The Chancellor’s Budget 2026 brings no increases to the headline rates of income tax, National Insurance, VAT or corporation tax. However, significant changes are coming for business owners planning an exit, landlords, savers and employers.
Most of these changes will take effect from April 2027, giving businesses and individuals a valuable but limited window to review their financial and tax planning.
What are the key changes in Budget 2026?
Chancellor John Healey delivered his first Budget on 28 October 2026. While the headline tax rates remain unchanged, several important measures will affect businesses and individuals over the coming years.
The main announcements include:
- Business Asset Disposal Relief lifetime limit reduced from £1 million to £500,000 from 6 April 2027.
- A new Founders’ Relief offering a 10% Capital Gains Tax rate on up to £10 million of qualifying lifetime gains.
- Higher tax rates on savings and property income from April 2027.
- Trading allowance increased from £1,000 to £3,000.
- Capital allowances changes, including an increase in the main-rate first-year allowance from 40% to 50%.
- Changes to employee share option schemes, including an increased EMI2 limit.
What does Budget 2026 mean for business owners?
One of the most significant announcements for business owners concerns Business Asset Disposal Relief (BADR).
The lifetime limit will be reduced from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The BADR Capital Gains Tax rate remains at 18%.
This means business owners considering selling all or part of their company should carefully review the timing of their disposal.
There are special rules for contracts entered into before 6 April 2027, so the date and structure of a proposed transaction will be important.
What is Founders’ Relief?
Budget 2026 introduces a new relief for qualifying founders of high-growth, innovative companies.
Founders’ Relief will offer a 10% Capital Gains Tax rate on up to £10 million of lifetime qualifying gains for disposals made from 6 April 2027.
HMRC’s consultation on the detailed qualifying conditions closes on 30 November 2026. Business owners should monitor the final rules to understand whether their company and shareholding will qualify.
What are the new tax rates on savings and property income?
From 6 April 2027, tax rates on savings income and property income in England, Wales and Northern Ireland will increase.
- Basic-rate taxpayers: 24%
- Higher-rate taxpayers: 44%
- Additional-rate taxpayers: 49%
These rates are two percentage points higher than the rates already legislated.
For landlords and individuals with substantial savings, this is one of the most important changes to consider when reviewing financial arrangements and tax planning.
What other personal tax changes have been announced?
Not every announcement involves an increase in tax. Budget 2026 also includes several measures that could benefit individuals and smaller businesses.
- Income tax and National Insurance headline rates remain unchanged.
- Income tax thresholds remain frozen, with National Insurance thresholds held until 2030-31.
- Dividend tax rates remain unchanged.
- The trading allowance increases from £1,000 to £3,000 from 6 April 2027.
- The Self Assessment reporting threshold for trading income increases to £3,000.
- The cash ISA allowance remains at £20,000 for all adults.
- A new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029.
- The approved mileage rate for business miles above 10,000 per year increases from 25p to 35p from 6 April 2027.
What changes are coming to employee share options?
The Company Share Option Plan (CSOP) is being relaunched as EMI2 from 28 October 2026, although it retains its CSOP name in legislation.
From 6 April 2027, the following changes will apply:
- The employee share option limit doubles from £60,000 to £120,000.
- Options can be exercised with tax advantages for up to 15 years, compared with the current 10-year period.
- The EMI exercise window following a disqualifying event extends to 180 days.
These changes could make tax-advantaged share options more attractive for companies that have outgrown the existing EMI arrangements.
What is changing for employers?
Employers will need to prepare for several changes to payroll and employment-related tax rules.
Payrolling benefits in kind: Mandatory payrolling will begin from 6 April 2027 for company cars, vans, fuel and medical benefits. Most other benefits will follow from April 2028.
Sponsored workers: Employer-paid Immigration Skills Charges and Certificate of Sponsorship fees become exempt from tax from 28 October 2026.
National Minimum Wage: The National Living Wage and National Minimum Wage will increase by 3.9% from April 2027.
What are the changes to VAT, business rates and duties?
Budget 2026 also introduces changes that will affect businesses across several sectors.
- Business rates: In England, the Small Business Rate Relief threshold for retail, hospitality and leisure increases from £12,000 to £18,000 from April 2027. Around 70,000 businesses are expected to pay no business rates.
