Autumn Budget 28 October 2026
Another year and yet another new chancellor. This was John Healey’s 1st Budget as Chancellor and, given his immediate predecessor only had 2 Budgets, it appears he was trying to make an impact early. As ever with recent Budgets a lot of the detail had been briefed to the media ahead of time but there were still some new announcements of interest on the day.
Many of the personal tax changes had been built in ahead by announcements at earlier budgets and we will cover these below.
Cynically, it could be said that these briefings are designed to make us think that the actual Budget could have been worse.
Overall, the Budget was described well by a BBC journalist as a ‘flotilla of small measures’. The OBR expects UK economic growth to remain subdued at 1.2% in 2026, fall to 1.0% in 2027, and then rise to 1.6% in 2028, 1.8% in 2029 and 1.7% in 2030.
Inflation reached 3.5% in the year to September 2026, well above the Bank of England’s 2% target. Higher oil and energy prices are contributing to the pressure. The OBR forecasts CPI inflation to average 3.4% in 2027, ease to around 2.1% in 2028 and 2029, and return to the 2% target in 2030.
The full government statement can be found here .
The OBR’s report can be found here .
Key changes were as follows:
Income Tax
No changes to headline income tax rates but beware of the new savings and property income taxes effective April 2027.
Do remember that Allowances and bands are frozen to 2031 (previously frozen to 2028). Allowances have now been frozen since 2021, bringing significantly more people into higher rates of tax than they would have otherwise paid.
As a reminder at the previous budget, Dividend taxes were increased from April 2026. The ordinary rate will rose from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%. The additional rate remains unchanged at 39.35%. The £500 tax free dividend allowance continues. Depending on income levels and personal circumstances, owner managers of companies may find it cheaper, in terms of overall tax take, to be paid by salary rather than by dividends from April 2026.
The previous Budget announced a two percentage point increase across all bands on savings income (interest). However, that increase has now been doubled to four percentage points before implementation meaning on savings income, the basic rate will rise from 20% to 24%, the higher rate from 40% to 44%, and the additional rate from 45% to 49% all effective from April 2027.
Basic Rate taxpayers can receive £1,000 of interest without paying tax, and Higher Rate taxpayers can receive £500 without paying tax.
Tax Planning point – please consider using ISA’s to shelter savings income from tax (up to £20,000 per year can be invested). Also consider splitting funds between spouses to ensure best use of the tax free allowances.
The government is also creating separate tax rates for property income, as already applies to savings and dividend income. From April 2027, the property basic rate will be 24%, the property higher rate 44% and the property additional rate 49%. Finance cost relief will be provided at the separate property basic rate of 24%.
Some landlords may wish to consider whether company ownership could reduce their ongoing tax burden. However, transferring property to a company can trigger Capital Gains Tax, Stamp Duty Land Tax, refinancing costs and other consequences. Contact us if you would like us to model the potential costs and benefits for your circumstances.
From April 2029, Self Assessment taxpayers with sufficient PAYE income will be required to pay more of their forecast liability in-year through PAYE. The government has also consulted on more frequent payments for other Self Assessment taxpayers, but the wider design has not yet been finalised.
State Pension - Pension Tax Allowance
The government will introduce the Pension Tax Allowance (PTA), so pensioners whose total income is no more than the full new State Pension do not face the administrative burden of paying small amounts of tax. The PTA is calculated by applying the basic rate of Income Tax, currently 20%, to the difference between the full new State Pension and the Personal Allowance. Individuals over State Pension age will qualify automatically if their total income, from all sources, is no more than the full new State Pension. For those with income above that level, the allowance will be withdrawn at a rate of £1 for every £3 of excess income. The allowance will apply from 6 April 2027 to 5 April 2030 and will be uprated in line with the full new State Pension during this Parliament.
National Insurance
No changes to rates were announced.
As announced in the previous budget, from 2029 National Insurance will be chargeable on Pension Salary sacrifices of greater than £2,000.
Employers will be required to report the sacrificed pension via the payroll system after April 2029.
Given this is likely to be around the time of the next election it may never actually happen.
Payroll Taxes
Although not announced in the Budget, mandatory payrolling of benefits in kind will begin on 6 April 2027 for company cars, car fuel, vans, van fuel and employer-provided medical benefits. Most remaining benefits in kind are due to follow from April 2028, while the timing for employer-provided loans and accommodation has not yet been confirmed. Employers will need to adapt their payroll processes and communicate the effect on employees. We will write separately to our payroll clients about the practical implications in the coming weeks.
Effective from April 2029 PAYE (along with VAT) will be required to be collected automatically by Direct Debit every month.
Capital Gains Tax
There were no material changes to the Capital Gains Tax regime.
As a reminder the lower rate of Capital Gains Tax is 18% the higher rate is 24%.
Capital Gains from Carried Interest continue to be taxed at 32%.
The Business Asset Disposal Relief Lifetime allowance is reduced to £500k (from £1m) taxed at 18% (this allowance was once worth £10m at 10%). Client’s looking to sell their companies soon would do well to ensure that is before 5 April 2027 before this reduction takes effect, unless they will qualify for the new Founders Allowance , below.
A New Founders Allowance was announced. This has similar hallmarks to the Business Asset Disposal Relief and an allowance of £10m at 10% but will be significantly harder to qualify for. This measure is subject to consultation, but the government’s initial plan is that to qualify:
Individual conditions
The individual will need to:
have held 25% of the company’s ordinary share capital (together with corresponding voting rights and rights to distributable profits and assets on a winding up), at the point when the trading activity for which the company was formed commenced, or the preparation for that trade commenced;
have held the shares or securities for at least five years before their disposal; and
have been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal.
