TChancellor John Healey’s first Budget, delivered on 28 October 2026 under the title “Breathing space for today, fresh hope for the future”, combined help with everyday costs, support for new and growing businesses, and changes to tax on investment income. The important detail is not just what has been announced, but when it takes effect and whether it applies to your circumstances.
Running a business and employing people
Minimum wage and parental support
On 1 April 2027, the National Living Wage will increase by 3.9% to £13.21 per hour. The National Minimum Wage for 18- to 20-year-olds will also increase by 3.9% to £11.27 per hour. Employers should update payroll to reflect the new rates from that date. The wider budgeting impact also includes associated employment costs, not just the hourly rate.
From April 2029, parental pay will be extended to additional eligible parents previously outside the system, including self-employed fathers, partners and adopters. Eligible recipients will receive two weeks of support worth up to £194 a week.
Business mileage: 55p retained and the higher-mileage rate increased
With fuel costs continuing to rise, for those using their own car or van for qualifying business journeys, the 55p-per-mile rate for the first 10,000 business miles is being made permanent. From 6 April 2027, the rate above 10,000 miles will increase from 25p to 35p. These are business-mileage rules, not an allowance for ordinary commuting.
The rates set the maximum approved tax-free reimbursement; employers are not automatically required to pay that amount. Employees receiving less may be able to claim tax relief on the difference, while eligible self-employed people can use mileage rates under the simplified expenses rules. Keeping a clear record of business journeys is as always key here.
Business rates: more relief for eligible businesses
From April 2027, the threshold for full small business rates relief for eligible retail, hospitality and leisure businesses will increase from £12,000 to £18,000. This follows the 20% rate cut for pubs, clubs and live music venues announced earlier this year. The threshold refers to a property’s rateable value, not turnover or rent, and is not a blanket exemption for every small business.
For qualifying businesses, the change could remove a significant overhead. However, location, property use and the detailed eligibility rules remain important.
Business investment: upfront relief and writing-down allowances
Capital allowances let businesses deduct the cost of qualifying equipment and machinery from their taxable profits. Some allowances give relief upfront, while others spread the deduction over several years.
The first-year allowance introduced at 40% in January 2026 will increase to 50%. This means businesses using this allowance can deduct half the cost of qualifying expenditure from their taxable profits in the year of purchase, rather than 40%. The remaining cost is relieved over time through writing-down allowances.
Where expenditure qualifies, full expensing or the Annual Investment Allowance can provide a 100% upfront deduction. The 50% first-year allowance does not replace these reliefs; it is particularly relevant to sole traders, partnerships and some leasing businesses that cannot use company full expensing. Separately, from April 2027, the main writing-down allowance will fall from 14% to 12%, meaning costs remaining in the main pool receive relief more slowly.
The relief available depends on your business, what you buy and when you buy it, so it’s worth checking the rules before making a purchase.
Employee share options: a new EMI2 announcement
A new EMI2 initiative has been announced, intended to help private businesses offer employees a stake in future growth. This could be relevant to businesses considering share-based incentives alongside cash remuneration.
EMI2 will double the value of tax-advantaged options employees can hold from £60,000 to £120,000 from 6 April 2027, giving scaling businesses a more generous and flexible way to attract and retain talented employees as well as enabling those employees to share in the value they help their companies create.
Starting, financing and selling a business
Starting a business: a higher trading allowance and founder support
From April 2027, the trading allowance will increase from £1,000 to £3,000, allowing people starting a small business or side hustle to earn up to £3,000 a year tax-free under the allowance. The Self Assessment reporting threshold for trading income will also rise to £3,000. Both figures refer to gross trading income—the total received before expenses—not profit. Trading income below £3,000 a year will not need to be reported under this threshold, although you may still need to submit a tax return for other reasons.
The government will also pilot a Young Entrepreneurs Allowance, providing successful applicants with support towards their living costs during the first year of their business.
Selling a business: Founders’ Relief and a lower BADR limit
A proposed Founders’ Relief would apply a 10% Capital Gains Tax rate to qualifying share disposals, up to £10 million of lifetime gains per individual, from 6 April 2027. It is targeted at founders and significant early investors in high-growth, innovative companies—not every business owner. The detailed design is subject to technical consultation.
