Autumn Budget 2026: What It Means for Small Businesses, Sole Traders and Landlords

The Autumn Budget was delivered on 28 October 2026, with the government announcing a range of tax changes and financial measures affecting businesses and individuals across the UK.

Although the headline Income Tax rates on employment earnings in England, Wales and Northern Ireland, the main National Insurance rates and the standard VAT rate remain unchanged, several important changes are planned for April 2027 and beyond. Devolved Income Tax decisions and changes to particular allowances or thresholds still matter.

These include higher tax rates on rental income and savings interest, an increase in the trading allowance, changes to business mileage rates, higher minimum wage rates and a reduction in the lifetime limit for Business Asset Disposal Relief.

For sole traders, limited company directors, employers and landlords, understanding what is changing, when the changes take effect and how they could affect future tax liabilities will be particularly important.

In this guide, we explain the key announcements from the Autumn Budget 2026 and what they could mean for you.

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Autumn Budget 2026: Key announcements at a glance

Some measures were announced previously and have been confirmed or amended in this Budget. Others remain subject to legislation, consultation or further HMRC guidance.

The future rates and dates below describe the announced position. Changes requiring Finance Bill 2026-27 legislation, including the higher property and savings rates, reduced BADR limit and capital allowance changes, should not yet be treated as enacted law.

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1. Trading allowance increasing to £3,000

One of the announcements affecting individuals with smaller amounts of self-employment income is an increase in the trading allowance.

From 6 April 2027, the trading allowance will increase from £1,000 to £3,000.

The trading allowance can allow individuals to receive a certain amount of gross trading or miscellaneous income without paying Income Tax on that income.

For example, someone earning £2,000 a year from occasional freelance work may benefit from the increased allowance from 2027/28, where the relevant conditions are met.

Changes to the Self Assessment reporting threshold

Alongside the increase in the trading allowance, the government has confirmed that the trading income reporting threshold for Self Assessment will also increase to £3,000.

This means individuals whose qualifying trading income is fully covered by the allowance will generally no longer need to declare that income solely because it exceeds the previous £1,000 threshold.

However, other income, circumstances or reporting requirements may still mean that a Self Assessment tax return is necessary.

These are linked changes to tax relief and reporting, not two allowances that can be added together. The limit concerns gross qualifying income before expenses, across the relevant activities, rather than profit or an allowance for each trade. It does not increase the separate property allowance.

The trading allowance does not cover partnership trading income. Restrictions also apply to certain income from connected companies or partnerships and from your employer or your spouse or civil partner’s employer. Keep income records even where full relief applies. If HMRC has issued a notice to file a return, do not ignore it: ask HMRC whether it can be withdrawn.

Is the trading allowance always the best option?

Not necessarily.

Where actual allowable business expenses exceed the trading allowance, calculating taxable profits using those expenses may be more beneficial.

For example, a sole trader with £5,000 of turnover and £3,500 of allowable expenses would generally be better off deducting their actual expenses rather than claiming the £3,000 trading allowance.

What does this mean for sole traders?

The increase could simplify the tax position for individuals earning relatively small amounts from side businesses, freelance work or occasional trading activities.

Established sole traders with higher turnover should continue maintaining appropriate business records and calculating their taxable profits under the normal rules. Our Self Assessment service and guide to registering as self-employed explain the wider reporting process.

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2. Changes to business mileage rates

The Budget confirms changes to the tax-free and tax-deductible mileage rates for employees and self-employed individuals using their own cars or vans for qualifying business journeys.

The mileage package was announced on 27 October 2026 and included in the Budget. The temporary 55p rate for the first 10,000 qualifying car or van miles, announced in May and effective from 6 April 2026, will become permanent.

From 6 April 2027, the rate for business mileage exceeding 10,000 miles will also increase from 25p to 35p per mile.

