The Chancellor, John Healey, delivered his first Budget on 28 October 2026. Headline rates of Income Tax, National Insurance and VAT were left alone, but a series of smaller measures, most starting in April 2027, will affect how much tax owner-managed businesses pay, when they pay it and how they plan for growth or exit. Here is what matters, and what to think about before the new tax year.
Stability on the main rates
Corporation Tax stays at 25% (main rate) and 19% (small profits rate), and dividend tax rates were not changed. Remember, though, that the basic rate of dividend tax rose from 8.75% to 10.75% in April 2026, so directors paid mainly through dividends should review their salary and dividend mix.
Capital allowances are changing
- Writing-down allowance: the main rate falls from 14% to 12% from 1 April 2027 for companies and 6 April 2027 for unincorporated businesses. It applies to existing pool balances as well as new spending.
- First-year allowance: the main rate rises from 40% to 50% for qualifying spending from 1 January 2027. It covers new plant and machinery, but not second-hand assets or cars.
- Unchanged: full expensing for companies and the £1 million Annual Investment Allowance.
For most smaller businesses, the Annual Investment Allowance will still cover qualifying equipment in full. The change bites hardest on cars and large pool balances, so plan significant purchases around your year end.
Planning an exit?
From 6 April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) halves from £1 million to £500,000. With the BADR rate already at 18%, owners selling with larger gains will pay more Capital Gains Tax.
A proposed Founders’ Relief is currently out to consultation. The government has proposed a 10% Capital Gains Tax rate for up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies, intended to start on 6 April 2027. This is not yet law, and the details could change. As proposed, founders would need to have held at least 25% of the company when it started trading, with the business meeting turnover, employment, growth, and innovation tests.
For most owner-managed businesses, BADR will remain the relevant relief. If a sale is on the cards, take advice on timing before April.
Property and savings income
From 6 April 2027, Income Tax on property and savings income rises by a further two percentage points, to 24%, 44% and 49%. If you hold rental property personally or significant cash outside an ISA, factor this into your planning.
Sole traders
The trading allowance triples from £1,000 to £3,000 from 6 April 2027. Trading income at or below that level will not need reporting through Self-Assessment, and above it you can deduct the allowance instead of actual expenses.
Making Tax Digital for Income Tax also extends to sole traders and landlords with qualifying income over £30,000 in 2025/26. HMRC will not charge late submission penalties on quarterly updates during 2027/28 for those joining in April 2027, though annual return penalties still apply. As Xero, QuickBooks and FreeAgent partners, Hydref Accounting can help you get set up.
Employers
- The National Living Wage rises from £12.71 to £13.21 an hour in April 2027.
- The 55p mileage rate for the first 10,000 business miles is now permanent, and the rate above 10,000 miles rises from 25p to 35p from 6 April 2027.
- Payrolling of company cars, vans, fuel, and medical benefits becomes mandatory from 6 April 2027.
Business rates and VAT
From 1 April 2027, qualifying retail, hospitality, and leisure properties in England get 100% Small Business Rates Relief up to a rateable value of £18,000, up from £12,000. From the same date, if you are not VAT registered, overseas suppliers of services such as software will have to charge you UK VAT.
Pubs, social clubs, and live music venues
Hospitality gets particular attention. From 1 April 2027, business rates relief for pubs, social clubs and most live music venues in England rises from 15% to 35%. Only the very largest live music venues, with a rateable value of £1 million or more, miss out on the increase.
On top of that, bill increases for qualifying retail, hospitality and leisure properties in England will be capped at CPI inflation in 2027/28 and 2028/29, although this does not cover increases caused by improvements to the property. The government says it will keep the relief under review alongside the 2029 revaluation.
For a village or market town pub, the combined effect could be a noticeable saving. It is worth checking your rateable value and making sure your local council has applied every relief you qualify for.
Looking further ahead
From April 2029, Self-Assessment payments on account move to more regular in-year payments, VAT and PAYE will need Direct Debit mandates, and invoices between VAT-registered businesses must be electronic. Good cash flow forecasting will matter more than ever.
If you would like to talk through what the Budget means for your business, book a time for a conversation with me here. We will help you turn the headlines into a clear plan for the year ahead.
This article reflects our understanding of the Autumn Budget 2026 at the time of writing in November 2026. Some measures are subject to consultation and may change. It is general information, not advice, so please speak to Hydref Accounting before acting.
