Chancellor John Healey delivered his first Budget on 28th October 2026, setting out the Government’s latest plans for taxation, public spending and the wider economy.
The 2026 Budget includes measures affecting individuals and businesses, from changes to Self Assessment payments and business mileage to support with business rates, investment and household costs.
Mileage rates and Fuel Duty
Earlier in 2026 the approved mileage allowance payment rate for employees using their own cars and vans for business journeys was increased from 45p to 55p per mile for the first 10,000 business miles, applying from 6th April 2026.
The Government has now confirmed that the 55p rate will be maintained, rather than reverting to the previous 45p rate. It has also confirmed a further increase for higher-mileage drivers: from 6th April 2027, the rate for business mileage above 10,000 miles will increase from 25p to 35p per mile.
The rates will therefore be:
- 2026/27: 55p for the first 10,000 qualifying business miles and 25p thereafter.
- From 6th April 2027: 55p for the first 10,000 qualifying business miles and 35p thereafter.
The changes are particularly relevant to company directors and employees who use their own cars or vans for qualifying business journeys, as well as eligible self-employed individuals who use simplified mileage expenses.
The temporary 5p-per-litre Fuel Duty cut is also being extended, while the planned RPI increase is being deferred until 1st July 2027.
Self Assessment payments are set to become more regular
The Government has confirmed a significant change to the way Self Assessment Payments on Account will operate. From April 2029, taxpayers who make Payments on Account will move towards smaller, more regular payments during the tax year in which income is earned, rather than making the existing twice yearly Payments on Account.
Around three million taxpayers currently make Payments on Account.
The Government has not yet determined exactly how frequently the payments will be made. Payments are expected to be automated, for example through Direct Debit. Taxpayers with sufficient PAYE income from employment or a private pension will also be able to choose to make payments through PAYE.
Taxpayers will still be required to submit their Self Assessment tax return by 31st January each year. The reform changes when payments towards the liability are made, rather than the overall amount of Self Assessment tax owed.
There will also be a transition year in 2029/30, as affected taxpayers make their final payment under the existing system while beginning payments under the new arrangements.
These changes come alongside the rollout of Making Tax Digital (MTD) for Income Tax, which represents a significant change to Self Assessment compliance for many self-employed individuals and landlords. Those within scope will be required to maintain digital records and provide information to HMRC using compatible software. However, it is important to distinguish the two reforms - MTD changes how information is recorded and reported to HMRC, while the payment reform changes when tax is paid. Becoming subject to MTD does not, by itself, mean that Income Tax becomes payable quarterly.
Taken together, however, the Self Assessment system is moving towards more digital, up-to-date reporting and more regular payment of tax. This makes good bookkeeping and maintaining current accounting records increasingly important throughout the year.
MTD April 2027 Cohort delayed penalties
Under today’s announcements, taxpayers who are required to join MTD for the first time from April 2027 will benefit from a soft-landing period for late filing penalties. This includes those with qualifying income above £30,000, as well as new trades or property businesses that started in 2025/26 and taxpayers who would otherwise have joined in April 2026 but received a temporary exemption, for example because they have trust income to report, need to file an SA109, or use averaging.
However, the soft landing is not being extended to everyone already within MTD. It will apply only to those entering MTD for the first time from April 2027. This means taxpayers who join MTD from April 2026 will start receiving penalty points for late quarterly updates from the 2027/28 tax year onwards.
HMRC given stronger powers to collect overdue tax
HMRC is being given stronger powers to pursue and recover unpaid tax, reinforcing the importance of dealing with tax liabilities promptly. Taxpayers who are unable to pay in full should engage with HMRC early and, where appropriate, consider agreeing a Time to Pay arrangement rather than allowing debts to remain outstanding.
Changes to Business Rates
The Budget introduces further Business Rates support for qualifying businesses in the retail, hospitality and leisure sectors in England.
From 1st April 2027, the rateable value threshold for 100% Small Business Rates Relief for qualifying retail, hospitality and leisure properties will increase from £12,000 to £18,000. The upper threshold for tapered relief will increase from £15,000 to £21,000. The Government estimates that these threshold changes will take approximately 70,000 additional high-street businesses out of Business Rates.
Further support includes:
- A two-year real-terms freeze in Business Rates bills for qualifying retail, hospitality and leisure properties in 2027/28 and 2028/29;
- An extension of transitional support for certain small and independent ratepayers.
- Total Business Rates relief of 35% for qualifying pubs, social clubs and live music venues from April 2027.
Eligibility will continue to depend on factors including the property’s rateable value, sector and the relevant relief conditions.
Businesses should review their individual position rather than assuming that the changes will automatically remove their Business Rates liability.
Minimum wage increases
Employment costs will remain an important consideration for businesses with employees, with the Government confirming further increases from 1st April 2027.