Company conditions
The company will need to:
be in scope of UK Corporation Tax (defined as being UK-resident for Corporation Tax purposes, or carrying on business in the UK through a permanent establishment); and the business must have a substantial UK presence for the 5 accounting periods before disposal;
be a trading company, or the holding company of a trading group, without substantial non-trading activities or excluded trading activities. For the purposes of Founders’ Relief excluded trading activities will be the same as those set out for the existing Enterprise Investment Scheme (such as dealing in land, financial services, or property development);
continue the new trade it was established for when the founder's shares were issued with no major change in the nature of the trade. Any other trades will be treated in a similar way to excluded trades;
have generated turnover of at least £10 million in the accounting period prior to disposal; and
have employed at least 15 qualifying full-time employees in the accounting period prior to disposal. A qualifying full-time employee will be defined as an individual working at least 35 hours per week (as with the Enterprise Investment Scheme), paid at least the UK National Minimum Wage. Directors, contract and agency workers will be excluded from this condition.
Growth conditions
The company will also need to meet at least two of the following three tests:
Turnover test: Annual average compound growth in turnover of 25% across three consecutive accounting periods within the ten years before disposal, with turnover of at least £10 million in the accounting period before the first of these three periods.
Headcount test: Annual average compound growth of at least 25% in qualifying full-time equivalent employees across three consecutive accounting periods within the ten years before disposal, with at least 15 full-time employees in the accounting period before the first of these three periods.
Innovation test: the company must (1) have incurred qualifying expenditure of £1.5 million or more on research and development (R&D) for which it met all of the conditions to make an R&D tax relief claim and (2) have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal.
These tests will make it significantly harder for Entrepreneurs or Founders to qualify for this generous relief. It is possible some of these reliefs will be improved during consultation.
The consultation can be found here
Corporation Tax
There were no changes to the Corporation Tax rates. Broadly, the small profits rate is 19% for annual profits up to £50,000, the main rate is 25% for profits above £250,000, and marginal relief produces an effective marginal rate of 26.5% between those limits. The thresholds are reduced where companies are associated.
The main-rate writing-down allowance will fall from 14% to 12% from 1 April 2027. Separately, the main-rate first-year allowance for qualifying expenditure will increase from 40% to 50% from 1 January 2027. The £1 million Annual Investment Allowance and full expensing remain separate reliefs, each with its own qualifying conditions.
Clients with substantial main-pool balances brought forward, or significant planned capital expenditure, should discuss the timing and type of investment with us in advance so that the available allowances and cash-flow consequences are properly understood.
Business Rates
From 1 April 2027, qualifying retail, hospitality and leisure properties in England with a rateable value of up to £18,000 will be eligible for 100% Small Business Rates Relief, with tapered relief available up to a rateable value of £21,000. Vape shops are excluded from Small Business Rates Relief under the new rules.
Stamp Duty Land Tax
No changes of note.
Council Tax
As a reminder, in 2025, the government has announced the introduction of a new High Value Council Tax Surcharge. From April 2028, owners of properties identified as being valued at over £2 million or more in 2026 will be liable for a recurring annual charge which will be additional to existing Council Tax liability.
High Value Council Tax Surcharge charging structure:
Threshold (£m) | Rate (£) | |
|---|---|---|
£2.0-2.5 | £2,500 | |
£2.5-3.5 | £3,500 | |
£3.5-5.0 | £5,000 | |
£5+ | £7,500 |
The valuations will recur every 5 years. This surcharge will be collected as part of the usual Council Tax routine by the local authority but the money is passed on to central Government.
VAT
No changes.
Inheritance Tax
Rates and allowances maintained until 2031 (previously 2030).
As well as the above changes we also have the changes announced in the 2024 Budget that have applied since 6 April 2026, which are:
Inherited pension funds will now be subject to IHT.
Agricultural Property Relief and Business Property Relief have been reformed. From 6 April 2026, a combined £2.5 million allowance applies to qualifying property eligible for 100% relief. Qualifying value above that allowance receives 50% relief, resulting in an effective Inheritance Tax rate of up to 20% rather than the standard 40%.
Any unused part of the £2.5 million Agricultural Property Relief and Business Property Relief allowance can be transferred to a surviving spouse or civil partner. This may provide a combined allowance of up to £5 million on the second death, in addition to other available Inheritance Tax bands and exemptions, depending on the circumstances.
A reminder that AIM shares previously qualifying for Business Property Relief will now be subject to a 20% IHT rate (since April 2026).
National Minimum Wage
The National Minimum wage rates from 1 April 2027 will increase but not by the inflation busting amounts of previous years. All rates increase by 3.9% so there is no repeat of the inflation busting rises to the 18-20 year old rate we have had over the last few years. Employers will need to carefully review their wage structure to ensure they do not fall foul of these new rates come 1 April 2027.
Age | Rate from 1 April 2027 | Rate to 31 March 2027 | Rise |
|---|---|---|---|
21+ | £13.21 | £12.71 | 3.9% |
18-20 | £11.27 | £10.85 | 3.9% |
Apprentice or 16-17 | £8.31 | £8.00 | 3.9% |
Annual Minimum Wage equivalent of a 35-hour week | ||
Age | from 1 April 2027 | To 31 March 2027 |
|---|---|---|
21+ | £24,042.20 | £23,132.20 |
18-20 | £20,511.40 | £19,747.00 |
Apprentice | £15,124.20 | £14,560.00 |
The headlines only tell part of the story. The real impact of any Budget depends on your personal circumstances, business goals and future plans.
If you'd like to understand what these changes could mean for you, we'd be delighted to have a conversation. Get in touch with our team and we'll help you identify any opportunities, answer your questions and plan confidently for the future.