Key Budget Changes: The Essential Takeaways 2026

Income Tax

• Property income: From April 2027, property income will be taxed at new rates of 24%, 44% and 49%, increasing the tax cost for individual landlords.
• Savings income: From April 2027, savings income tax rates will rise to 24%, 44% and 49%, affecting individuals with significant savings and investment income.
• Trading Allowance: From April 2027, the Trading Allowance and Self Assessment trading-income reporting threshold will increase from £1,000 to £3,000, reducing administration for small-scale traders and side hustles.
• Pension Tax Allowance: From April 2027, a new Pension Tax Allowance will prevent pensioners whose income is no more than the full new State Pension from having to settle small tax liabilities through Simple Assessment.
• Business mileage: From April 2027, the Approved Mileage Allowance Payments (AMAPs) and self-employed simplified mileage payments for business mileage above 10,000 miles will rise from 25p to 35p per mile, benefiting employees with significant business travel.
• Company cars: Company Car Tax rates will continue to increase, including a further one percentage point increase for zero-emission vehicles in 2030/31.
• Pensions and IHT: From April 2027, unused pension funds and certain death benefits will come within the scope of Inheritance Tax, making estate planning more important for business owners.

Corporation Tax

• Capital allowances: The main rate first-year allowance for qualifying plant and machinery will increase from 40% to 50% from 1 January 2027, although the main writing-down allowance will subsequently fall to 12% in April 2027.
• R&D tax relief: R&D claims should become simpler from April 2027, including the removal of the separate Claim Notification Form and later simplification of the Additional Information Form.
• Bank Corporation Tax Surcharge: The surcharge will increase from 3% to 6% for 15 months, before the increased rate ends on 31 March 2028.
• EMI and CSOP: Employee share schemes will become more flexible, including a £120,000 CSOP option limit and changes to the EMI rules, helping growing SMEs use equity to attract and retain employees.

VAT

• Domestic electricity: The temporary 0% VAT rate on domestic electricity will continue until 30 June 2027, rather than reverting to the normal 5% reduced rate in April.
• Electronic invoicing: Mandatory electronic VAT invoicing is planned from April 2029, so businesses should expect their accounting and invoicing processes to become increasingly digital.
• Online Marketplace Sales: From October 2027, online marketplaces become responsible for VAT collection on qualifying UK business sales through their platforms.

Capital Gains Tax

• Business Asset Disposal Relief: The lifetime BADR limit will be halved from £1 million to £500,000 for qualifying disposals from 6 April 2027. This could make the timing of business sales important.
• Founders' Relief: A new Founders' Relief is planned from April 2027, offering a lower CGT rate for qualifying founders and early investors in high-growth UK businesses. The conditions are expected to be more onerous than the current BADR rules and so is not a like-for-like replacement.
• Reorganisations and company purchase of own shares: significant changes are expected to the rules relating to certain types of reorganisations from April 2028, however exact detail is yet to be announced.

Tax administration

• Benefits in kind: Most benefits in kind will move to mandatory payrolling, starting with company cars, vans, fuel and medical benefits from April 2027, with most other benefits following in 2028.
• Subsistence expenses: From April 2028, tax-free benchmark subsistence rates will increase significantly, including £20 for more than 5 hours, £60 for more than 10 and £75 for over 24 hours of qualifying business travel.

Other announcements worth mentioning

• National Living Wage: The National Living Wage will rise 3.9% to £13.21 an hour from 1 April 2027, increasing payroll costs for many SMEs.

• Fuel duty: The 5p fuel duty cut will continue for a further six months, with the planned RPI increase deferred until 1 July 2027.

• Warm Homes loans: The new Warm Homes loans scheme will help households spread the upfront cost of solar panels, batteries and heat pumps.
  High Value Council Tax Surcharge: From April 2028, residential properties worth £2 million or more will face an additional council tax surcharge.

• Business Rates Relief: From April 2027, Small Business Rates Relief thresholds for qualifying retail, hospitality and leisure properties in England increase to £18,000 for full relief and £21,000 for tapered relief.

• £100 Household Energy Payment:  Eligible households in council tax bands A–D will receive £100 support from January 2027.

• Mileage