28 October 2026

Autumn Budget 2026: the lowdown for you and your small business clients

Emily Coltman FCA
Chief Accountant

“This is a Budget for the working people of Britain, for British businesses, big and small,” said Chancellor John Healey, as he introduced the 2026 Autumn Budget today.

As “global economic storms” continue to result in higher running costs, the Chancellor announced a series of measures designed to cut the cost of doing business while maintaining fiscal discipline. These included cuts to red tape, changes to the trading allowance and additional support for high street businesses.

These are our key takeaways for you and your small business clients. 

MTD for Income Tax

The next wave of MTD for Income Tax is set to go ahead as previously confirmed, bringing landlords and sole traders who earned over £30,000 worth of qualifying income in 2025/26 into scope from 6th April, 2027. You can prepare your practice and clients to get MTD done with our collection of guides and webinars. 

Clients who join MTD for Income Tax in April 2027 will not receive late filing penalties if they file any of their 2027/28 quarterly updates late.

Smaller, more regular contributions for Self Assessment bills

The government announced plans to change how Payments on Account will work for Income Tax. From April 2029, taxpayers who are within Self Assessment (which includes MTD for Income Tax) will have to make smaller, more regular contributions towards their tax bill throughout the year. This will replace the current system whereby taxpayers make two large lump-sum payments on 31st January and 31st July. 

The government says this “will help taxpayers budget and plan for their tax obligations, reducing the risk of large, unexpected tax bills and making it less likely that they fall behind on tax due and build up debt”.

HMRC will consult with stakeholders and affected taxpayers before implementing the new payment schedule. 

Direct Debits become mandatory for VAT and PAYE liabilities 

From April 2029, the government will require businesses to set up a Direct Debit instruction for their VAT and PAYE liabilities. Businesses do not need to actually pay by Direct Debit if they use another payment method to pay their bill ahead of the deadline - but the Direct Debit instruction will be used to collect any unpaid balances.

Investment in HMRC to ensure tax compliance

HMRC will get an additional 670 compliance officers by 2029/30, strengthening HMRC’s ability to tackle non-compliance and recover unpaid tax. This is in addition to previous commitments to recruit 5,500 more compliance officers by 2029/30.

Minimum wage to rise by almost 4%

The Chancellor announced rises to both the UK’s National Living Wage (which applies to workers aged 21 and over) and the National Minimum Wage (for those aged 18, 19 and 20). 

• The National Living Wage will rise by 3.9%, moving from £12.71 to £13.21 per hour
• The National Minimum Wage will also rise by 3.9%, going up from £10.85 to £11.27 an hour.

This represents a slightly-above-inflation increase for 2.3 million people.

Parental pay introduced for self-employed dads, partners and adopters

About 150,000 self-employed dads, partners and adopters will qualify for a parental allowance for the first time from April 2029. Until now, only employees in these positions could qualify for state support. Under the new rules, they will be eligible for two weeks’ support worth up to £194 a week. The new rules will apply across Great Britain (so not in Northern Ireland).

First-year allowance to increase to 50%

The Chancellor announced that the first-year allowance will rise from 40% to 50% for qualifying expenditure incurred on or after 1st January 2027.

Writing down allowance to reduce to 12%

The Chancellor also announced that the main pool writing down allowance will fall from 14% to 12%, taking effect from 1st April 2027 for Corporation Tax and 6th April 2027 for Income Tax.

Capital Gains Tax and entrepreneurial support  

From 6th April 2027, the government will introduce changes to capital gains tax reliefs for business owners and founders. 

• Founders’ Relief: A new Capital Gains Tax Founders’ Relief will provide a reduced 10% CGT rate on up to £10 million in lifetime gains for qualifying founders of high-growth, innovative companies. The detailed eligibility criteria remain subject to technical consultation. 
• Business Asset Disposal Relief (BADR): The lifetime limit on gains eligible for BADR will be reduced from £1 million to £500,000. 