Example: 15,000 business miles

For someone completing 15,000 qualifying business miles in a tax year:

• First 10,000 miles: 10,000 × 55p = £5,500.
• Remaining 5,000 miles: 5,000 × 35p = £1,750.
• Total mileage amount: £7,250.

Under the 2026/27 rates, the equivalent amount would be £6,750.

That represents an additional £500 in the mileage amount potentially available under the relevant rules. It does not mean an automatic £500 tax saving.

What does this mean for businesses?

The changes will be particularly relevant to tradespeople, mobile service providers and other individuals who travel regularly for work.

For an employee or company director using their own car or van, the approved amount is an Income Tax-free reimbursement ceiling. If the employer pays less, Mileage Allowance Relief may be available on the qualifying shortfall; it is tax relief, not reimbursement of that shortfall by HMRC.

For an eligible sole trader using simplified expenses, the amount is a deduction when calculating taxable profit. At a 20% marginal Income Tax rate, an extra £500 deduction would reduce Income Tax by £100, before any other tax effects. Do not claim actual vehicle running costs or capital allowances for the same expenditure as well. These are not the advisory fuel rates for company cars, and different rates apply to motorcycles and bicycles.

Ordinary commuting between home and a permanent workplace does not normally qualify as business mileage.

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3. Higher tax rates on rental income

Landlords are among those affected by the Budget’s Income Tax announcements.

From 6 April 2027, the government plans to introduce higher tax rates on taxable property income.

The four-percentage-point increase reflects changes announced across the 2025 and 2026 Budgets, including a further two-percentage-point increase announced in October 2026.

The announced property income rates apply in England, Wales and Northern Ireland, subject to devolved property-rate decisions. Scotland and Wales have powers over property income rates. This comparison is for an individual taxpayer in England, relevant to landlords in Lancaster and the surrounding area. Companies holding property pay Corporation Tax under different rules.

Your other income affects which tax band your rental profit falls into. From 2027/28, allowances will generally be used against employment, trading and pension income first. Property income will then be taxed before savings and dividends.

Example: A landlord with £10,000 of taxable rental profit

Assuming the entire £10,000 falls within the basic-rate band:

In this simplified example, the landlord would pay an additional £400 in Income Tax.

This example assumes the full £10,000 is taxable after allowances, falls entirely within the basic-rate band, and has no mortgage finance-cost tax reduction or other adjustments. It is not an example of a landlord whose only income is £10,000 and who has an unused Personal Allowance.

The actual impact will depend on the landlord’s other income, available allowances, reliefs and individual circumstances.

Residential mortgage finance-cost relief

For individual residential landlords covered by the restriction, qualifying mortgage interest reduces the tax bill rather than the rental profit. The current relief rate is 20%. From 2027/28, the calculation is linked to the property basic rate, so the Budget’s proposed 24% rate would also apply to this relief. The increase to 24% remains subject to legislation.

Relief is calculated on the lowest of three amounts: qualifying finance costs, property profits after losses, and income above the Personal Allowance after the required adjustments. That income calculation excludes savings and dividends. Relief cannot reduce the Income Tax liability below zero; qualifying unused finance costs can be carried forward under the rules. A higher-rate taxpayer does not receive relief at their higher tax rate. The £10,000 example above assumes no finance-cost tax reduction.

What does this mean for landlords?

Landlords should review their expected rental profits and consider how the changes could affect their future Self Assessment liabilities and payments on account.

The higher rates could be particularly relevant to landlords who already pay higher-rate Income Tax or have several rental properties.

Our guide to allowable expenses for landlords explains some of the costs that may be deducted when calculating taxable rental profits. See also our support for landlords.

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4. Savings income tax rates increasing

Individuals receiving taxable savings interest may also be affected.

From 6 April 2027, the announced tax rates on savings income will increase as follows:

These changes apply to taxable savings income across the UK.

