Budget 2026: Breathing Space for Today, Fresh Hope for the Future
Autumn Budget 2026 | Key tax changes and what they could mean for individuals, families and businesses
The Chancellor of the Exchequer delivered the Autumn Budget 2026 to Parliament on 28 October 2026, setting out measures intended to ease financial pressures on households and businesses while supporting long-term economic growth.
Against a backdrop of higher government borrowing costs and continuing uncertainty in the global economy, the Budget seeks to provide some immediate relief while encouraging investment, entrepreneurship and business development.
In this article, we summarise the key announcements affecting income tax, pensions, employment, business taxation, capital gains tax, VAT, fuel duty and household finances.
1. The economy and public finances
The UK economy continues to face significant challenges. Since the start of the conflict in the Middle East, borrowing costs across the G7 have risen to, or close to, levels not seen for decades. The Office for Budget Responsibility (OBR) forecasts that the UK will pay an average of £14 billion more each year in government debt interest than anticipated in the Spring.
However, there are also signs of economic resilience. According to the Budget announcements:
Whole-economy investment has increased by 6.9% since the start of the Parliament.
Business investment has risen by 7.5%.
Productivity growth exceeded 2% last year.
The UK recorded joint-fastest GDP growth in the G7 during the first half of 2026.
The OBR has upgraded its UK economic growth forecast for 2026 to 1.2%.
GDP grew by 0.7% in the three months to August.
The Government's stated objective is to give families and businesses greater breathing space today while delivering the structural changes needed to support future prosperity.
2. Income tax and personal savings
Several changes affecting personal income, savings and first-time buyers were announced.
Tax on savings and property income
From April 2027, tax rates on savings income and property income are set to increase by two percentage points across all bands.
Individuals receiving interest on savings or rental income may therefore wish to review their expected tax liabilities and consider how the changes could affect their financial planning.
Individual Savings Accounts (ISAs)
The Government will retain the annual Cash ISA allowance at £20,000 for savers aged 18 and over from April 2027.
A new ISA for first-time buyers was also announced. Further details of its operation and eligibility should be checked against the published legislation and guidance.
Lifetime ISA withdrawal charge
The withdrawal charge for Lifetime ISAs will be reduced to 20%. The stated intention is to ensure that first-time buyers purchasing properties above the existing £450,000 property price cap are not penalised.
Trading allowance
From 6 April 2027, the trading allowance will increase from £1,000 to £3,000. This is intended to support people starting a business and those earning income from small trading activities.
Anyone earning additional income should consider whether the new allowance changes their reporting obligations or tax position.
Income tax assignment for mayors
From 2028, all mayors are expected to receive an assignment of income tax revenue. Further details will be needed to establish how this arrangement will operate in practice.
3. Employment taxes and the National Living Wage
The National Living Wage will increase by 3.9% to £13.21 per hour from 1 April 2027.
Employers should consider the effect of this increase on payroll costs, staffing budgets and wider employment expenses. Employees receiving the National Living Wage should also see an increase in their hourly pay, subject to the applicable eligibility rules.
4. Pensions and retirement income
A new pension tax allowance will apply for the tax years 2027/28 to 2029/30.
Under the announced measure, individuals above State Pension age whose total income is at or below the value of the new State Pension will not pay income tax.
This change is intended to provide support to pensioners with lower incomes. Those approaching retirement or already receiving the State Pension should review their overall income and tax position once the detailed rules are available.
5. Business taxation and investment
The Budget includes a number of measures affecting business rates, capital investment, research and development, and the wider corporate tax system.
Corporation tax and capital allowances
The Government has reaffirmed its commitment to the corporate tax roadmap, including a cap on the headline corporation tax rate at 25%.
From April 2027:
The main rate of writing-down allowances will reduce by two percentage points to 12%.
The main First Year Allowance (FYA) will increase from 40% to 50%.
These changes may affect the timing and value of tax relief available on qualifying business investment. Businesses planning to purchase equipment or other qualifying assets should review the relevant rules before making investment decisions.
Bank corporation tax surcharge
The bank corporation tax surcharge will increase from 3% to 6% for 15 months, before ending on 31 March 2028.
This measure is specifically relevant to businesses within the scope of the surcharge.
Business rates
The Government has announced changes intended to support businesses in the retail, hospitality and leisure sectors.
The threshold for small business rate relief will increase from £12,000 to £18,000. The Chancellor stated that this would remove approximately 70,000 additional businesses from business rates altogether.
For other businesses in these sectors, the Government intends to freeze business rates in real terms for the next two years, limiting above-inflation increases.
The Government also intends to withdraw certain business rates reliefs from vape shops and adult gaming centres.
Separately, the Government plans for local and regional government to retain 100% of business rates income before the end of the decade, with mayors receiving a share of business rates revenue from 2027.
Businesses should check their eligibility for relief and assess how the changes may affect their property-related costs.
Research and development tax relief
The Government intends to simplify the administration of research and development (R&D) tax relief claims.
The Budget documents state that Finance Bill 2026–27 will include legislation to remove the requirement to submit a claim notification form for R&D claims made on or after 1 April 2027.
The additional information form is also due to be simplified from autumn 2027.
These changes are intended to make R&D tax relief easier to access. Businesses undertaking qualifying research and development should continue to maintain appropriate records and seek advice on eligibility and claim requirements.
Making Tax Digital for Income Tax
The Treasury has announced transitional penalty easements for individuals joining Making Tax Digital (MTD) for Income Tax from 6 April 2027.
More than one million taxpayers with income of £30,000 are expected to join the system. Under the announced arrangements, they will not receive penalty points for late submission of their first four quarterly updates for the 2027/28 tax year.
