Autumn Budget 2026

Freezing Personal Tax thresholds

Personal Tax thresholds have been ‘frozen’ since April 2019 and are not due to be ‘defrosted’ until at least April 2031.

The Income Tax personal allowance, the higher-rate threshold and additional-rate threshold will therefore remain at £12,570, £50,270 and £125,140, respectively. The National Insurance Contributions’ (NICs) secondary threshold will also be frozen at £5,000 until 2030-31.

Taxation for landlords

It was announced in the 2025 Autumn Budget that there would be a 2% increase in the Basic, Higher and Additional Rates of Income Tax for landlords from 6 April 2027. However, the Chancellor has since taken this a step further, and from 6 April 2027 the rates of Income Tax on property income will be increased by a further 2% (on top of the previously announced changes), so that the new rates of tax are 24%, 44% and 49% for Basic, Higher and Additional Rate taxpayers respectively.

This change may prompt more private landlords to consider incorporation, bearing in mind that Corporate Tax rates are generally lower than Income Tax rates (ranging from 19% to 25%) and as companies can claim full tax relief for any mortgage interest paid.

Alternatively, some landlords may be encouraged to sell their properties, as despite the pre-budget rumours, there was no increase to the higher and lower rates of Capital Gains Tax.

Taxation on savings income

Similarly to the changes made to Income Tax for landlords, the rate of Income Tax applicable to savings income will increase to 24% for Basic Rate taxpayers, 44% for Higher Rate taxpayers and 49% for Additional Rate taxpayers.

These new rates will be applicable from 6 April 2027.

Trading Allowance increase

From 6 April 2027, the Government are increasing the trading allowance from £1,000 to £3,000. This allowance provides relief for trading income and simplifies the system for those individuals whose trading expenses fall below the amount of the relief. Where the allowance fully covers the amount of trading income received before expenses, there will be no self-assessment reporting requirements or tax to pay on this income.

Lifetime ISA withdrawal charge reduced

The Chancellor has announced a welcome change for Lifetime ISA (LISA) savers, with the withdrawal charge on unauthorised withdrawals being reduced from 25% to 20% with effect from 29 October 2026.

A Lifetime ISA can be used either to purchase a first home (subject to the qualifying conditions, including the current £450,000 property value limit) or to save for retirement. Individuals aged 18 to 39 can open a Lifetime ISA and contribute up to £4,000 per tax year until age 50. The Government adds a 25% bonus to contributions, providing a maximum annual bonus of £1,000.

Prior to this change, withdrawals made for any reason other than a qualifying first-time property purchase or from age 60 onwards were subject to a 25% withdrawal charge. Importantly, this charge applied to the total value of the fund, including the Government bonus.

For example:

• Contributions: £4,000

• Government bonus: £1,000

• Total Lifetime ISA balance: £5,000

Under the previous rules, a 25% withdrawal charge applied to the £5,000 balance, resulting in a charge of £1,250. This left the saver with £3,750, meaning they received less than their original £4,000 contribution.

From 29 October 2026, the withdrawal charge will reduce to 20%. Using the same example, a 20% charge on a £5,000 balance results in a deduction of £1,000, leaving the saver with £4,000. In effect, the saver repays the Government bonus but retains their original contribution.

This change removes the additional penalty that previously applied to unauthorised withdrawals, providing greater flexibility for Lifetime ISA holders who may need access to their savings before purchasing a qualifying property or reaching retirement age.

Young Entrepreneurs Allowance

The Budget introduces a new Young Entrepreneurs Allowance, designed to support young people who want to start their own business. The allowance will work by covering up to a year of living costs while they develop and grow their venture.

The measure aims to reduce one of the biggest barriers faced by aspiring entrepreneurs, namely the financial risk of leaving employment or dedicating time to a new business before it generates a sustainable income. By providing financial support during the critical start-up phase, the government hopes to encourage more young people to turn innovative ideas into successful businesses, widen access to entrepreneurship, and foster the next generation of business founders and wealth creators in the UK.

Little detail was provided within the Budget documents as to how this allowance would work in practice. However, as this is published, we will provide an update.

