Chancellor John Healey delivered his first Budget on Wednesday 28 October 2026, and the first of Andy Burnham’s premiership. There were no increases to income tax on employment or dividends, but there are significant changes for business owners selling up, for landlords and savers, and for employers in retail, hospitality and leisure.
The headline measures for our clients are:
- Business Asset Disposal Relief: the lifetime limit is halved from £1 million to £500,000.
- New Founders’ Relief: a 10% Capital Gains Tax rate on lifetime gains of up to £10 million for founders of the most successful companies.
- Savings and property income: a further 2 percentage point rise in income tax rates from April 2027.
- Capital allowances: the main rate first-year allowance rises from 40% to 50%; the main writing down allowance falls from 14% to 12%.
- Trading allowance: tripled from £1,000 to £3,000.
- Business rates: the Small Business Rate Relief threshold for retail, hospitality and leisure rises from £12,000 to £18,000.
- Self assessment: reform from 2029 to move more taxpayers onto smaller, more regular payments.
- Energy and fuel: VAT relief on domestic electricity and the 5p fuel duty cut both extended to July, plus a £100 energy payment for households in council tax bands A to D.
The economic and fiscal backdrop
The Office for Budget Responsibility (OBR) has upgraded its growth forecast for 2026 to 1.2%, followed by 1.0% in 2027 and between 1.6% and 1.8% a year thereafter. The Chancellor said the UK was the joint-fastest growing G7 economy in the first half of the year, alongside the US.
The Chancellor confirmed both fiscal rules are met, now tested in the third year of the forecast:
- Stability rule (day-to-day spending covered by tax receipts): headroom of £15 billion in 2029-30, rising to £22 billion in 2030-31. Part of last year’s buffer has been used to absorb the economic impact of the conflict in the Middle East.
- Investment rule (public sector net financial liabilities falling as a share of GDP): debt is forecast at 83.2% of GDP this year, peaking at 83.8% before falling to 81.7% by 2031-32.
Borrowing is forecast to fall from 4.2% of GDP this year to 1.8% by 2030-31. The Government says every policy in the Budget is fully funded, with the main revenue raisers being a temporary bank surcharge increase, higher gambling duties, the BADR limit, and higher tax on savings and property income.
Business owners and entrepreneurs
The biggest changes for owner-managed businesses are to Capital Gains Tax on exit, and they pull in opposite directions depending on the size of the gain.
Business Asset Disposal Relief limit halved
The lifetime limit for Business Asset Disposal Relief (BADR) falls from £1 million to £500,000. The BADR rate has been 18% since 6 April 2026, so the maximum lifetime saving against the 24% main rate falls from £60,000 to £30,000. The Chancellor indicated that most claimants (around three in four) will be unaffected, as their lifetime gains fall below the new limit.
Early reports indicate the new limit applies from 6 April 2027, with the 18% rate unchanged, but this and any anti-forestalling rules need confirming in the Budget documents. When BADR changed in 2024, contracts entered into before Budget day but completing afterwards were subject to anti-forestalling rules. Anyone part-way through a sale should take advice before exchanging or completing.
New Founders’ Relief
A new Founders’ Relief will charge Capital Gains Tax at 10% on lifetime gains of up to £10 million, aimed at founders of the UK’s most successful companies.
Taxing profit extraction consistently
The Chancellor announced changes to “outdated rules” so that people taking profits out of their companies are taxed consistently, while protecting genuine commercial transactions and family succession. This is likely to be relevant to company purchases of own shares, liquidations and other transactions that currently produce a capital rather than income result, so restructuring plans in progress should be reviewed.
Capital allowances
- Full expensing for companies on eligible plant and machinery is maintained.
- The main rate first-year allowance increases from 40% to 50%.
- The main rate writing down allowance falls from 14% to 12%.
The net effect favours businesses investing in new assets and slightly slows relief on existing pools.
Start-ups and share schemes
- The trading allowance triples from £1,000 to £3,000, increasing the amount of income from a new side business that can be received tax-free.
- A new Young Entrepreneurs Allowance will cover a year of living costs for young founders.
- An “EMI2” scheme was announced, alongside a doubling of the generosity of the Company Share Option Plan. Details are awaited.