The Personal Savings Allowance remains £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers; additional-rate taxpayers do not receive it. The 0% starting rate for savings, with a maximum £5,000 band reduced by other income, may also apply. These rules can mean that some or all interest attracts no tax.

As with property income, Budget 2025 had already proposed 22%, 42% and 47% for April 2027. The October 2026 announcement adds a further two percentage points to that planned position; the table compares the combined change with rates actually applying in 2026/27.

Interest earned within an ISA generally remains exempt from UK Income Tax.

Cash ISA allowance

The government has also reversed the previously planned reduction in the annual cash ISA subscription limit.

The cash ISA limit will remain £20,000 from April 2027, within the unchanged £20,000 overall adult ISA limit. This is a shared limit across eligible ISA accounts, not a separate allowance for each type. Account eligibility and product-specific limits still apply. The government is also exploring an incentive for first-time stocks and shares ISA investors; the design is not yet settled.

What does this mean for savers?

Individuals with significant taxable savings interest may wish to review how their interest income is taxed, particularly where they already complete Self Assessment returns.

The increased rates do not necessarily mean everyone earning interest will pay more tax, as the available allowances and exemptions remain important.

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5. Business Asset Disposal Relief lifetime limit reducing

Business Asset Disposal Relief (BADR) can allow qualifying individuals to pay a reduced Capital Gains Tax rate when disposing of eligible business assets or shares.

The Budget announces that the lifetime limit for qualifying gains will reduce from £1 million to £500,000 from 6 April 2027.

The relief is subject to detailed eligibility conditions, including requirements relating to the business, ownership and qualifying period.

Example: Selling a business

Suppose an individual sells qualifying business shares and realises a gain of £750,000, with no previous BADR claims.

Under the existing £1 million lifetime limit, the entire gain could potentially qualify for BADR, assuming all conditions are satisfied.

Under the proposed £500,000 lifetime limit, only £500,000 would potentially qualify, with the remaining gain subject to the applicable normal Capital Gains Tax rules.

For illustration, assuming the remaining gain is taxable at the 24% main Capital Gains Tax rate and ignoring the annual exempt amount and other reliefs:

In this simplified example, the reduction in the lifetime limit would increase the Capital Gains Tax liability by £15,000.

What does this mean for company directors?

Business owners considering retirement, selling their company or restructuring their business should review the timing and tax implications of any proposed transaction.

The reduction in the lifetime limit could be significant for individuals expecting larger capital gains.

However, the qualifying conditions, disposal date, contractual arrangements and transitional provisions all need careful consideration.

HMRC’s Budget overview says special provisions are planned for certain contracts entered into before 6 April 2027 but completed later, and for certain share reorganisations and exchanges. Their detailed application needs to be checked against the forthcoming legislation.

Simply signing a sale agreement before the new rules take effect should not be assumed to preserve the existing lifetime limit.

Proposed Founders’ Relief

The government has also proposed a more targeted relief for founders and significant early investors in high-growth, innovative UK companies. Founders’ Relief would apply a 10% Capital Gains Tax rate to up to £10 million of qualifying lifetime gains, for eligible share or securities disposals from 6 April 2027.

Proposed conditions include a substantial shareholding when the business started, minimum ownership and UK-residence periods, and demanding company size, UK-presence and growth or innovation tests. Certain sectors, including property development and financial services, would be excluded. Qualifying BADR and Investors’ Relief gains from 6 April 2027 would reduce the available Founders’ Relief lifetime limit.

BADR covers a wider range of qualifying business disposals; Founders’ Relief is aimed at people who helped build companies meeting these additional tests. The £750,000 example above does not assume eligibility for it. The design is under technical consultation until 30 November 2026, with legislation to follow, so eligibility should be checked once the final rules are available.

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6. National Minimum Wage and National Living Wage increases

Employers will need to prepare for higher minimum wage rates from 1 April 2027.

