE process instead.
9. Cost of Living Measures
Alongside the tax changes, the Chancellor announced a range of measures aimed at household costs:
- The temporary 5p cut in fuel duty has been extended, and the planned inflation increase deferred, until 1 July 2027.
- Households in Council Tax bands A to D will receive a one-off £100 Household Energy Payment, as a council tax rebate from January 2027.
- VAT on household electricity remains at 0% until 1 July 2027, and standing charges on household gas bills are set to be scrapped from 2027.
Summary
Autumn Budget 2026 avoided headline tax rises for working people but increases tax on property and savings income by a further two percentage points from April 2027 and halves the BADR lifetime limit to £500,000. Capital Gains Tax rates are unchanged, while the new Founders’ Relief, a £3,000 trading allowance and higher first-year allowances offer welcome relief.
Many of the finer details will follow as HMRC publishes its technical notes and the Finance Bill progresses.
If you would like to understand how Autumn Budget 2026 affects you, your property portfolio or your business, get in touch with us at Tax Expert.
Fill out our form here, email us at info@taxexpert.co.uk, or message us on our WhatsApp for out of office hours.
Kind regards,
Ilyas Patel