- The British Business Bank will double its commitments to women-led businesses and funds to £200 million, with a new scale-up programme for female founders.
- A further £20.4 billion over five years will go to the National Wealth Fund and British Business Bank, including up to £5 billion focused on defence and dual-use technology.
Personal tax
Income tax on employment and dividend income is unchanged, but savers and landlords face a further increase.
Savings and property income
Income tax rates on savings and property income will rise by a further 2 percentage points from April 2027. This is on top of the 2 point rise already legislated in Finance Act 2026 for the same date. On our reading, the combined effect would take the rates from 20%, 40% and 45% today to 24%, 44% and 49% from 6 April 2027, subject to confirmation in the Budget documents.
The Chancellor said 88% of people will pay no more tax on their savings, largely because of the personal savings allowance and ISAs.
Landlords holding property personally should now review whether incorporation, a change of ownership between spouses, or other restructuring remains worthwhile, taking account of SDLT and CGT costs.
ISAs
- The planned cut in the cash ISA limit to £12,000 for under-65s will not go ahead. The annual limit stays at £20,000 for people of all ages.
- A new Starter ISA will be developed with the industry to reward first-time investors.
- A First-Time Buyer ISA will replace the Lifetime ISA. From today, if the home you buy costs more than the Lifetime ISA price limit, you will get back at least what you paid in.
Pensioners
A new pension tax allowance means pensioners whose income is no more than the full new State Pension will not pay income tax during this Parliament. From 2030, the triple lock will be adjusted so the State Pension rises in line with earnings and inflation.
Self assessment
From 2029, the administration of self assessment will be reformed so that more taxpayers make smaller, more regular payments instead of large January and July bills. HMRC is also receiving extra funding and stronger powers to collect overdue tax from those who can pay but ignore repeated contact.
Carers and families
- The Carer’s Allowance earnings “cliff edge” will be removed, so carers no longer lose the whole allowance by earning a penny over the weekly earnings limit (currently £204).
- Self-employed fathers and partners will be eligible for paid parental leave for the first time.
Employers and employees
- National Living Wage and National Minimum Wage: both rise by 3.9%, benefiting around 2.3 million workers. From April 2027 the National Living Wage (age 21 and over) rises from £12.71 to £13.20 an hour, and the 18 to 20 rate from £10.85 to £11.27. Raising both by the same percentage pauses the move towards a single adult rate.
- Mileage allowance payments: the tax-free rate for business miles above 10,000 a year rises from 25p to 35p per mile, and the 55p rate for the first 10,000 miles, increased earlier this year, is made permanent. This will help care workers, engineers and others who drive for work, and employers should update expense policies once the rates are confirmed.
- Employer National Insurance: no changes were announced.
- Pay transparency: the Government will act soon on pay transparency in job adverts.
Employers in low-margin, high-headcount sectors should start modelling the April 2027 wage increase now, alongside the business rates changes below.
Business rates, VAT and duties
Business rates for retail, hospitality and leisure
- The Small Business Rate Relief threshold for retail, hospitality and leisure properties rises from £12,000 to £18,000. Around 70,000 more businesses will pay no business rates at all, and the Chancellor said around half of shops, restaurants and gyms will now pay nothing.
- Other businesses in these sectors will have their rates frozen in real terms, with no above-inflation rise for the next two years.
- The previously announced 20% business rates cut for pubs, clubs and music venues applies from April 2027.
- Adult gaming centres and vape shops will be carved out of business rates reliefs, and the transitional relief supplement is extended for two more years.
VAT
- Online marketplaces face stronger requirements so that sellers cannot avoid VAT on online sales.
- VAT rules for larger taxi and private hire firms will be aligned regardless of where they are located, while protecting smaller local firms.
- All land sold to social housing providers will be VAT-free.
Duties and the bank surcharge
- Machine Games Duty rises from 20% to 25% for higher-stakes machines, protecting pubs and seaside arcades.
- A £10 million alcohol duty relief for around 2,000 small brewers and cider makers.
- The bank surcharge increases by 3 percentage points for 15 months from January 2027, to fund energy support.