The National Living Wage for workers aged 21 and over will increase by approximately 3.9%. The apprentice rate applies to apprentices under 19, or aged 19 and over in the first year of their apprenticeship. Other apprentices receive the minimum rate for their age. The under-18 rate applies to eligible workers above school leaving age.

Example: A full-time employee aged 21 or over

Assuming an employee works 37.5 paid hours per week for 52 weeks:

This represents an increase of £975 per year in gross wages for one full-time employee. Annual figures use 1,950 hours at the hourly rate before rounding; multiplying the rounded weekly figures by 52 gives a slightly different result.

The employer’s overall additional cost may be higher once associated employer National Insurance and pension contributions are considered.

What should employers consider?

Employers should review their payroll arrangements ahead of April 2027.

In particular:

• Hourly pay: Ensure all affected employees receive at least the applicable minimum rate.
• Employment contracts: Review salaries and contracted hours where necessary.
• Payroll budgets: Allow for increases in gross wages and associated employer costs.
• Age changes: Check employees moving into a different minimum wage age band.
• Salary deductions: Consider whether deductions or working arrangements affect minimum wage compliance.

For businesses employing several members of staff, even relatively small hourly increases can have a noticeable impact on annual payroll costs.

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7. Mandatory payrolling of benefits in kind

The Budget tax documents set out a revised phased timetable for the previously announced reform requiring payrolling of most taxable benefits in kind.

Under the existing system, employers commonly report benefits such as company cars, private medical insurance and other taxable benefits using forms P11D, unless the benefits are already payrolled.

From April 2027, the government intends to make payrolling mandatory for certain benefits, with the remaining benefits brought into the system in April 2028.

What does this mean for employers?

Employers providing taxable benefits will need to ensure their payroll software and processes can correctly calculate and report the taxable value through Real Time Information.

This could affect businesses providing company cars, private medical insurance and other benefits to directors or employees.

Employers should review their existing benefits arrangements before the new requirements take effect. The excluded loans and living accommodation should not be assumed to become mandatory in April 2028. Our payroll service can help employers review their reporting arrangements.

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8. Changes to capital allowances

The Budget also announces changes to capital allowances for businesses purchasing qualifying assets.

Two important changes are planned:

Capital allowances let a business deduct qualifying equipment costs when working out taxable profits. A first-year allowance gives relief upfront; writing-down allowances spread relief on the remaining qualifying balance over later years.

The proposed 50% main-rate first-year allowance is for qualifying new and unused plant and machinery, excluding cars and overseas leasing. It is separate from the existing 50% allowance for special-rate assets. The 50% rate would apply to expenditure incurred on or after 1 January 2027. Placing an order or paying a deposit does not by itself settle when expenditure is incurred for tax purposes.

The 12% writing-down rate is planned from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax. If an accounting period covers the change date, check the transitional calculation before applying the new rate to the whole period.

Annual Investment Allowance and full expensing

For many small businesses, the first question is whether the full cost can already be deducted upfront:

• Annual Investment Allowance (AIA): generally allows the full cost of qualifying plant and machinery to be deducted, up to £1 million for a 12-month period. It can cover eligible second-hand equipment as well as new items, but not cars. Short periods, shared allowances and private use can restrict the claim.
• Full expensing: companies within Corporation Tax can deduct the full cost of qualifying new and unused main-rate plant and machinery. Cars and most assets bought for leasing are excluded.

These allowances remain available under their existing rules. Where a full deduction is available, it may be more useful than the proposed 50% allowance. A deduction reduces taxable profit; it does not mean HMRC repays the purchase price.

Example: £20,000 of qualifying expenditure

Assuming the expenditure qualifies for the relevant main-rate first-year allowance, but not an alternative 100% allowance:

The revised first-year allowance would provide an additional £2,000 of initial tax deductions in this example.

However, the actual tax saving depends on the business’s tax position, and other allowances may provide more favourable relief.

What does this mean for small businesses?