Affected taxpayers should nevertheless prepare for the new reporting requirements and ensure their accounting systems and records are ready.
6. Capital gains tax and business owners
Two important announcements affect entrepreneurs and individuals disposing of business assets.
Business Asset Disposal Relief
The lifetime limit for capital gains eligible for Business Asset Disposal Relief (BADR) will reduce from £1 million to £500,000 from April 2027.
Business owners considering a sale or disposal may wish to review the timing and structure of a potential transaction, taking account of their individual circumstances and the final legislation.
New founders' relief
The Government has also announced a new founders' relief, offering a 10% capital gains tax rate on qualifying lifetime gains of up to £10 million for founders of eligible businesses.
The measure is intended to encourage entrepreneurship and help establish the UK as a destination for building successful companies.
The detailed eligibility conditions will be particularly important. Founders considering a future sale or exit should seek advice before relying on the proposed relief as part of their planning.
7. VAT changes
The Budget includes several measures affecting energy costs, online sales and passenger transport.
VAT on electricity bills
The temporary VAT cut on electricity bills will be extended until 1 July 2027.
Households should check the details of the extension to understand how and when any benefit will be reflected in their bills.
Online marketplaces
From October 2027, online marketplaces will become responsible for collecting VAT on qualifying sales made by UK businesses using their platforms.
Businesses selling through online marketplaces should review their VAT arrangements and understand how the change may affect their accounting and reporting processes.
Taxi and private hire operators
Larger private hire operators will be required to account for VAT consistently on the full passenger fare, while smaller and local taxi and minicab businesses will be protected under the announced arrangements.
Affected operators should review the detailed rules to determine whether their current VAT treatment needs to change.
8. Excise duties and fuel costs
Fuel duty
The 5p fuel duty cut will be extended for a further six months, until 1 July 2027.
This provides continued support for motorists and businesses reliant on road transport, although the actual effect on pump prices will depend on wider market conditions.
Machine Games Duty
From April 2027, the rate of Machine Games Duty on machine games with stakes exceeding £1 will increase from 20% to 25%.
Businesses operating affected gaming machines should assess the impact on their costs and pricing.
9. Support for households and energy bills
Household energy costs remain a significant concern, and the Budget includes measures intended to provide relief.
Removal of gas standing charges
The Chancellor has announced plans to remove standing charges from household gas bills for approximately 23 million homes.
A standing charge is a fixed daily fee payable regardless of how much gas a household uses. It currently averages approximately £108 a year for a typical household, according to the announcement.
The Government will ask Ofgem to deliver the removal of these charges in 2027, or as soon as possible thereafter.
Households should await confirmation of the implementation arrangements and how the change will affect individual energy tariffs.
£100 winter energy payment
Households in Council Tax bands A to D in England will receive a £100 payment paid directly into their bank accounts under the announced winter energy support scheme.
Equivalent funding will be provided to the devolved nations.
The Chancellor described the scheme as a £2.6 billion package intended to help households manage rising energy bills during the coldest months.
Eligible households should look out for further information about payment dates, eligibility checks and delivery arrangements.
10. Motoring and business mileage
The Budget includes an increase in the mileage rate available to higher-mileage business drivers.
For individuals travelling more than 10,000 business miles per year, the rate for petrol, diesel and electric vehicles will increase from 25p to 35p per mile, according to the announcement.
This follows a temporary increase in the rate applicable to the first 10,000 business miles, from 45p to 55p, for the 2026/27 tax year.
The changes are intended to support people who rely on their own vehicles to earn a living.
Employees and self-employed individuals should check which mileage rules apply to them, as tax relief depends on their employment or business circumstances and the relevant HMRC requirements.
11. What should individuals and businesses do next?
Although some measures are intended to provide immediate relief, many of the tax changes will take effect in 2027 or later. It is therefore important to distinguish between announcements and changes that have been enacted and implemented.
We recommend that individuals and businesses consider the following steps:
Individuals and savers: Review savings income, rental income and other sources of taxable income in light of the proposed changes from April 2027.
First-time buyers: Monitor the detailed rules for the new ISA and the revised Lifetime ISA withdrawal charge.
Pensioners: Check eligibility for the new pension tax allowance once the qualifying conditions are published.
Business owners: Review capital investment plans, business rates eligibility and the potential effect of changes to capital allowances.
Entrepreneurs: Consider how the changes to Business Asset Disposal Relief and the proposed founders' relief may affect future exit planning.
Employers: Prepare for the National Living Wage increase and review payroll budgets.
Online sellers and transport operators: Assess the potential effect of the forthcoming VAT changes.
Taxpayers affected by Making Tax Digital: Review accounting software, digital record-keeping and quarterly reporting arrangements ahead of the April 2027 start date, where applicable.
Our view
The Autumn Budget 2026 combines measures aimed at easing household and business pressures with changes that may have longer-term implications for tax planning, investment and entrepreneurship.
For some taxpayers, the announcements may create opportunities to review their financial arrangements. For others, increases in the taxation of savings and property income, changes to business reliefs and new compliance requirements may require careful planning.
The practical effect will depend on individual circumstances, the final legislation and the dates on which the measures come into force.
If you would like to understand how the Budget may affect you, your family or your business, please contact our team to discuss your circumstances and the steps you may need to take.
Important disclaimer
Whilst we take care to ensure the accuracy of this document, no responsibility for loss incurred by any person acting or refraining from action as a result of this information can be accepted by the authors or firm.
This article is intended for general information purposes only and does not constitute personal tax, financial or legal advice. Budget announcements may be subject to consultation, legislation and further guidance. Readers should obtain professional advice before making decisions based on the measures discussed.
Source: HM Treasury, Budget 2026: Breathing space for today, hope for the future — GOV.UK.
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