Walker Accountancy

The Chancellor, John Healey, presented his first Budget statement on 28 October 2026.

This is a brief round up of the main announcements affecting individuals and small business tax:

Unless stated otherwise, the income tax rates and bands below are for England, Wales and Northern Ireland. The Scottish Government sets its own rates and bands for Scottish income tax. Some UK-wide allowances and taxes may also apply to Scottish taxpayers.

• Personal tax and national insurance:
  • As previously announced, the main income tax and national insurance thresholds will remain frozen until the end of the 2030-31 tax year (some allowances, such as the blind person’s allowance, continue to be uprated in line with inflation). The personal allowance remains at £12,570.
  • The Pension Tax Allowance will apply from 6 April 2027 to 5 April 2030. Pensioners with total income up to the value of the full new State Pension will not have to pay income tax. The allowance will taper away for those with income just above that level.
  • The lower earnings limit will increase to £6,916 (from £6,708) from 6 April 2027. This is the earnings at which employees receive a credit towards their State Pension. This means that director-shareholders still needing State Pension credits will need a salary of at least £6,916, which may mean their company paying some employer national insurance.
  • The small profits threshold for the self employed will increase to £7,355. Voluntary class 2 contributions will increase to £3.80 per week and class 3 to £19.05 per week from 6 April 2027.
  • The trading allowance for the self employed will increase from £1,000 to £3,000 from 6 April 2027. Traders with gross income under the £3,000 threshold will generally not be required to register for self assessment solely because of that income.
• Employer national insurance
  • As previously announced, the employer NI threshold (secondary threshold) will remain at £5,000 until the end of the 2030-31 tax year.
• Pension contributions
  • A reminder that, from April 2029, the amount that is exempt from National Insurance contributions (NICs) under salary sacrifice for pension contributions will be capped at £2,000 a year.
• Self assessment payments
  • From April 2029, taxpayers who make payments on account will have to make more regular in-year payments towards their final tax bill. Payments will be automated, for example by direct debit, with eligible taxpayers also able to choose to pay through PAYE. The detailed design of the new arrangements has not been finalised and further information will be provided in 2027.
    
    The key factor to note is that there will be a transitional period where taxpayers are making payments for 2028-29 in July 2029 and potentially January 2030 under the old system, whilst also making payments for 2029-30 under the new system from April 2029. This could create cash flow difficulties.
    