Payments on Account reform

The Government has confirmed that it is continuing to explore reforms to the way Income Tax Self-Assessment liabilities are collected, with a consultation on "Timely Payments" having closed earlier this year. The proposals are intended to reduce the time lag between income being earned and tax being paid, bringing the Self-Assessment system closer to real-time taxation.

Under the current rules, many taxpayers make two payments on account each year, due on 31 January and 31 July, based on the previous year's tax liability. The Government is considering replacing or supplementing this approach with more frequent in-year payments. For individuals who also receive employment or pension income through PAYE, one proposal would allow part of their Self-Assessment liability to be collected through their tax code. For those without PAYE income, such as many self-employed individuals and landlords, more regular monthly or quarterly payments are being explored.

At present, these changes remain at the consultation stage, and no immediate action is required. The Government has indicated that any reforms would not be implemented before April 2029, with the existing payments on account regime continuing in the meantime.

If introduced, the proposals would represent a significant change for taxpayers who are accustomed to making tax payments many months after income has been received. While reform could help spread tax payments more evenly throughout the year, it may also accelerate the timing of tax payments and have cash flow implications for some taxpayers. We will continue to monitor developments and provide further updates as the Government responds to the consultation and publishes more detailed proposals.

Making Tax Digital: Extension of the penalty easement

The Government has confirmed that the transitional penalty easement for Making Tax Digital (MTD) for Income Tax will be extended to taxpayers joining the regime from April 2027. The extension is intended to provide additional support as the next tranche of sole traders and landlords are brought into MTD, many of whom may have limited experience of digital record keeping or tax software.

Under the existing easement, taxpayers entering MTD are not subject to late filing penalty points for missed quarterly updates during their first year in the regime. Quarterly submissions are still required, but taxpayers are given an opportunity to familiarise themselves with the new reporting requirements without the immediate risk of penalties. Importantly, the easement does not apply to annual tax return obligations or to late payment penalties, which remain in force.

The extension will be welcome news for taxpayers due to join MTD from April 2027, when the income threshold is reduced and a much larger population of sole traders and landlords becomes subject to the rules. It reflects concerns raised by professional bodies that additional time is needed for taxpayers to adapt successfully to quarterly reporting and digital record-keeping requirements.

While the announcement reduces the immediate compliance risk for those entering the regime, taxpayers should not view the easement as a postponement of MTD itself. Digital record keeping and quarterly reporting obligations will still apply, and businesses should continue preparations to ensure they are ready for the transition.

Pension Tax Allowance

From 6 April 2027, the government will introduce a new Pension Tax Allowance designed to reduce the need for pensioners with low income to pay small amounts of Income Tax on their State Pension where it exceeds their tax-free Personal Allowance.

The Pension Tax Allowance will relieve pensioners from Income Tax up to the difference between the full new State Pension and the Personal Allowance. For those with income above this level, the Pension Tax Allowance will gradually reduce by £1 for every £3 of additional income above this level.

Salary Sacrifice for pension

A measure previously announced, which has remained unchanged, salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance Contributions (NICs) from April 2029.

This means that salary-sacrificed pension contributions above £2,000 will be treated as ordinary employee pension contributions in the tax system and therefore be subject to both employer and employee NICs.

Very broadly, we estimate that where an employee on a £50k salary contributes 5% into their pension, the combined employee and employer NICs might only be around £85 more a year under these new rules, whereas where an employee on a £110k salary contributes 10% into their pension (perhaps to stay under the £100k threshold for childcare funding for example), the combined employee and employer NICs might be around £1,500 more.

The exact net impact for employees will depend on other factors, for example, if their employer currently ‘passes on’ their employer NIC savings onto the employee or not.

Pensions and Inheritance Tax

One of the most significant changes announced in recent years remains the planned inclusion of most unused pension funds and death benefits within the scope of Inheritance Tax (IHT) from 6 April 2027. The measure has already been legislated and represents a substantial shift in the way pensions are treated for estate planning purposes.

Following today's Budget, there has been no significant change to this policy, and the Government has confirmed that the planned reforms will proceed as expected. While there had been speculation in advance of the Budget that the rules could be amended, delayed or softened, no material announcements were made in relation to pension-related IHT provisions.

