By Chris Milsom Oct 2026
The headlines
The 28 October 2026 Budget did not raise the main rates of income tax, National Insurance or VAT. Instead, it raises tax on savings and property income, cuts some reliefs, and adds new incentives for founders and business investment.
Most changes start on 6 April 2027. That gives you around five months to plan. Below, we set out what matters for each type of client, and what you can do now.
This is general information, not personal advice. Please talk to us before acting.
Employees and savers
Income tax bands and the £12,570 Personal Allowance stay the same for 2026-27 and 2027-28. The big change is tax on savings interest. From 6 April 2027 it rises to 24% (basic), 44% (higher) and 49% (additional), up from 20%, 40% and 45%. The Personal Savings Allowance (£1,000 basic rate, £500 higher rate) and the £20,000 ISA limit both stay.
What to do
- Use your 2026-27 ISA allowance before 5 April 2027, then your new one from 6 April. Interest inside an ISA stays tax-free.
- If your spouse or civil partner pays a lower rate of tax, holding savings in their name can use their allowances and lower rate.
- If you use your own car for work, the tax-free mileage rate is now permanently 55p a mile for the first 10,000 miles and 35p after that. If your employer pays less, you can claim tax relief on the difference.
Landlords and property investors
From 6 April 2027, rental profits get their own tax rates: 24%, 44% and 49% in England, Wales and Northern Ireland. Until then, they are taxed at the normal 20%, 40% and 45%. Stamp Duty Land Tax rates are unchanged. HMRC will also consult on collecting more property income data from third parties.
The published documents don’t say how the new rates affect the 20% tax credit for mortgage interest. We will update you when draft law is published.
What to do
- Think about timing. A tax-deductible repair paid after 6 April 2027 saves tax at the higher new rate. Never delay urgent or safety work for tax reasons.
- Review who owns each property. Moving a share to a spouse or civil partner who pays less tax can lower the bill. Check the mortgage terms and legal costs first.
- For larger portfolios, re-check whether holding property in a company makes sense. Corporation Tax is 19% to 25%. But moving property into a company can trigger Capital Gains Tax and Stamp Duty Land Tax, so get advice first.
- Keep your records tidy. HMRC will have more data to check your return against.
Sole traders and the self-employed
Class 4 National Insurance stays at 6% on profits between £12,570 and £50,270, and 2% above that. Several changes help the self-employed.
What to do
- Side income: the Trading Allowance triples from £1,000 to £3,000 from 6 April 2027. Small side earnings may become tax-free. If your costs are more than £3,000, claiming actual costs is still better.
- Mileage: the 55p (first 10,000 miles) and 35p (after that) rates are now permanent. If you use simplified mileage, make sure you claim the new rates.
- Making Tax Digital: if you join in April 2027, you won’t get penalty points for late filing of your first four quarterly updates. Use that year to get your software and routine right, rather than relying on the grace period.
- Cash flow: from April 2029, payments on account will become smaller and more frequent. Start budgeting monthly for tax now.
- Family: from April 2029, self-employed fathers, partners and adopters will be able to get parental pay for the first time.
Owner-managed companies and directors
Corporation Tax stays at 19% for profits up to £50,000 and 25% above £250,000. Dividend tax rates are unchanged at 10.75%, 35.75% and 39.35%, with a £500 allowance. Full expensing (100%) and the £1 million Annual Investment Allowance both stay.
The changes:
- The main rate writing-down allowance falls from 14% to 12% from 1 April 2027.
- The main rate first-year allowance rises from 40% to 50% for spending from 1 January 2027.
- EMI2 (the new name for CSOP) doubles the share option limit to £120,000 per employee from 6 April 2027, on top of EMI.
- The R&D Claim Notification Form is scrapped from 1 April 2027.
- The rules on how money taken out of a company is taxed will be reformed from April 2028. Draft law is due in 2027.
What to do
- Plan big purchases. Use full expensing or the AIA where you can. For spending that doesn’t qualify, the new 50% first-year allowance may help.
- If you charge your company interest on a director’s loan, that interest is savings income. It will be taxed at the higher savings rates from April 2027, so review whether it still makes sense.
- If you are planning a share buyback or closing a company from 2028, talk to us early about the distribution reforms.
- Use EMI and EMI2 to reward and keep key staff.
Employers and payroll
Employer National Insurance stays at 15% on earnings above £96 a week, and the Employment Allowance stays at £10,500. Wage costs will still rise.
