30 October 2026 –
Chancellor John Healey delivered his first Autumn Budget on 28 October 2026.
This felt like a relatively ‘tame’ one after two high-tax budgets delivered by his predecessor, Rachel Reeves, being described as ‘underwhelming’ by some journalists.
However, it was not without some surprises as well as a few welcome announcements.
The shock increase to tax on rental income is yet another blow to landlords, whilst there were some pleasing developments for the self-employed and pensioners.
Here are my top ten highlights…
1. Increase in property and savings tax rates
Perhaps one of the biggest surprises was the (additional) 2% increase in Income Tax rates for property and savings income.
Following last year’s Budget, we were already set for a 2% increase on tax rates for these income sources from April 2027.
This additional 2% increase will take the basic, higher and additional rates to 24%, 44%, and 49% respectively, which now feel significantly higher than the comparative rates for other ‘non savings income’ (including employment, self-employment and pensions income) which remain at 20%, 40%, and 45% respectively.
These new rates will apply from April 2027, impacting private landlords and savers. Rent and savings income arising within a Limited Company is not affected by this change.
(For residential property landlords claiming tax relief on their mortgage interest, it is expected that the tax reducer will also be increased to 24%).
2. Minimum wage increases
In April 2027, minimum wages will be increasing by 3.9% across the board:
- The National Living Wage (for 21 year olds and over) £13.21
- 18 – 20 year olds £11.27
- 16 – 17 year olds £8.31
- Apprentice rate £8.31
This will yet again increase the wage burden on small employers.
These will apply from the start of the first pay reference period that begins on or after 1 April 2027.
3. Trading allowance increase
One surprising, but welcome announcement, was the increase in the trading allowance from £1,000 to £3,000.
Currently those with income (before expenses) of £1,000 or less from self-employment, including side hustles, do not have to pay tax on this income, or even report these earnings to HMRC.
Individuals with income above £1,000 but with expenditure totalling less than £1,000 can choose to claim the trading allowance as a deduction from their total income (rather than actual expenses incurred), thus simplifying reporting for those individuals claiming the relief.
In the Budget it was announced that the allowance is going to increase to £3,000, taking effect from 6 April 2027.
(The property allowance remains unchanged at £1,000).
4. Approved mileage rates
Following the increase of the approved mileage rates from 45p to 55p from 6 April 2026 for the first 10,000 business miles, it has been announced that the government will also increase the rates for business mileage above 10,000 miles from 25p to 35p per mile.
This will apply from 6 April 2027.
5. ISAs and other savings schemes
Another welcome change was the scrapping of plans to lower the annual cash ISA subscription limit from £20,000 to £12,000 for individuals aged under 65 from 6 April 2027.
It appears the new Chancellor is opting for a carrot rather than stick approach, with the government announcing it will be developing a new ISA incentive, which will seek to encourage individuals to invest in Stocks and Shares ISAs.
There will also be the introduction of a first-time buyer ISA and a Help to Save scheme.
The government will also be reducing Lifetime ISA withdrawal charges for properties over the property price cap.
6. Pension Tax Allowance
This will protect pensioners from Income Tax if their State Pension increases to above the Personal Allowance of £12,570 (expected to happen next year for those entitled to the full State Pension).
The availability of this allowance is confirmed for 2027-28, 2028-29, and 2029-30.
The value of the allowance will be calculated by applying the basic rate of Income Tax (20%) to the difference between the full new State Pension and the Personal Allowance.
There will be a gradual withdrawal of it such that individuals with total income above the value of the full new State Pension will have their Pension Tax Allowance withdrawn at a rate of £1 for every £3 of income above this level, avoiding a cliff edge. In effect this means that pensioners with annual income above £13,319 are not expected to benefit from the relief.
No claim will be needed – the Pension Tax Allowance will be given automatically based on the age and income of the individual.
7. CGT Rates
Owners of property, shares and other investments will breathe a sigh of relief that the CGT rates have not increased.
There had been concerns amidst much speculation that the new Prime Minister wanted to raise CGT rates to match, or bring them closer to, Income Tax rates which stand as high as 45%.
The top rate of CGT remains at 24%.
8. Business Asset Disposal Relief (BADR)
Following rumours leading up to the Budget that this relief (formerly known as Entrepreneurs’ Relief) might be scrapped altogether, it has been retained but with the lifetime limit falling from £1 million to £500,000, with this reduced limit applying to BADR qualifying disposals made on or after 6 April 2027.
BADR allows individuals that qualify to pay a lower rate of tax (currently 18%) up to the lifetime limit.
This will be a blow to owners of small businesses that are planning to sell up or retire in the near future, and it is possible that this announcement will cause some to reconsider the timing or method of their exit.
Another consequence could be a renewed interest in EOTs (Employee Ownership Trusts), which took a hammering at last year’s Budget.
The government did announce a new relief (‘Founders’ Relief’) for business owners and entrepreneurs, with a reduced CGT rate of 10% on qualifying disposals, with a £10 million lifetime limit per shareholder. This is yet to be ironed out in detail, with a technical consultation to follow, but the qualifying conditions are expected to be much stricter than BADR with the relief aimed at founders of high-growth companies trading in the UK, applying from 6 April 2027.
9. Making Tax Digital for the self-employed and landlords
If there were those holding their breath that the government might scrap MTD altogether in this Budget, they would have been sorely disappointed.
There will however be a ‘soft landing’ for those coming into the regime from April 2027 (generally those with gross combined income over £30,000), meaning there will not be any late submission penalty points to quarterly updates for the 2027-28 tax year.
This mirrors the approach taken for those that came into the regime in April 2026.
Those in this next (April 2027) cohort will still need to send their quarterly updates before they are able to submit their final end of year tax return.
10. Finally, these updates are a few years away but deserve a mention:
- Mandatory e-invoicing will take effect from 1 April 2029, and will require VAT invoices to be issued and received in a prescribed electronic format. This will be a huge change and is likely to have a significant impact on small businesses.
- Those filing self-assessment tax returns who make payments on account will be required to make more regular in year payments towards their tax bill from April 2029.
- The government will require taxpayers to set up a Direct Debit instruction for VAT and PAYE return liabilities from April 2029, subject to defined exceptions. Though it should be noted businesses will still be able to pay by other payment methods, with the Direct Debit acting as a safeguard to collect any remaining liability at the due date.
- The government is expected to introduce legislation in future to enable HMRC to recover certain lower value debts through regular deductions from bank accounts – this is where customers repeatedly fail to engage with HMRC. The changes are expected to take effect from 2029-30.
- The government is bringing in a ‘requirement to correct legislation’, which will include a general obligation on taxpayers to correct inaccuracies when they are identified. There will also be a new power enabling HMRC to issue a Customer Correction Notice where it has reason to suspect an inaccuracy. This will apply from 1 April 2028.
These may not have made the headlines but are considerable changes which small businesses and landlords should be aware of.
Need a more detailed and bespoke analysis?
This article seeks to highlight some key points of the Budget but is by no means an exhaustive list.
Zip Accounting can provide a more tailored assessment of the impact of the Budget on your finances.
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