As a result, pensions can no longer be viewed solely as an effective vehicle for passing wealth to future generations outside the IHT net. Individuals with substantial pension funds should continue to review their estate planning arrangements to understand the potential impact of the new rules and consider whether any changes to their wider succession planning may be appropriate.

We will continue to monitor developments and provide further updates as additional guidance and legislation emerge. However, based on today's Budget, the key message is that the pensions and IHT changes remain firmly on track for implementation from April 2027.

Corporation Tax

Corporation Tax: no changes to the rates

The Government confirmed that Corporation Tax rates will remain unchanged until at least March 2029, maintaining the main rate at 25% and the small profits rate at 19%.

Loans to participators- changes to reporting requirements put on ice (for now!)

Following a recent consultation, the Government has confirmed that it will not proceed with plans to introduce additional reporting requirements for loans from close companies to shareholder/ participators. This will come as welcome news to many businesses, given that the proposed requirements had the potential to be particularly onerous in certain circumstances. However, the reprieve may be short-lived as the Government have made clear that HMRC will continue to “work on” the concerns they have in this area and to ensure taxpayers have access to “the best information to help them meet their tax obligations.”

Capital allowances

Reduction in main pool Writing Down Allowance (WDA):

It was announced in the Budget that from April 2027 the main pool WDA will be reduced from 14% per annum to 12% per annum. This will mean that companies/unincorporated businesses will receive full relief for plant and machinery and other main pool items at a slower rate than before this date.

Companies will still be able to claim the £1million Annual Investment Allowance (AIA) and 100% full-expensing relief (discussed below) on new qualifying plant and machinery, with this reduction most likely to affect businesses with large brought forward balances on the main pool or those purchasing cars that qualify as main pool expenditure i.e. those with emissions between 1 – 50 g/km.

For example, a company purchasing a car for £50,000 with emissions of 30 g/km, would, prior to the rate change receive £7,000 of capital allowances in year one (£50,000 x 14%), resulting in a corporation tax saving of £1,750 (£7,000 x 25%) on the assumption the company is subject to the main rate of corporation tax, and 14% capital allowances on the writing balance each year thereafter. Following the rate change after April 2027, the company would only receive capital allowances at 12% on the written down balance.

A hybrid rate applies for business whose chargeable period spans 1 April (Corporation Tax) 6 April for (Income Tax).

Increase in the main pool first-year allowance:

It was also announced that, with effect from 1 January 2027, the main pool first-year allowance for companies and unincorporated businesses acquiring assets which are leased out (excluding cars), will increase to 50% of the cost of the asset (up from the current 40%). The balance of the expenditure will qualify for main pool writing down allowances at 14% per annum on a reducing balance basis, decreasing to 12% from April 2027. This relief is not available for second-hand assets or assets leased to overseas customers.

For example, if a company purchases plant and machinery qualifying for the main pool for £100,000 after April 2027, the company will receive immediate relief of £50,000 (£100,000 x 50%) in the year of purchase. The remaining £50,000 would be allocated to the main pool and in subsequent years the company could claim only 12% WDA amounting to £6,000 per annum (£50,000 x 12%).

Please note, the main pool first-year allowance is available to all businesses, not just incorporated businesses, and this relief will have a significant impact for businesses which primarily lease out assets to customers who will benefit from some accelerated relief.

As a reminder, the permanent first-year allowance is still available to companies which applies to certain main pool plant and machinery beyond the current availability of 100% full-expensing relief.

100% full-expensing relief can be claimed on assets which would otherwise qualify for the main pool (excluding cars); however, they must not be:

• Second-hand assets or assets acquired from connected parties;

• Leased out; or

• Long life assets (assets with a useful life of more than 25 years).

Furthermore, businesses are still able to claim the Annual Investment Allowance (‘AIA’) on qualifying expenditure up to £1million.

Capital Gains Tax: Company distributions

The Government is consulting on the tax treatment of distributions from companies, aiming to preserve capital treatment (i.e. distributions from companies being taxed at Capital Gains Tax rates rather than Income Tax) to genuine changes in ownership. They have stated that genuine changes of ownership can include passing down shares in family scenarios.