- Private hire: Larger private hire operators will charge VAT on their full fares from 2 January 2028. The turnover threshold will be subject to consultation, with £50 million as the lead option.
- Social housing: Sales of land to registered housing associations will be zero-rated for VAT from 1 April 2027.
- Energy and fuel: The 0% VAT rate on household electricity and the 5p fuel duty cut continue until 30 June 2027.
- Fuel duty: Fuel duty returns to pre-2022 levels, adjusted by RPI, from 1 July 2027.
What are the changes to capital allowances?
Businesses planning significant investment in equipment and other qualifying assets should pay attention to the changes to capital allowances.
The main-rate first-year allowance increases from 40% to 50% for expenditure from 1 January 2027.
At the same time, the main-rate writing-down allowance falls to 12% from April 2027.
Businesses planning substantial capital expenditure should review the timing of their investments to understand how these changes may affect their tax position.
What other changes should businesses know about?
There are several further announcements that could affect businesses over the coming years.
Corporation tax: The main rate remains at 25%, and the small profits rate remains at 19%, including for the year beginning 1 April 2028.
Bank surcharge: The surcharge on bank profits increases from 3% to 6% between 1 January 2027 and 31 March 2028. This could influence lending decisions and borrowing conditions.
Making Tax Digital: Those joining Making Tax Digital for Income Tax in April 2027 will not receive late-submission penalty points for quarterly updates during 2027-28.
What should you do now?
Although many of the changes do not take effect until April 2027, there are practical steps you can take now to prepare.
- Planning a business sale? Consider whether completing before 6 April 2027 could preserve the £1 million BADR lifetime limit.
- Running a growing company? Monitor the qualifying conditions for the new Founders’ Relief.
- A landlord or saver? Review how your property and savings are held before April 2027.
- Rewarding key employees? Compare existing EMI arrangements with the increased EMI2 (CSOP) limit.
- Buying equipment? Consider the timing of capital expenditure around the increased 50% first-year allowance.
- An employer? Start preparing your payroll systems for mandatory payrolling of benefits in kind.
Looking further ahead: What changes are coming from 2029?
Some Budget 2026 measures will take longer to come into effect, but businesses and individuals should be aware of them now.
- From April 2029, Self Assessment taxpayers who make payments on account will move to more regular in-year payments.
- Direct Debit will become mandatory for VAT and PAYE.
- Changes to electronic invoicing will also take effect.
These measures mean businesses should continue reviewing their accounting, payment and financial reporting processes over the coming years.
Frequently asked questions
What happens to Business Asset Disposal Relief after Budget 2026?
The BADR lifetime limit will be reduced from £1 million to £500,000 for qualifying disposals made on or after 6 April 2027. The 18% Capital Gains Tax rate remains unchanged. Special rules apply to contracts entered into before this date.
What are the new tax rates on property and savings income?
From 6 April 2027, savings income across the UK and property income in England, Wales and Northern Ireland will be taxed at 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers.
What is Founders’ Relief?
Founders’ Relief is a new Capital Gains Tax relief for qualifying founders of high-growth, innovative companies. It offers a 10% tax rate on up to £10 million of lifetime qualifying gains for disposals from 6 April 2027. HMRC’s consultation closes on 30 November 2026.
What is EMI2?
EMI2 is the new name for the Company Share Option Plan (CSOP) from 28 October 2026. From 6 April 2027, the employee limit doubles from £60,000 to £120,000, and options can be exercised with tax advantages for up to 15 years.
When does payrolling benefits in kind become mandatory?
Mandatory payrolling begins on 6 April 2027 for company cars, vans, fuel and medical benefits. Most other benefits will follow from April 2028.
How does Budget 2026 affect your business?
Every business and personal financial situation is different. While Budget 2026 provides some opportunities, it also introduces important tax changes that require careful planning.
Many of the measures will be subject to further legislation and clarification through the Finance Bill. Reviewing your circumstances early can help you understand the potential impact and make informed decisions.
To discuss how Budget 2026 affects you, contact your usual LMJ Group adviser, call 0330 390 5959 or email sales@lmjgroup.co.uk.
This article is based on announcements made in Budget 2026 and HMRC’s Overview of Tax Legislation and Rates published on 28 October 2026. It is for general information only and does not constitute advice. Legislation may change during the Finance Bill’s passage through Parliament.