Income tax from property and savings income to rise

Income tax from property and savings income will be increased by a further 2% from April 2027, on top of the 2% already announced, making a total rise of 4% from existing rates. Income Tax rates for property rental income for taxpayers (excluding Scottish taxpayers) will go up to 24%, 44% and 49% respectively for the basic, higher and additional rates. Income Tax rates for savings income for all UK taxpayers will be 24%, 44% and 49%.

Trading allowance tripled from £1k to £3k

In a boost to freelancers and side-hustlers, the trading allowance will be tripled from £1,000 to £3,000, starting from 6th April 2027. 

If your clients earn less than £3,000 per year from their self-employment, this means they will not need to register with HMRC or pay tax on those earnings. If clients earn more than £3,000 per year from their sole trade, they will still need to register with HMRC but they can use either the new increased trading allowance of £3,000, or their actual business expenses and capital allowances, against their income to work out their profit. Clients can’t of course use both the trading allowance and their actual costs against their income - they have to use one or the other.

Mileage rate rises

The government has announced an increase to mileage rates for both employees and the self-employed.

The mileage rate increase from 45p to 55p per mile for journeys up to 10,000 miles per tax year, which was introduced from 6th April 2026, has been made “permanent”. Meanwhile the rate for each mile your clients drive for their business over 10,000 miles per tax year is set to increase from 25p to 35p from 6th April 2027.

Fuel duty freeze to continue for six months

Fuel duty has been frozen until 1st July 2027. The 5p duty discount will also continue until 1st July 2027. That discount was first introduced in 2022, and was due to last 12 months, but has been extended ever since.

Additional support for high streets 

The Chancellor announced additional reliefs and support for retail, hospitality and leisure (RHL) businesses, following the Prime Minister’s July announcement of an extra 20% relief for pubs, social clubs and most live music venues in England. This relief will be introduced from 1st April 2027. 

Thresholds for Small Business Rates Relief increased

The threshold for businesses to qualify for 100% Small Business Rates Relief (SBRR) will be increased from £12,000 to £18,000 for qualifying RHL businesses in England from April 2027. The threshold for businesses to qualify for tapered relief will also increase from £15,000 to £21,000. 

Business rates bills frozen

For the RHL businesses in England that don’t qualify for Small Business Rates Relief, business rates bills will be frozen from April 2027 to April 2029. 

Vape shops and adult game shops will be excluded from this freeze.

Greater share of business rates retained by local government

The Chancellor committed to increasing the share of business rates to be retained by local governments as opposed to central government, with a goal of 100% of business rates being retained locally by 2030. 

Expanded Company Share Option Plan to be known as EMI2

The Chancellor announced changes to the Company Share Option Plan (CSOP), doubling the individual employee option limit from £60,000 to £120,000 and extending the exercise period from 10 to 15 years.

The government will also remove the interaction of the CSOP with the Enterprise Management Incentives (EMI) option limit, allowing eligible employees to receive the full amount of options available under each scheme.

CSOP will also be renamed EMI2, making it clear that this is an option for growing companies that have moved beyond EMI or are not eligible for EMI.

Close company reporting requirements not going ahead for now

The Chancellor confirmed that the government will not introduce the proposed reporting requirements for close companies for now. Close companies do not need to report all transactions with participators as initially proposed.

Changes to the taxation of company profit withdrawals

The Government also separately published details on changes to the taxation of company profit withdrawals - expected to take effect from April 2028. This aims to reduce opportunities for business owners to extract accumulated profits under Capital Gains Tax rules, where dividend income tax would otherwise apply. The reforms will modernise the tax treatment of distributions and repayments of capital, potentially increasing tax liabilities for some owner-managed businesses. Draft legislation is expected in 2027 for technical consultation.

You can find out more in the government’s full Budget 2026 Report. We also have a blog post you can share with your clients on what the Budget means for small businesses.