Businesses planning to purchase equipment, machinery or other capital assets should consider which capital allowance rules apply before making investment decisions.

The timing of expenditure can affect the amount of tax relief available, particularly where expenditure does not qualify for immediate 100% relief.

For an individual purchase, check eligibility for AIA or full expensing before relying on this example. No expenditure can receive more than one allowance for the same cost.

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9. Business rates relief for qualifying small businesses

The Budget includes additional support for certain retail, hospitality and leisure businesses in England.

From 1 April 2027, the Small Business Rate Relief thresholds for qualifying properties in these sectors will increase.

These increased thresholds apply to qualifying retail, hospitality and leisure properties rather than all commercial properties.

The government estimates that around 70,000 additional high street businesses will no longer pay business rates as a result of the changes. This is an estimate, not a guaranteed outcome for any particular property.

Additional measures include relief increased to 35% for qualifying pubs, social clubs and live music venues, together with transitional support. The announced two-year real-terms freeze for qualifying retail, hospitality and leisure bills caps increases by inflation rather than fixing bills in cash terms; exclusions include improvements and the loss of other reliefs.

What does this mean for local businesses?

Qualifying cafés, restaurants, shops and other businesses operating from commercial premises may benefit from lower business rates.

However, eligibility depends on the property, its rateable value and the relevant relief conditions.

Businesses should review their business rates bills when the changes take effect.

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10. What hasn’t changed for limited company directors?

Although the Budget includes several changes affecting business owners, some important tax rates remain unchanged.

Dividend tax rates

The government has not announced a further increase in dividend tax rates for 2027/28.

These rates remain relevant to limited company directors who receive dividends alongside salary or other income.

The amount of dividend tax payable depends on the individual’s total taxable income, available allowances and applicable tax bands.

Corporation Tax

The government has also maintained the existing Corporation Tax framework.

The small profits rate remains 19% and the main rate 25%. The ordinary profit thresholds remain £50,000 and £250,000, with marginal relief potentially applying between them. Associated companies and short accounting periods can reduce those thresholds. The Budget separately increases the bank surcharge.

Our Annual Accounts and Corporation Tax service covers support for limited companies.

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11. Pension Tax Allowance for pensioners

The Budget confirms details of the Pension Tax Allowance, previously announced at Budget 2025, from 6 April 2027.

This measure is intended to prevent pensioners whose total income does not exceed the value of the full new State Pension from facing small Income Tax liabilities solely because State Pension increases take their income above the Personal Allowance.

The allowance will apply for the following tax years:

• 2027/28
• 2028/29
• 2029/30

The relief will operate as a tax reduction rather than a general increase in the Personal Allowance.

People above State Pension age, or reaching it within the tax year, can qualify based on their total income regardless of its source. Receiving the State Pension itself is not a condition.

For individuals with income above that level, the tax reduction is withdrawn by £1 for every £3 of excess income. Its value is based on 20% of the difference between the full new State Pension and the Personal Allowance. HMRC intends to apply it automatically using the information it holds. It does not increase the Personal Allowance, change pension contribution allowances or generate a payment where no tax is due.

What does this mean for pensioners?

The measure should reduce the number of pensioners facing small Income Tax bills where their income consists solely, or predominantly, of the State Pension.

However, pensioners receiving additional private pensions, employment income, rental income or other taxable income may still have Income Tax to pay.

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12. Making Tax Digital and future tax administration changes

The Budget includes several measures aimed at changing how businesses and individuals report and pay tax.

Making Tax Digital for Income Tax

The government will not apply late-submission penalty points to quarterly updates for the 2027/28 tax year for taxpayers required to join Making Tax Digital for Income Tax in April 2027.

This is a limited easement for that cohort and those quarterly updates, not a blanket suspension of tax penalties or late-payment rules. Quarterly updates must still be sent before the tax return can be submitted.

It does not mean that qualifying taxpayers can ignore their Making Tax Digital obligations. Our MTD guide and Making Tax Digital service explain the reporting framework.

