Skip to main content Autumn Budget 2026: the key takeaways for small businesses
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 UK small businesses.
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 you earn less than £3,000 per year from your self-employment, this means you will not need to register with HMRC or pay tax on those earnings. If you earn more than £3,000 per year, from your sole trade, you will still need to register with HMRC but you can use either the new increased trading allowance of £3,000, or your actual business expenses and capital allowances, against your income to work out your profit. You can’t use both the trading allowance and your actual costs against your income - you have to use one or the other.
Capital Gains Tax changes and support for entrepreneurs
From 6th April 2027, the government will introduce changes to Capital Gains Tax (CGT) 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 will be subject to technical consultation.
- Business Asset Disposal Relief (BADR): The Chancellor announced a cut to the lifetime limit on gains eligible for BADR, which is a relief which potentially reduces the amount of Capital Gains Tax you pay when you sell (or ‘dispose of’) all or part of your business. Under the changes, you would only be eligible for BADR for gains of up to £500,000, down from £1 million.
Support for female and young entrepreneurs
To help female-led businesses access growth capital, the government is introducing a scale-up programme focused on removing early-stage fundraising barriers. This is supported by a £100 million commitment from the British Business Bank and wider initiatives to improve access to investment and support emerging fund managers.
The government will also pilot a Young Entrepreneurs Allowance, which will help applicants cover their living costs during their first year of business.
Red tape “slashed” to save businesses money
The Chancellor has announced plans to “strip back outdated paperwork, unnecessary form filling, and extend suspensions on tariffs” in a bid to cut the weight of bureaucracy on small businesses. The government claims the plans could save businesses across the UK “almost £800 million”.
The changes include:
- plans to make compliance guidance clearer, simpler and more small business-friendly
- making it simpler for small firms to bid for public contracts
- streamlining ONS business surveys to reduce the number of data requests businesses have to fill out
- extending import tariff suspensions on more than 250 products favoured by businesses
- simplifying the UK’s corporate reporting requirements
The government has also redoubled its commitment to implement the “Tell Us Once” ambition. This strategy aims to make sure businesses only have to provide information to official bodies and regulators once, rather than telling multiple government departments and agencies.
MTD for Income Tax penalty delays
The next wave of Making Tax Digital (MTD) for Income Tax is set to go ahead as previously confirmed, bringing self-employed people and landlords who earned over the £30,000 threshold for qualifying income in 2025/26 into scope from 6th April 2027.
In welcome news, the government confirmed that those first using MTD for Income Tax from April 2027 will not receive late filing penalties for their first four quarterly updates. Penalty points will apply from April 2027 to late filers who have had to use MTD for Income Tax since April 2026.
For information on whether MTD for Income Tax will affect you, and how to get ready if it does, check out our collection of easy-to-understand information, deep-dive guides and webinars.
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 within Self Assessment (which includes Making Tax Digital 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 Value Added Tax (VAT) and Pay As You Earn (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.
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 rather than the central government, with a goal of 100% of business rates being retained locally by 2030.
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%.
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 per 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. The new rules will apply across Great Britain (so not in Northern Ireland).
Mileage rate rises
If you use your car for work, you could be set to get extra support with motor costs from April 2027. The government has announced an increase to mileage rates - one of the ways you can get tax relief on a business journey in your own vehicle.
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 you drive for your business over 10,000 miles per tax year is set to increase from 25p to 35p.
Find out more about mileage and motor expenses in our dedicated guide.
Fuel duty freeze to continue for six months
Fuel duty remains 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.
You can find out more in the government’s full Budget 2026 Report.
Disclaimer: The content included in this blog post is based on our understanding of tax law at the time of publication. It may be subject to change and may not be applicable to your circumstances, so should not be relied upon. You are responsible for complying with tax law and should seek independent advice if you require further information about the content included in this blog post. If you don't have an accountant, take a look at our directory to find a FreeAgent Practice Partner based in your local area.