- Tariffs are suspended on more than 100 supermarket products.
- Tax rules for investment by foreign sovereign entities will be brought more in line with other countries.
Energy, fuel and cost of living
For households:
- VAT relief on domestic electricity, in place since 1 October 2026, is extended to July 2027, worth around £50 a year on the price cap.
- A one-off £100 energy payment this winter for around 20 million households in council tax bands A to D, paid directly into bank accounts.
- Gas standing charges, averaging £108 a year, will be removed for around 23 million homes, phased in from 2027 through Ofgem. Unit rates will rise to compensate, so the Treasury estimates around three in five households will save about £45 a year net, while heavier gas users could pay more. Similar reforms will follow for electricity.
- The planned gas shippers’ obligation and hydrogen levy is scrapped, with those projects funded directly by government.
For businesses:
- The new British Industrial Competitiveness Scheme will take 25% off electricity bills for around 10,000 industrial firms from April 2027, with backdated payments for energy costs this year.
- The 5p cut in fuel duty and the reduced rate on red diesel are extended through to July 2027, supporting hauliers, contractors and farmers.
Property and housing
- First-time buyers: a new equity loan scheme, “Your First Home”, opens next spring for buyers without family support, backed by £4.7 billion of government lending. Reports indicate it will let first-time buyers purchase a new-build home with a 2.5% deposit and a 20% government equity loan.
- Social housing: an extra £1.5 billion for the Social and Affordable Homes Programme, cheaper borrowing for councils extended, and VAT-free sales of land to social housing providers.
- Building regulations: no major changes for the rest of this Parliament, except where critical for safety.
- Brownfield sites: biodiversity requirements removed for more brownfield developments.
- Rough sleeping: £430 million to keep the offer of a route off the streets open every winter for the rest of this Parliament.
For developers and contractors, the regulatory freeze and brownfield changes should reduce cost and delay on smaller schemes.
Devolution and the North West
The Budget sets out a roadmap for fiscal devolution that will give mayors, including the Liverpool City Region, more control over locally raised tax:
- 20% of business rates revenue will go to mayors from next year, rising to 100% retained locally by the end of the decade.
- From 2028, mayors will receive a share of income tax receipts.
- From 2028, mayors and strategic authorities can introduce an overnight visitor levy.
- New Good Growth Funds for mayors and a further £1.5 billion of devolved loans for mayoral authorities.
Closer to home, the Budget includes £20 million to restore Liverpool’s Littlewoods Building. For local businesses, a greater share of business rates staying in the city region should, over time, strengthen the link between local growth and local investment. Hospitality and tourism clients should watch for any visitor levy proposals from 2028.
What it means for our key sectors
Charities: No charity-specific tax measures were announced. The National Living Wage increase will add to staff costs from April 2027. Charities with trading subsidiaries in retail or hospitality should check whether the higher Small Business Rate Relief threshold improves their position. Higher mileage rates will help volunteers and staff who drive for the charity.
Healthcare: Care providers and practices will feel the 3.9% wage rise, partly offset by the higher mileage rate for staff who travel between patients. The NHS productivity and AI review may shape future commissioning.
Solicitors and professional practices: Retiring partners and shareholders planning a sale should review the BADR limit reduction now. Incorporated practices should watch closely for the detail on taxing profit extraction consistently.
Construction: The red diesel and fuel duty cuts continue to July 2027. The 50% first-year allowance supports investment in plant and machinery outside full expensing, and the freeze on building regulations and brownfield changes should ease development.
What to do now
- Selling or passing on a business? Check your cumulative BADR claims against the new £500,000 limit, and take advice before exchanging contracts until the commencement rules are confirmed.
- Planning a share buyback, liquidation or restructure? Pause and review once the profit extraction detail is published.
- Landlords and savers: model the impact of the April 2027 rate rises and review how income-producing assets are held.
- Employers: budget for the April 2027 wage increase and update mileage policies.
- Retail, hospitality and leisure: check your rateable value against the new £18,000 Small Business Rate Relief threshold.
- Investing in plant or equipment: factor the 50% first-year allowance into the timing of purchases.
If you would like to discuss how the Budget affects you or your business, please contact us.