Mandatory VAT e-invoicing

The government intends to introduce mandatory structured electronic VAT invoicing from 1 April 2029.

Current rules allow paper, PDF and electronic invoices where the relevant requirements are met. Under the planned change, VAT invoices within scope would need to use a prescribed structured format. A PDF sent by email would not, by itself, meet that requirement.

The Finance Bill is intended to provide the powers for the new rules, with detailed requirements to follow through regulations and the implementation roadmap.

Businesses using accounting software should monitor developments to ensure their invoicing systems remain compliant.

Changes to Self Assessment payments on account

The government also plans to introduce more regular payments towards Self Assessment liabilities from April 2029 for taxpayers already required to make payments on account.

Payments on account are currently normally due in two instalments, on 31 January and 31 July. The proposed replacement would use more frequent automated payments, with an option for eligible taxpayers to pay through PAYE. The detailed design is still being developed: no new number of instalments or specific payment dates should be assumed.

For now, the existing Self Assessment payment deadlines continue to apply. Our Self Assessment checklist can help with preparation.

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13. Other announcements affecting households and businesses

Although much of the Budget focuses on taxation, several other measures may affect individuals and businesses.

Fuel duty

The government has announced an extension of the existing 5p-per-litre fuel duty reduction through 30 June 2027. From 1 July 2027, the cut is scheduled to end and rates will be uprated by RPI inflation.

This may be relevant to businesses with significant vehicle and transport costs.

Household energy support

The Budget announces an extension of the temporary zero rate of VAT on qualifying domestic electricity supplies in Great Britain through 30 June 2027, instead of reverting to 5% after 31 March 2027. Northern Ireland is to receive funding for comparable support; the announcement does not establish identical VAT treatment there.

It also announces a £100 Household Energy Payment for eligible households in England in Council Tax bands A to D, with payments planned from January 2027.

Self-employed parental support

The government has announced plans for a new Parental Allowance for eligible self-employed fathers, partners and adopters in Great Britain from April 2029. A sufficient work and earnings history will be relevant; the announcement also covers certain people with recent or irregular employment who do not qualify for statutory paternity or adoption pay.

Further details of the eligibility conditions and administration will be needed ahead of implementation.

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What should small business owners do following the Autumn Budget?

Not every Budget announcement requires immediate action.

However, there are several areas worth considering over the coming months:

• Sole traders: Review the changes to the trading allowance, reporting threshold and business mileage rates.
• Landlords: Consider the impact of higher property income tax rates on future tax liabilities.
• Company directors: Review any planned business disposals that could qualify for Business Asset Disposal Relief.
• Employers: Budget for the minimum wage increases and prepare for mandatory payrolling of benefits in kind.
• Businesses purchasing assets: Check which capital allowance rules will apply to planned expenditure.
• Retail and hospitality businesses: Review eligibility for the revised business rates relief.
• VAT-registered businesses: Monitor the planned introduction of mandatory electronic invoicing.
• Pensioners: Consider whether the new Pension Tax Allowance could affect their Income Tax position.

Many of these measures will not take effect until 2027 or later, giving businesses time to prepare.

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Need advice on how the Autumn Budget affects you?

Tax changes can affect businesses and individuals in different ways, depending on their income, business structure and personal circumstances.

At Baldwin’s Accountancy Services, based in Hest Bank, Lancaster, we support sole traders, limited companies, landlords and individuals across Lancaster, Morecambe, Carnforth and the surrounding areas.

If you’re unsure how any of the Autumn Budget announcements could affect your business or personal tax position, please get in touch to discuss your circumstances.

This article summarises the Autumn Budget delivered on 28 October 2026 and relevant earlier announcements confirmed or amended alongside it. Some measures remain subject to legislation, consultation or further HMRC guidance. The information is general guidance and should not be treated as advice tailored to individual circumstances.

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