The consultation is still underway, with the draft legislation on this topic set to be available next year, with a view to the changes taking effect from April 2028. Currently, the consultation is indicating the following:

• Repayments of capital will be classed as Income Tax distributions, to the extent the amount repaid exceeds the original capital subscribed. For example, currently, if a high amount of share capital has been created as a result of a share for share exchange, it can be possible for shareholders to extract a higher amount of value from a company and obtain capital treatment, even if the amount they originally they paid for their shares was minimal.

• They recognise that repayments of capital are often used in genuine commercial demergers (i.e. ‘capital reduction demergers’), and this may be addressed by making the alternative type of ‘statutory’ demerger more flexible. Currently, statutory don’t work whereby one of the businesses involved in the demerger is an investment business, or if the main purpose of the demerger is to facilitate a sale.

• It is proposed that the ‘trade benefit test’ for a company purchase of own shares is too subjective, and should be replaced with a more mechanical test which broadly requires sellers to hold more than 5% of the share capital of a company and to exit completely in order to benefit from capital treatment

• There is a proposed alignment of the treatment of distributions from non-UK resident companies with those of UK resident companies, removing distortions in tax treatments from similar payments from a UK company and a Non-UK company

An overall theme in the consultation is that the transactions in securities rules (whereby HMRC can impose an income tax charge on distributions by issuing a counteraction notice) should be strengthened.

Capital Gains Tax: Business Asset Disposal Relief

The current rules allow gains on shares in trading companies and business assets to qualify for a reduced rate of Capital Gains Tax of 18% (compared to the main rate of Capital Gains Tax of 24%) up to a lifetime limit of £1m (subject to certain conditions being met).

This lifetime limit is reducing to £500k from April 2027. Therefore, for disposals from April 2027 onwards, this relief will only be worth a maximum of £30,000 per individual (£500k (24%-18%)).

Capital Gains Tax: Founders Relief

From April 2027, a new ‘Founders’ Relief’ will be introduced offering a reduced 10% capital gains tax rate on up to £10m of lifetime gains, therefore a potential tax saving of £1.4m for those who qualify (£10m x (24% - 10%).

There are, however, some quite stringent conditions that will need to be met, including:

• The seller will need to have held 25% of the company’s ordinary share capital, voting rights and rights to distributions on a winding up, at the point when the trading activity for the company commenced.

• They must have held the shares for at least five years before the disposal

• They must have been UK resident under the Statutory Residence Test for at least five continuous tax years before the disposal

• The company must be within the scope of UK corporation tax and must have a substantial UK presence for the five accounting periods before disposal

• The company must be a trading company, or the holding company of a trading group, without substantial non trading activities (i.e. which is the same test currently in place for Business Asset Disposal Relief mentioned above) or substantial excluded trading activities (which are the same excluded activities within the current ‘Enterprise Investment Scheme’ such as dealing in land).

• There must have been no major change in the nature of the trade since the founder’s shares were issued

• The company must have generated turnover of at least £10m in the accounting period prior to disposal

• It must have employed at least 12 full-time employees in the accounting period prior to disposal

In addition, the company must meet at least two of the following three tests :

• Turnover test – annual average compound growth in turnover of 25% across three consecutive accounting periods within the 10 years before disposal, with turnover of at least £10m in the accounting period before the first of these three periods

• Headcount test – Annual average compound growth of at least 25% in qualifying full-time equivalent employees across three consecutive accounting periods within the ten years before disposal, with at least 15 full-time employees in the accounting period before the first of these three periods, and

• Innovation test – the company must have incurred qualifying expenditure of £1.5m or more on research and development (for which it met all of the conditions to make an R&D tax relief claim) and must have claimed R&D tax reliefs for that expenditure for an accounting period or periods ending within the three years before disposal.

Therefore, this is a significant tax relief for those that qualify, but meeting all the necessary conditions, particularly the ‘turnover’ and ‘innovation’ conditions, will be key.

Capital Gains Tax: Relief for gifts of business assets

From 6 April 2027, the legislation will be amended to clarify that the formula restricting gift holdover relief on the disposal of qualifying shares includes both assets within the intangible fixed assets regime and assets qualifying for the substantial shareholding exemption. This change will apply from 6 April 2027 and is intended to simplify access to the relief by removing the current anomaly affecting businesses with goodwill derived from a business established before April 2002.