• Non-earned income tax rates
  • Dividends: There are no further changes to dividend tax rates, which remain at 10.75% (basic rate), 35.75% (higher rate) and 39.35% (additional rate). The dividend allowance remains at £500.
  • Savings and property income: Tax on savings and property income will increase by a further 2 percentage points across all bands from 6 April 2027. The basic rate will be 24%, the higher rate 44% and the additional rate 49% (rather than the 22%/42%/47% announced last year). Finance cost relief will be given at the property basic rate (24%).
• Corporation tax
  • There were no changes to the rates of corporation tax. The main rate remains at 25% and the small profits rate at 19%.
• Capital allowances
  • From April 2027, the rate of writing-down allowance (WDA) on the main pool of plant and machinery will reduce from 14% to 12% per year (1 April for companies and 6 April for unincorporated businesses).
  • From 1 January 2027, the main rate first year allowance will increase from 40% to 50% for qualifying new expenditure, including plant and machinery for leasing. This will not be available for cars or second-hand assets.
  • (Note: these measures will have little impact on most small businesses where their expenditure is covered by the annual investment allowance, but the lower writing down allowance will affect existing pools and expenditure not qualifying for an immediate deduction).
• Minimum Wage
  • The national living wage will increase by 3.9% to £13.21 (from £12.71) with effect from 1 April 2027.
  • The national minimum wage for 18-20 year olds will increase to £11.27 (from £10.85).
  • The apprentice rate and the rate for 16-17 year olds will increase from £8.00 to £8.31 per hour.
• Capital gains tax
  • There were no changes to the rates or standard annual allowance for capital gains.
  • The lifetime limit for Business Asset Disposal Relief will reduce from £1m to £500,000 for disposals from 6 April 2027. The rate remains at 18%.
  • There will be a new Founders’ Relief, giving a 10% capital gains tax rate on up to £10 million of lifetime qualifying gains for eligible founders and certain early investors in high-growth, innovative companies from 6 April 2027. Full eligibility conditions are subject to technical consultation.
• Inheritance tax
  • There were no changes announced to headline inheritance tax rates or thresholds.
  • As a reminder, most unused pension funds and pension death benefits will be included in the estate for inheritance tax purposes from 6 April 2027, as previously announced.
• Landlords and property:
  • As mentioned above, tax rates on property income will increase to 24%, 44% and 49% from 6 April 2027.
  • The government is also consulting on expanding third-party reporting of property income data to HMRC. This means, for example, lettings agents may be required to report more details to HMRC. Details of the proposed reporting requirements and implementation dates are still to follow.
  • A £65 annual fee per property will be introduced for England’s new ‘Register your rental property’ service, with rollout from 15 December 2026. Registration will be phased, so the dates applying to individual landlords will need to be checked. Registration in the East Midlands starts on 15 February 2027, with a deadline of 14 May 2027.
• Family support
  • From April 2029, a new Parental Allowance will be available for eligible self-employed fathers, partners and adopters, and those who do not meet the earnings or employment-history conditions for statutory pay.
  • Carer’s Allowance will be tapered for earnings above the weekly earnings limit, rather than the whole allowance being lost if earnings go just over it. The taper will be £1 for each £1 of earnings above the limit. This will be introduced during 2030-31 in England and Wales, with the precise start date still to be confirmed.
• Savings
  • The cash ISA limit will not now be reduced to £12,000 as announced last year. The total ISA limit remains at £20,000 and this can all be held in cash.
  • A new First Time Buyer ISA will replace the Lifetime ISA for new savers from 6 April 2029. Contributions will be limited to £4,000 per year, with a 25% government bonus paid on withdrawal for a qualifying first home purchase up to £450,000. The bonus will be capped at £20,000 and there will be no upper age restriction. Existing Lifetime ISA holders can continue under the current rules.
  • From 29 October 2026, the Lifetime ISA withdrawal charge for an otherwise qualifying first home purchase above the £450,000 price cap will reduce from 25% to 20%. The charge for other unauthorised withdrawals remains at 25%.
  • The government will explore a new incentive for those investing in a stocks and shares ISA for the first time.
  • As mentioned above, tax rates on savings and property income will increase by a further 2 percentage points from April 2027.
• VAT
  • The VAT registration thresholds remain unchanged.
  • From 1 April 2027, overseas suppliers providing services to UK businesses that are not VAT registered will have to charge and account for UK VAT. This could mean extra costs for small businesses that cannot reclaim the VAT. The reverse charge will continue for relevant services bought by VAT-registered businesses.
  • From 1 October 2027, online marketplaces will be responsible for collecting VAT on relevant sales by UK VAT-registered businesses and other UK businesses with annual sales of at least £90,000 per platform. Personal sales, second-hand goods and business-to-business transactions will be excluded.
• Energy
  • The temporary zero rate of VAT on qualifying domestic electricity will be extended to 1 July 2027.
  • Households in council tax bands A-D in England will receive a £100 Household Energy Payment directly into bank accounts from January 2027.
  • The Government has announced plans to abolish standing charges on domestic gas bills by the end of 2027, or as soon as possible afterwards. The costs will instead be added to the unit price of gas, meaning households using less gas should benefit, while those with higher consumption may pay more. Electricity standing charges will also be reviewed, with further details expected in 2027.
• Motoring
  • The 55p per mile tax-free mileage rate for the first 10,000 business miles in an employee’s own car or van will be made permanent from 6 April 2026. The corresponding rate for eligible self-employed mileage claims also increases.
  • The rate above 10,000 business miles will increase from 25p to 35p from 6 April 2027.
  • The temporary 5p-per-litre fuel duty cut will continue until 1 July 2027, with the planned RPI increase also deferred until then.
  • Vehicle excise duty will increase in line with RPI from 1 April 2027.
  • As previously announced, a new mileage-based tax will apply to electric and plug-in hybrid cars from 1 April 2028, in addition to the existing Vehicle Excise Duty. The charge will be 3p per mile for fully electric cars (including hydrogen fuel cell cars) and 1.5p per mile for plug-in hybrids. Drivers will estimate their annual mileage, with arrangements being developed to simplify reporting and adjust payments where actual mileage differs.
  • For eligible heavy goods vehicles, the annual vehicle excise duty rate is £1 for licences or renewals taken out between 1 July 2026 and 30 June 2027.
  • The van benefit charge and car and van fuel benefit charges will increase in line with CPI from 6 April 2027.
  • Company car benefit rates for 2030-31 will increase by 1 percentage point. The rate for electric cars will be 10%, the rate for cars emitting 1-50g/km will be 20%, and other bands will increase by 1 percentage point up to a maximum of 40%.
• Other travel and subsistence
  • From 6 April 2028, the benchmark scale rates (which employers can use to reimburse qualifying travel and subsistence expenses without checking receipts) will increase to £20 for travel over 5 hours, £60 for over 10 hours and £75 for over 24 hours.
  • The overseas scale rates will be simplified, replacing the current destination-specific rates with a tiered system linked to the domestic rates.
• Business rates
  • For qualifying retail, hospitality and leisure properties in England, the rateable value threshold for full small business rates relief will increase from £12,000 to £18,000 from 1 April 2027, with tapered relief up to £21,000 (currently £15,000).
• Other announcements
  • Employment expenses: From 6 April 2028, the £2,500 threshold above which employment-expense claims have to be made through Self Assessment will be removed. Employees will be able to claim relief on larger amounts of qualifying unreimbursed expenses through PAYE.
  • MTD ITSA penalties: There will be no late submission penalty points for the first four quarterly updates for those joining MTD in April 2027. The quarterly updates will still need to be submitted; this does not cover the annual return or late payment.
  • E-invoicing: From 1 April 2029, VAT-registered businesses will need to use structured electronic invoices for business-to-business and business-to-government transactions. The detailed requirements will follow.
  • VAT and PAYE payments: Businesses will need a direct debit instruction in place from 1 April 2029 for VAT and 6 April 2029 for PAYE, subject to defined exceptions. They can still pay by another method before the specified cut-off, with the direct debit collecting any unpaid balance.
  • Payments to participators: The government will not now proceed with the proposed new reporting requirements for company payments to shareholders. This includes the potential in-year reporting of dividends mentioned in last year’s blog.
  • Benefits in kind: Mandatory payrolling of company cars, vans, fuel and medical benefits will start from 6 April 2027. Other benefits will follow from 6 April 2028, apart from employment-related loans and employer-provided accommodation.
  • R&D relief: The Claim Notification Form will be removed from 1 April 2027 and the Additional Information Form simplified from autumn 2027.
  • State pension: The Government is changing how the Triple Lock operates after the current Parliament. From April 2030, the State Pension will increase by the highest of 2.5%, inflation, or the increase needed to preserve its value relative to earnings at April 2029. This replaces the existing earnings-growth element of the Triple Lock.