Budget 2026: What the changes mean for you and your business

On Wednesday 28 October 2026, the Chancellor announced the Budget, the first since Andy Burnham became Prime Minister. It has been declared that the Budget offers “breathing space” to businesses facing higher energy costs, while increasing incentives for founders, scale-ups and investment. The Budget has also tightened tax compliance. We set out below the key announcements from the Budget and the potential steps individuals and businesses should consider in response.

Capital investment and corporation tax reliefs

The main rate of corporation tax remains capped at 25% and full expensing is retained.

The main rate first-year allowance is to be increased from 40% to 50% for expenditure incurred on or after 1 January 2027, while the main rate writing-down allowance falls from 14% to 12% from 1 April 2027 (6 April 2027 for income tax).

The Bank Corporation Tax Surcharge will temporarily double from 3% to 6% for 15 months, from 1 January 2027 to 31 March 2028. In addition, the foreign permanent establishment exemption will become mandatory for accounting periods beginning on or after 1 January 2027, preventing overseas branch losses from reducing UK corporation tax.

Businesses should consider the timing of capital expenditure over the coming months to maximise the enhanced 50% first-year allowance, and review the impact of the lower writing-down allowance on existing pools.

Income tax, capital gains tax, and distributions

From 6 April 2027, the rates of income tax on property income and savings income will rise by a further two percent across the board. The rates shall be 24% (basic rate), 44% (higher rate) and 49% (additional rate). There is still time to act before the increased rates come into effect. Landlords and those with significant savings outside ISAs should review how their assets are held.

The capital gains tax annual exempt amount remains at £3,000. Crucially for businesses, the lifetime limit for Business Asset Disposal Relief (BADR) will be halved from £1 million to £500,000 for disposals from 6 April 2027.

Fortunately, a new relief has been introduced. A new Founders’ Relief will offer a 10% rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies with effect from 6 April 2027 as well. The Government hopes this will help businesses “start, scale and stay” in the UK. The full eligibility criteria are awaited.

Founders and shareholders contemplating an exit should take advice now on whether a disposal is best timed before or after 6 April 2027, given the interplay between the reduced BADR limit and the new Founders’ Relief.

The Government will modernise the tax treatment of company distributions from April 2028, so that similar transactions are taxed consistently regardless of legal form or structure. Importantly, the reforms are designed to protect capital treatment for genuine changes in ownership, including families passing down their business, and in some cases will make relief for demergers more generous. Draft legislation is expected in 2027. Owner-managers should review profit extraction, reorganisation, demerger and succession plans ahead of the April 2028 changes.

Business rates and support for high-street businesses

From 1 April 2027, Small Business Rates Relief thresholds for qualifying retail, hospitality and leisure (RHL) properties in England will increase to a rateable value of £18,000 for 100% relief and £21,000 for tapered relief. Relief for pubs and live music venues increases from 15% to 35%.

Savings and ISAs

The Government’s proposed reduction in the cash ISA limit from £20,000 to £12,000 has been scrapped.

From April 2029, a new First Time Buyer ISA, offering a 25% Government bonus towards a first home worth up to £450,000, will replace the Lifetime ISA for new savers. From 29 October 2026, the Lifetime ISA withdrawal charge for first-time buyers purchasing above the £450,000 price cap falls from 25% to 20%.

Pensions, private wealth and trusts

A new Pension Tax Allowance will apply from 6 April 2027 until 5 April 2030, so that pensioners whose total income is at or below the value of the full new State Pension will not have to pay tax because of State Pension increases.

Beneficiaries will also no longer be taxed solely because pension and lump sum death benefits are paid more than two years after the member’s death, for payments made on or after 28 October 2026. Looking further ahead, the Triple Lock will be adjusted from April 2030.

Employment and workforce measures

Businesses should be aware that the National Living Wage and National Minimum Wage will both rise by 3.9% from 1 April 2027, with the National Living Wage increasing to £13.21 per hour.

The Government has also committed £100 million of funding across 2027-2029 to expand Mayoral Apprenticeship Brokerage Pilots supporting SMEs in recruiting more apprentices. This has been coupled with the Youth Employment and Skills package, which offers grants to businesses recruiting eligible unemployed young adults.

Critically for employers, the Government has confirmed it will legislate so that non-compete clauses in employment contracts no longer prevent start-ups and scaling firms from hiring, or workers in the everyday economy from moving jobs. A consultation on wider restrictive practices will follow, with a detailed position expected in early 2027.

Employers should budget for higher labour costs and begin reviewing restrictive covenants in employment contracts and incentive documentation, as their enforceability may be significantly curtailed.

Employee share incentives are also being enhanced. The Company Share Option Plan (CSOP) will be rebranded as EMI2, with the individual option limit doubling from £60,000 to £120,000, the exercise period extending from 10 to 15 years, and the interaction with the EMI option limit removed, all from 6 April 2027. Within EMI itself, the exercise window following a disqualifying event will extend from 90 to 180 days, companies moving to an Employee Ownership Trust (EOT) structure will retain access to EMI, and the separate notification of option grants will be removed. Growing companies should consider or revisit their option arrangements to take advantage of the expanded EMI and EMI2 limits.

Property

Annual Tax on Enveloped Dwellings charges will increase by 3.5% for 2027-28, and Stamp Duty Land Tax on rent paid under assured tenancies in England is being removed.

What should you do now?

With many changes taking effect in 2027 and 2028, there is still time for individuals and businesses to be proactive with investment timing, exit and succession planning, estate planning, share incentives and employment contracts.

Get in touch with Blacks

If you would like to discuss how the Budget could affect you, your business or your estate and succession, please contact our team on 0113 207 0000.

*Blacks Solicitors LLP does not provide financial or tax advice, and the content of this blog post is for information purposes only.*

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