What to do
- Pay rates: from 1 April 2027 the National Living Wage rises 3.9% to £13.21 an hour. The 18 to 20 rate rises to £11.27. Build this into your budgets and payroll now.
- Mileage: you can now pay staff up to 55p a mile (first 10,000 miles) and 35p after that, tax-free. Update your expenses policy.
- Company cars: the tax on electric company cars stays low: 4% of list price in 2026-27, 5% in 2027-28 and 7% in 2028-29. Electric car schemes are still worth offering, but the government says it may reform salary sacrifice for these cars, so watch for news.
- Van and fuel benefits: these charges rise with inflation from 6 April 2027.
- Payments: from April 2029, you must set up a direct debit for VAT and PAYE bills.
Selling a business, founders and investors
Capital Gains Tax stays at 18% and 24%, with a £3,000 tax-free amount. Two big changes start on 6 April 2027:
- Business Asset Disposal Relief: the lifetime limit halves from £1 million to £500,000. The rate stays 18%.
- New Founders’ Relief: a 10% rate on up to £10 million of lifetime gains, for qualifying founders of high-growth, innovative companies. The detailed rules are still out for consultation. Any Business Asset Disposal Relief or Investors’ Relief you claim from 6 April 2027 reduces your Founders’ Relief limit.
What to do
- If you plan to sell soon and expect a gain over £500,000, a sale completed before 6 April 2027 could keep the £1 million limit. The deal must still make commercial sense. Check for any anti-forestalling rules once draft law is published.
- If you might qualify for Founders’ Relief, wait for the final rules before deciding whether to sell now or later.
- Investors: the EIS, SEIS and VCT schemes will get technical changes to make them easier to use. These still offer income tax relief for investing in smaller companies.
Families, estates and retirement
Inheritance Tax allowances are frozen: £325,000 nil-rate band and £175,000 residence nil-rate band. The 100% allowance for agricultural and business property relief is £2.5 million. The pension annual allowance stays at £60,000.
New this Budget:
- Pension Tax Allowance from 6 April 2027. Pensioners whose income is at or below the full new State Pension won’t pay tax just because the State Pension goes up. It tapers away for incomes between £13,037 and £13,319.
- Pension death benefits: the “two-year rule” is removed for payments made on or after 28 October 2026. Beneficiaries are no longer taxed just because a payment is late.
- Trusts: new Inheritance Tax rules limit deductions for debts linked to trust property, from 28 October 2026.
- Lifetime ISA: the penalty for using it on a home above the price cap falls to 20% from 29 October 2026.
What to do
- Review your will and gifting plans, as frozen allowances mean more estates pay tax over time.
- If a trust has loans or debts against it, ask us to check the new rules.
- Pension contributions get tax relief and lower your “adjusted net income”. This can help protect your Personal Allowance, which is lost between £100,000 and £125,140.
VAT, business rates and other costs
VAT stays at 20%, and the registration threshold stays at £90,000 (deregistration £88,000). Several rules change:
- Online sellers: from October 2027, online marketplaces will collect VAT on sales by UK businesses. This covers VAT-registered sellers and others with £90,000 or more of sales per platform.
- Overseas services: from April 2027, only VAT-registered businesses use the reverse charge. Overseas suppliers will charge UK VAT to UK businesses that are not registered.
- E-invoicing: VAT invoices must be electronic in a set format from 1 April 2029.
- Energy and fuel: 0% VAT on home electricity and the 5p fuel duty cut both run to 1 July 2027.
- Business rates (England): from April 2027, retail, hospitality and leisure properties get 100% small business relief up to £18,000 rateable value, tapering to £21,000.
What to do
- Online sellers: check your sales on each platform and review your pricing before October 2027.
- Small unregistered businesses that buy software or advertising from overseas: budget for VAT on those costs from April 2027, and ask us whether registering voluntarily makes sense.
- Check your accounting software has a plan for e-invoicing.
- Retail, hospitality and leisure businesses: check your rates bill in April 2027.
Next steps
The key date is 6 April 2027. Many of these changes still need to pass through Finance Bill 2026-27, and some details (Founders’ Relief, the distribution reforms) are still being consulted on. Book a review with us before the end of the tax year so we can look at your own position.
Sources
- HM Treasury, Budget 2026: Breathing Space for Today, Fresh Hope for the Future (HC 726), 28 October 2026, Executive summary, Chapters 2–4 and Chapter 6 policy decisions. gov.uk/official-documents
- HMRC, Annex A: rates and allowances, Budget 2026 overview of tax legislation and rates, published 28 October 2026. gov.uk
