Budget 2026: what it means for you and your business

Most of the changes announced at the Budget on 28 October 2026 start from April 2027, but a few apply sooner, including a higher first-year allowance for spending from 1 January 2027. Some of them are significant for business owners, landlords and savers.

Our tax team has checked the Budget documents, and this post sets out what was announced and who it affects.

Business owners and directors

Business Asset Disposal Relief limit halved

The lifetime limit for Business Asset Disposal Relief falls from £1,000,000 to £500,000 for disposals on or after 6 April 2027. The rate stays at 18%. Special rules apply to contracts made before that date but not yet completed. (OOTLAR para 1.33)

If you plan to sell or close your company, the value of the relief could halve for gains above £500,000, so it is worth re-checking the numbers on any planned exit now.

A new Founders’ Relief

The Budget announced a new Capital Gains Tax Founders’ Relief from 6 April 2027, charging 10% on up to £10 million of lifetime gains for qualifying founders. The details are out for consultation until 30 November 2026 and could change. (GOV.UK consultation)

Distributions and repayments of capital

The government has confirmed it will modernise how company distributions and repayments of capital are taxed, from April 2028, with draft legislation in 2027. (GOV.UK summary of responses; OOTLAR para 2.15)

If you have an exit, a liquidation or a capital reorganisation planned after April 2028, bear this in mind.

Capital allowances

The first-year allowance for new, unused main-rate plant and machinery rises from 40% to 50% for spending on or after 1 January 2027. The main-rate writing-down allowance falls from 14% to 12% from 1 April 2027 for companies and 6 April 2027 for sole traders and partnerships, with a blended rate for accounting periods that span the change. Cars and second-hand assets do not qualify for the first-year allowance. (OOTLAR para 1.42)

In practice, the timing of equipment purchases around 1 January and 1 April 2027 matters, so talk to us before you commit to large spending.

Rates that are not changing

Corporation Tax stays at 19% and 25%, with the £50,000 and £250,000 limits, up to FY2028. Dividend rates (10.75%, 35.75% and 39.35%) and the £500 dividend allowance are unchanged for 2026/27 and 2027/28. (OOTLAR Annex A)

Employers

Payrolling benefits in kind

The government will legislate in Finance Bill 2026-27 to make payrolling mandatory for cars, vans, fuel and medical benefits from 6 April 2027. Most other benefits follow from 6 April 2028. Employment-related loans and living accommodation are not part of the mandatory change, although employers can choose to payroll them from 2027/28. (OOTLAR para 1.24; SI 2026/1082)

If you run a payroll, check that your software can handle benefits and agree a plan for 2027/28 before the year starts.

Company cars

Company car benefit percentages for electric cars stay at 4%, 5%, 7% and 9% from 2026/27 to 2029/30. The Budget added a further 1 point rise for 2030/31. (OOTLAR para 1.25)

If you are taking on a car lease that runs past April 2030, factor the 2030/31 rise into it.

Mileage over 10,000 miles

The approved mileage rate above 10,000 business miles rises from 25p to 35p a mile from 6 April 2027. The 55p rate for the first 10,000 miles is unchanged. (OOTLAR para 2.7)

National Insurance and the Employment Allowance

Employer National Insurance stays at 15%, and the Employment Allowance stays at £10,500 for 2026/27 and 2027/28. (OOTLAR Annex A)

Landlords

Higher tax on property income

From 6 April 2027, property income will have its own Income Tax rates. Finance Act 2026 set them at 22%, 42% and 47%. At the Budget the government announced it will legislate in Finance Bill 2026-27 for 24%, 44% and 49% instead, in England, Wales and Northern Ireland. The Scottish and Welsh governments can set their own property rates. (OOTLAR para 1.2)

Finance Act 2026 links the tax credit for residential mortgage interest and other finance costs to the property basic rate from 6 April 2027. Under Finance Act 2026 that is 22%. If Finance Bill 2026-27 sets the property basic rate at 24% as announced, the credit will be 24%.

A landlord with higher profits and a smaller mortgage pays more. Before April 2027, it is worth reviewing how your properties are held and what each one earns after tax.

Making Tax Digital

Making Tax Digital for Income Tax applies from 6 April 2027 if your qualifying self-employment and property income is over £30,000. If you have to join MTD in April 2027, you will not get penalty points for late quarterly updates in 2027/28. (OOTLAR para 2.36)

Individuals and savers

Savings income

Savings income will be taxed at 24%, 44% and 49% from 6 April 2027, 4 points above the rates for earned income. (OOTLAR paras 1.1 to 1.2; Annex A)

The cash ISA limit stays at £20,000 from April 2027 for savers aged 18 and over. (OOTLAR para 2.5)

From 29 October 2026, the Lifetime ISA withdrawal charge when you buy a home above the Lifetime ISA property price cap falls from 25% to 20%; other unauthorised withdrawals still carry a 25% charge. (OOTLAR para 2.4; SI 2026/1130)

It is a good time to look at where your savings are held and to use your ISA allowance where you can.