The National Living Wage for workers aged 21 and over is currently £12.71 per hour from 1st April 2026. From 1st April 2027, it will increase by 3.9% to £13.21 per hour.
The Government states that this represents an increase of approximately £910 in gross annual earnings for a full-time worker on the National Living Wage.
The National Minimum Wage for workers aged 18 to 20 will also increase by 3.9%, from £10.85 to £11.27 per hour from 1st April 2027.
Employers should review their payroll and staffing budgets ahead of April 2027.
The impact may extend beyond employees currently paid at the statutory minimum, as businesses may also need to consider pay differentials between roles and levels of responsibility.
Support for entrepreneurs and growing businesses
The Budget includes a number of measures intended to support individuals starting businesses, founders developing innovative companies and established businesses seeking investment.
Income Tax Trading Allowance increased to £3,000
From 6th April 2027, the Income Tax Trading Allowance will increase from £1,000 to £3,000. The allowance is particularly relevant to individuals earning smaller amounts of trading income alongside employment or another main source of income.
It could therefore benefit people testing a business idea, freelancing or generating income from a side business before deciding whether to develop it further.
The Trading Allowance applies to gross trading income before expenses. It does not simply provide every individual with £3,000 of additional tax-free profit and people with income above the allowance may still need to report their income and consider whether claiming actual expenses would produce a better result.
Individuals with growing businesses should continue to maintain appropriate records and consider their wider tax and reporting obligations.
Improved access to finance
The Government will bring forward £1 billion of investment through the British Business Bank and increase the Bank’s financial capacity by £2 billion to support additional investment in UK businesses. It is also expanding the Growth Guarantee Scheme, with the intention of supporting £6.5 billion of additional lending to small and medium-sized businesses across the Parliament.
Capital Gains Tax changes
The Budget includes significant Capital Gains Tax changes for entrepreneurs and business owners, particularly those considering a future sale or exit.
New Founders’ Relief
From 6th April 2027, the Government intends to introduce a new Founders’ Relief, providing a reduced 10% Capital Gains Tax rate on up to £10 million of qualifying lifetime gains per individual. The relief is intended for qualifying founders and significant early investors in high-growth, innovative UK companies.
The detailed qualifying conditions are still being developed. A technical consultation is open until 30th November 2026, after which the Government intends to legislate through Finance Bill 2026/27. The relief is intended to apply to qualifying disposals of shares or securities made on or after 6th April 2027.
Business Asset Disposal Relief
From 6th April 2027, the lifetime limit on qualifying gains eligible for Business Asset Disposal Relief will reduce from £1 million to £500,000.
This follows the previously announced increase in the BADR tax rate to 18% from 6th April 2026.
The reduction in the lifetime limit will be particularly important for business owners considering a future sale, company closure or other qualifying disposal. Special rules will apply to certain contracts, share reorganisations and exchanges spanning the commencement date.
Residential property disposal reporting
The Budget also makes a technical change to residential property disposal reporting. From 28th October 2026, the rules will be amended to prevent late-filing penalties on a UK property disposal return continuing to accrue where the disposal has subsequently been reported through the individual’s Self Assessment return.
Anyone considering selling shares, disposing of a business or closing a company should take advice before proceeding. The tax treatment may differ significantly depending on the timing of the transaction and whether the qualifying conditions for BADR or Founders’ Relief are satisfied.
Capital allowances for business investment
The Budget includes changes to the tax relief available when businesses invest in qualifying plant and machinery. From April 2027, the main rate of Writing Down Allowance will reduce by two percentage points to 12%. However, the main First-Year Allowance will increase from 40% to 50% from 1st January 2027, giving qualifying businesses a larger upfront deduction for eligible investment.
The Government has also reaffirmed its commitment to the Corporate Tax Roadmap, including maintaining the headline Corporation Tax rate at no more than 25% and retaining full expensing for qualifying expenditure.
Businesses planning significant purchases should consider the timing and nature of the expenditure before proceeding, as different capital allowance rules may apply.
Changes to tax on property and savings income
From 6 April 2027, the Income Tax rates applying to property and savings income will be 22% at the basic rate, 42% at the higher rate and 47% at the additional rate. These rates were originally announced in Budget 2025.
These changes will be particularly relevant to landlords, individuals with substantial taxable savings income and taxpayers whose income exceeds the available savings allowances. For property income, the new rates will apply in England, Wales and Northern Ireland, while the savings rates will apply across the UK. The Government has said it will engage with the devolved governments of Scotland and Wales regarding powers to set property income rates.
Clients with rental properties should consider the impact of the higher rates alongside mortgage-interest restrictions and other allowable property expenses when forecasting their future tax liabilities.