Employee Share Schemes

These schemes allow eligible companies to give employees the option to buy shares in the future in a tax efficient way, at a price that is agreed when the option is granted. Changes were announced today that will make these more flexible.

Less red tape and a name change for Company Share Option Plans (‘CSOP’)

CSOP is a share scheme available to employees of companies of all sizes and in all sectors. From 6 April 2027, the government will widen the CSOP rules to:

• Increase the CSOP individual option limit from £60K to £120K.

• Extend the CSOP exercise period from 10 to 15 years.

• Remove the interaction with the Enterprise Management Incentive (EMI) option limits, thereby allowing the schemes to operate independently of each other and enabling eligible employees to receive the full amount of options available under each scheme.

It was also announced that CSOPs will now be called ‘EMI2’ as the government considers this will “help businesses understand how the schemes fit together”.

Enhanced flexibility for Enterprise Management Incentive (‘EMI’) schemes

EMI is designed to help eligible smaller businesses recruit and retain key employees, but some business activities are excluded from the relief. However, an employee can hold share options worth up to £250K as at the date of grant, so the limit remains higher than under the new CSOP rules.

From 6 April 2027, the government will provide greater flexibility under the Enterprise Management Incentives (EMI) rules by:

• Extending the EMI exercise window following disqualifying events from 90 to 180 days.

• Ensuring that companies entering into an Employee Ownership Trust (‘EOT’) structure will retain access to EMI.

• Enabling companies to set aside shares and share options for employees for 15 years without triggering disguised remuneration rules.

• Removing the need for HMRC to be notified when EMI options are granted. Grants will instead be reported through the existing EMI end-of-year return.

National Living Wage and National Minimum Wage

The Chancellor confirmed in today's Budget that both the National Living Wage and National Minimum Wage will increase by 3.9% from April 2027, providing a pay rise for around 2.3 million of the UK's lowest-paid workers. The National Living Wage for those aged 21 and over will increase from £12.71 to £13.21 per hour, while the rate for workers aged 18 to 20 will rise from £10.85 to £11.27 per hour.

The increase broadly aligns with current inflationary pressures and forms part of the Government's wider package of measures aimed at supporting households with ongoing cost-of-living challenges. For full-time employees receiving the National Living Wage, the changes will result in a meaningful increase in annual earnings from April 2027.

While the announcement will be welcomed by employees, it will also increase employment costs for businesses, particularly those operating in labour-intensive sectors. Employers should therefore consider the impact of the higher wage rates alongside other employment-related costs as they plan for the 2027/28 financial year.

Overall, the increase was widely expected ahead of the Budget and does not represent a significant policy change. Rather, it continues the Government's commitment to maintaining wage growth for lower-paid workers while balancing the wider economic and labour market environment.

Mandatory payrolling of Benefits in Kind

The Budget confirms that the Government remains committed to the introduction of mandatory payrolling of most Benefits in Kind. Whilst this is not a new policy, having been announced previously and subsequently delayed, today's announcement provides a clear indication that the reforms are now expected to proceed, with implementation beginning from 6 April 2027.

Under the new rules, employers will be required to report and collect tax on company cars and vans, car and van fuel benefits and private medical benefits through PAYE using Real Time Information (RTI) from April 2027. Most other taxable benefits and expenses will follow from 6 April 2028, with employment-related loans and employer-provided living accommodation remaining outside the mandatory regime.

The changes are intended to modernise the tax treatment of employee benefits by collecting tax in real time through payroll, reducing reliance on the year-end P11D process and minimising the risk of employees facing unexpected tax adjustments after the tax year has ended. For many employees, this should result in a more accurate and streamlined collection of tax on benefits.

Although the reform is not expected to increase the amount of tax payable, it will require employers to review their payroll processes and systems to ensure benefit information can be reported throughout the year. Given the previous delays to the project, some businesses may have assumed the changes would be postponed indefinitely. However, following today's Budget, it appears that mandatory payrolling is now firmly back on track and employers should begin preparing for implementation ahead of the 2027 and 2028 start dates.