Allowances and bands

The Personal Allowance stays at £12,570 and the basic rate band at £37,700, held at these levels to 5 April 2031. The trading allowance rises to £3,000 from 6 April 2027. (OOTLAR para 1.5; Annex A)

Capital Gains Tax

The Capital Gains Tax rates of 18% and 24% and the £3,000 annual exempt amount are unchanged. (Annex A)

VAT on home electricity

The temporary 0% VAT rate on qualifying domestic electricity will be extended to 30 June 2027. Northern Ireland stays at 5% for now; the government expects the relief to apply there from April 2027. (OOTLAR para 2.20)

Pensions and Inheritance Tax

Unused pensions will be brought into Inheritance Tax for deaths from 6 April 2027. This is now law in Finance Act 2026. (OOTLAR para 1.27)

For payments made on or after 28 October 2026, pension and lump sum death benefits will no longer become taxable just because they are paid more than two years after the scheme administrator knew, or should have known, of the member’s death; the government will legislate in Finance Bill 2026-27. (OOTLAR para 1.18)

The pensions annual allowance (£60,000), the money purchase annual allowance (£10,000) and the lump sum allowance (£268,275) are unchanged. The Inheritance Tax nil-rate band (£325,000), residence nil-rate band (£175,000) and the £2.5 million 100% allowance for agricultural and business property relief also stay. (Annex A)

We would suggest reviewing your pension nominations and estate plan before April 2027.

Making Tax Digital and HMRC administration

If you have to join MTD in April 2027, you will not get penalty points for late quarterly updates in 2027/28. You will still need to send every update before you can file your tax return. If you joined in April 2026, HMRC will not apply penalty points for late quarterly updates in 2026/27, but points apply from 2027/28. (HMRC guidance)

People eligible for qualifying care relief, non-UK resident foreign entertainers and sportspeople, and people HMRC expects to be non-resident will be exempt from MTD until further notice. Secondary legislation is due before April 2027. (OOTLAR para 2.37)

From April 2029, VAT and PAYE return liabilities will have to be paid by Direct Debit, subject to exceptions, with legislation in a future Finance Bill. (OOTLAR para 2.32)

The MTD thresholds are unchanged: £30,000 from April 2027 and £20,000 from April 2028. If you need help getting ready, see our Making Tax Digital service.

Things to look at now

1. If you are planning a sale or exit, re-check the numbers against the £500,000 Business Asset Disposal Relief limit before 6 April 2027.
2. If you are buying equipment, time large purchases around the 50% first-year allowance from 1 January 2027.
3. If you let property or hold savings, work out what the 24%, 44% and 49% rates mean for you from April 2027, and use your ISA allowance.
4. If you run a payroll, get ready to payroll cars, vans, fuel and medical benefits from 6 April 2027.
5. If you are joining MTD in April 2027, choose software and get your records digital this winter.
6. If you are doing pension or estate planning, review pension nominations before unused pensions come into Inheritance Tax.

Key dates

• The Founders’ Relief consultation closes on 30 November 2026.
• On 1 January 2027 the first-year allowance rises from 40% to 50%.
• On 1 April 2027 the main-rate writing-down allowance falls to 12% for companies.
• On 6 April 2027 it falls to 12% for sole traders and partnerships.
• 6 April 2027 is the main start date. From then the BADR limit is £500,000, savings and property income rates are 24%, 44% and 49%, the trading allowance is £3,000, cars, vans, fuel and medical benefits are payrolled, mileage above 10,000 miles is 35p, Founders’ Relief starts, MTD applies from £30,000 and unused pensions come into Inheritance Tax.
• The 0% VAT rate on domestic electricity in Great Britain ends on 30 June 2027.
• From April 2028 most other benefits are payrolled, the new rules for distributions and repayments of capital apply, and MTD applies from £20,000.
• From April 2029 VAT and PAYE are paid by Direct Debit.
• In 2030/31 company car benefit rises by a further 1 point.

Talk to us before you act

If you want to know what the Budget means for your own figures, speak to us before you act.

Sources

• Penalties for Making Tax Digital for Income Tax, HMRC guidance
• The Income Tax (Pay As You Earn) (Amendment No. 3) Regulations 2026, SI 2026/1082
• The Individual Savings Account (Amendment) (No. 3) Regulations 2026, SI 2026/1130
• Budget 2026: Overview of tax legislation and rates (OOTLAR), GOV.UK
• OOTLAR Annex A: rates and allowances, GOV.UK
• Budget 2026 document, GOV.UK
• Modernising the taxation of distributions and repayments of capital, GOV.UK
• Founders’ Relief technical consultation, GOV.UK

Checked on 29 October 2026. This is general information, not tax advice. Measures announced at the Budget on 28 October 2026 still need Finance Bill or other legislation before they become law, and rates can change at future fiscal events. Please speak to us before acting on anything here. IB&Co Accountants is regulated by the IFA and IPA.