Pension Tax Allowance
The Government will introduce a new Pension Tax Allowance from 6th April 2027. Under the announced measure, pensioners whose total income is no more than the value of the full new State Pension will not incur an Income Tax liability solely because State Pension increases take their income above the Personal Allowance.
The measure is currently scheduled to apply until 5th April 2030, with further details expected on its operation and interaction with other income.
Energy support
The Budget contains several measures intended to reduce household energy costs. A new £100 Household Energy Payment will be provided from January 2027 to households in Council Tax bands A to D in England. The Government expects up to 20 million households to receive the payment, with corresponding funding being provided to the devolved governments.
VAT on qualifying domestic electricity supplies in Great Britain has been temporarily reduced from 5% to 0% for the period from 1st October 2026 to 30th June 2027, with the 5% rate due to resume on 1st July 2027.
The Government has also asked Ofgem to abolish domestic gas standing charges in Great Britain, aiming for implementation by the end of 2027 or as soon as possible afterwards.
These are primarily household measures, but they will nevertheless be relevant to many individual clients.
Cash ISAs and the new First Time Buyer ISA
The Government has reversed its previous proposal to reduce the annual Cash ISA subscription limit for individuals under 65 to £12,000 from April 2027. The Cash ISA limit will instead remain at £20,000.
The Government is also introducing a new First Time Buyer ISA, designed specifically to help individuals save towards purchasing their first home. The new First Time Buyer ISA is expected to replace the Lifetime ISA for new savers from 6th April 2029. Existing Lifetime ISA holders will be able to retain their accounts and continue saving into them under the existing rules. Separately, from 29th October 2026, the Lifetime ISA withdrawal charge will reduce from 25% to 20% for first-time buyers purchasing a property above the existing £450,000 property-price limit.
The Government’s review concluded that the existing Lifetime ISA can be complex, particularly because of its dual purpose and the withdrawal charge that can apply when funds are accessed outside the permitted circumstances. The new First Time Buyer ISA is intended to provide a simpler product focused specifically on first-time home ownership. Until the new product becomes available, individuals can continue to open a Lifetime ISA.
What should businesses and individuals do now?
For many clients, there is no need to take immediate action simply because of the Budget. However, there are several areas worth reviewing:
- Business mileage: ensure mileage claims reflect the 55p rate for the first 10,000 qualifying business miles in 2026/27. From 6 April 2027, the rate above 10,000 miles will increase from 25p to 35p.
- Self Assessment: prepare for the move to more regular payments from April 2029 if you currently make Payments on Account.
- Payroll: factor the April 2027 National Living Wage and National Minimum Wage increases into employment costs and cash-flow forecasts.
- Business Rates: check whether the revised thresholds, sector reliefs or transitional support could reduce future bills.
- Capital Gains Tax: seek advice before selling shares, disposing of a business or closing a company.
- Property and savings income: affected taxpayers should forecast the effect of the total four-percentage-point increase in the applicable Income Tax rates from April 2027.
- Capital expenditure: consider the timing of planned plant and machinery purchases in light of the capital allowance changes.
Entrepreneurial activity: individuals with smaller side businesses should consider whether the increased £3,000 Trading Allowance could apply from April 2027. - Cash flow: changes to Self Assessment payment timings may require affected taxpayers to adjust how they save and budget for tax.
Additional announcements
Other announcements in the Budget include:
- A new Parental Allowance for fathers, partners and adopters in Great Britain from April 2029.
- A planned taper for earnings above the Carer’s Allowance Weekly Earnings Limit during 2030/31.
- An extension of the £2,500 Universal Credit surplus earnings threshold for one further year from 1 April 2027.
- Tariff suspensions on 72 business products from 5 August 2026, alongside extensions to existing suspensions covering 361 products in 2027/28.
- A 3.7p-per-litre reduction in Red Diesel duty until July 2027.
- Increased generosity of Small Producer Relief for Alcohol Duty from 1 February 2027.
- Changes to Climate Change Levy rates from 1 April 2028.
- An extension of VAT Online Marketplace Liability rules.
- The previously announced High Value Council Tax Surcharge will apply from April 2028 to owners of residential properties in England valued at £2 million or more. The annual charges range from £2,500 for properties valued between £2 million and £2.5 million to £7,500 for properties valued at £5 million or more. Existing Council Tax will remain payable in addition to the surcharge.
What happens next?
The Budget provides the headline announcements, but detailed legislation and HMRC guidance will ultimately determine how individual measures apply.
Some changes have already taken effect, some begin in 2027 and others will not be introduced until 2029 or later. It is therefore important to check the relevant commencement date before making tax, investment or business decisions.
If you are considering a significant transaction or business decision, speak to your dedicated accountant before taking action so we can consider the tax implications based on your individual circumstances.
This article provides general information only and should not be treated as personalised tax, financial or investment advice.