Business Asset Disposal Relief (BADR) provides an 18% Capital Gains Tax rate on qualifying gains when you sell a business or shares. From April 2027, the total gains you can claim this relief on over your lifetime will fall from £1 million to £500,000. This limit applies to the gain you make on the sale, not the total selling price.
Tax rates and paying HMRC
Employment and dividend tax rates: no further headline increase
The government committed to keeping the main employment income tax rates at 20%, 40% and 45% for 2027/28. Dividend tax rates will also remain unchanged from April 2027 at 10.75%, 35.75% and 39.35%, following the increases introduced in April 2026. The £500 dividend allowance will be retained too.
Property and savings income: further tax increases from April 2027
From 6 April 2027, tax rates on property and savings income will rise from the current basic, higher and additional rates of 20%, 40% and 45% to 24%, 44% and 49% respectively. The four-percentage-point increase combines the previously announced two-percentage-point rise with a further two-percentage-point rise announced in today’s Budget.
The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland, subject to devolved powers to set property income tax rates.
Self Assessment: smaller regular payments
The government will require Income Tax Self-Assessment taxpayers who make payments on account to make more regular in-year payments towards their final tax bill from April 2029.
Overdue tax
Further funding and stronger collection powers have also been announced for overdue tax. The government will introduce a new power enabling HMRC to recover lower value tax debts through regular instalments directly from the bank accounts of individuals and companies who can afford to pay but repeatedly fail to do so from July 2029.
VAT and PAYE: required direct debit arrangements
From April 2029, taxpayers will need to have a direct debit instruction in place for VAT and PAYE return liabilities. Businesses can still pay using another method before the specified cut-off date; the direct debit will collect any balance left unpaid.
Household finances and buying a home
Energy bills: standing charges and a £100 household payment
The government has announced plans to remove standing charges from household gas bills, with implementation expected from 2027 or as soon as possible afterwards. This is not the same as removing the underlying costs: moving costs into the unit rate means the effect on individual bills will depend on energy usage. Equivalent reforms to electricity bills are also being considered.
A £100 household energy payment, via the Council Tax system, will support eligible households in council tax bands A–D in England from January 2027, with funding for similar support elsewhere in the UK. The temporary VAT cut on electricity will also continue until 1 July 2027.
Pension income: protection around the full new State Pension
A new pension tax allowance has been announced to prevent pensioners with income up to the value of the full new State Pension from paying income tax.
Cash ISAs: the proposed cut is dropped
The proposed £12,000 cash ISA cap has been dropped, with the £20,000 allowance retained.
A new Starter ISA will be explored for people investing in a stocks and shares ISA for the first time
First-time buyers: a replacement ISA and equity loan support
From April 2029, the new First Time Buyer ISA will accept contributions of up to £4,000 a year, with no upper age limit. A 25% government bonus will be paid when funds are withdrawn for a qualifying first-home purchase costing up to £450,000, avoiding the need for a withdrawal charge.
A separate change applies to existing Lifetime ISAs from 29 October 2026: withdrawals for otherwise qualifying first-home purchases above £450,000 will face a reduced 20% charge. This removes the government bonus without imposing the additional penalty on the saver’s own contributions.
A separate “Your First Home” equity loan scheme has been announced for next spring, backed by £4.7 billion of government-supported lending. Eligibility, property restrictions, repayment terms and any conditions concerning other financial support will need checking before buyers can assess whether it is suitable.
What should business owners take away?
For small business owners, the areas to review include payroll costs, mileage policies, business rates eligibility, tax-payment cash flow and planned investment. Landlords and business owners considering a sale should pay particular attention to the relevant rates, relief conditions and commencement dates.
There is no need to make a rushed decision based on a Budget headline. The next step is to understand what actually impacts your business and personal circumstances.
If you would like help making sense of the announcements, get in touch. We can help you identify which measures are relevant and what needs a closer look.
Based on announcements made on 28 October 2026. Some measures remain subject to consultation or legislation. This is general information, not personalised advice; please speak to us before taking action.
Reference: HM Treasury (2026). Budget 2026: Breathing space for today, fresh hope for the future. HC 726. Published 28 October 2026.