Increase in mileage rates

The Approved Mileage Allowance Payment rate for business mileage above 10,000 miles per year will increase from 25p to 35p per mile, from 6 April 2027. Also, the rate of 55p for the first 10,000 business miles will be retained on a permanent basis. This represents the largest increase in mileage rates for more than 15 years and is intended to better reflect the rising costs of fuel, vehicle maintenance and other motoring expenses incurred by employees and self-employed individuals who use their own vehicles for work.

Stamp Duty and Stamp Duty Land Tax (‘SDLT’)

• Stamp Duty taxes on shares will be replaced with the “Securities Transfer Tax” from late 2027. Details of the implications of this measure had not been released at the time of writing.

• SDLT group relief: from 29 October 2026, the rules around SDLT group relief will be tightened so that it could potentially be ‘clawed back’ more easily in certain circumstances.

VAT

E-Invoicing requirements

It was announced that the government will introduce legislation to enable HMRC to make regulations requiring VAT invoices to be issued and received in a prescribed electronic format. The government has published an implementation roadmap, which sets out the further details about e-invoicing and a suggested timeline. The changes are proposed to take effect from April 2029.

VAT reform of the reverse charge for B2B supplies of services from overseas

The Government has announced it will restrict the VAT reverse charge for supplies of services from overseas, so that it only applies if the receiving UK business is VAT registered. This change means that where a UK business is not VAT registered, the overseas supplier will be required to charge and account for UK VAT. In reality most businesses receiving these kinds of supplies were already VAT registered in our experience, but nevertheless this does represent a tightening of this rule for some, and will affect some businesses making cross-border supplies within their own group. The change will take effect from April 2027.

Reforming the customs treatment of low-value imports (LVI)

There will be new legislation in Finance Bill 2026-27 to reform the customs treatment of low-value imports, with implementation of the reforms happening by October 2028, six months earlier than previously announced. LVI is currently defined as a shipment or package sent directly to a customer or business with a total intrinsic value (excluding shipping and insurance) not exceeding £135. These reforms will bring the customs treatment of LVI imports closer to that of goods imported as freight, with import VAT and other duties typically applying to both (from October 2028).

Extending the temporary 0% VAT rate for domestic electricity

As announced today, the Government will extend the temporary VAT zero rate for domestic electricity supplies until 30 June 2027. A 0% rate of VAT will continue to apply to qualifying electricity supplies that would otherwise be subject to the reduced rate of 5% from 1 April 2027.

Zero rate for land sold to a relevant Housing Association

From 1 April 2027 the Government intends to bring into effect a new zero rate of VAT on the sale of land to registered social housing providers (relevant Housing Associations). This will resolve a particular problem for when land that has been ‘opted to tax’ (particularly common where “Promotion Agreements” are in place) is sold to a hybrid purchaser that has both a development arm (that wants to be the first to develop past the ‘golden brick’ stage) and the housing association arm (that doesn’t want to incur VAT at 20% on the land purchase as it intends to make an exempt supply of residential lettings to its tenants).

Requiring Direct Debit arrangements for VAT (and PAYE) return liabilities

Finally for VAT and indirect taxes, the government will soon be requiring taxpayers to set up a Direct Debit instruction for VAT (and PAYE) return liabilities. This will be the case from April 2029, subject to specific exceptions. Businesses will continue to be able to use other payment methods to pay their liability before then, but the Direct Debit instruction will be used to collect any unpaid balances.

High Value Council Tax Surcharge 

The Government's proposed High Value Council Tax Surcharge, often referred to in the press as a "mansion tax", continues to progress following today's Budget. The measure was originally announced in the 2025 Budget and will apply to residential properties in England valued at £2 million or more, with implementation currently scheduled for April 2028.  

The consultation on the detailed design of the surcharge closed on 14 July 2026, and the Government has now published its response, confirming that the policy will move forward. While a number of technical aspects were considered during the consultation process, including valuation methodology, exemptions, appeals and payment deferral arrangements, there were no major changes announced to the overall framework of the charge.  

The surcharge is intended to apply to owners of high-value residential properties and will be charged in addition to existing council tax liabilities. The Government has previously indicated that annual charges will vary according to property value, with relatively few properties expected to be affected nationwide.  

From a practical perspective, today's Budget provides further confirmation that the Government remains committed to this reform. We will continue to monitor developments as the detailed legislation is brought forward, as will form part of affected individuals’ wider property and wealth planning considerations.