What Budget 2026 Changed for Small Business Owners

Last updated: 29 October 2026 · Written by Axel

Budget 2026 was delivered on 28 October 2026. For most small business owners the main changes are higher income tax on savings and property income from April 2027, a cut in the lifetime limit for Business Asset Disposal Relief, and a trading allowance that triples to £3,000. Tax on wages and dividends does not change. Almost everything below is announced but not yet law, and most of it starts on or after 6 April 2027.

How to read this page: Now law means it is already in force. Announced, not law yet means Parliament still has to pass it, usually in Finance Bill 2026-27, and the details could change before then. Each point links to the official source. The full list of measures is in the Overview of Tax Legislation and Rates, and the figures are in Annex A: rates and allowances.

Sole traders

Now law

• The tax-free mileage rate for a car or van is 55p a mile for the first 10,000 business miles. It started as a temporary rise in May 2026 and is already written into law for 2026-27 and later years (Taxation (Energy and Vehicles) Act 2026, section 2).

Announced, not law yet

• The trading allowance rises from £1,000 to £3,000, and so does the income level at which you must report trading income through Self Assessment. Starts 6 April 2027 (HMRC policy paper).
• The simplified mileage rate above 10,000 business miles rises from 25p to 35p from 6 April 2027 (OOTLAR 2.7).
• Plant and machinery: the main writing-down allowance falls from 14% to 12% from 6 April 2027, and the main rate first-year allowance rises from 40% to 50% for spending from 1 January 2027. The £1 million Annual Investment Allowance stays (OOTLAR 1.42).
• Making Tax Digital for Income Tax: if you must join in April 2027, you will not get late submission penalty points on your quarterly updates for 2027-28. You still have to send them (OOTLAR 2.36).
• From April 2029, if you make payments on account you will pay in smaller, automatic instalments during the year instead of twice a year. How often has not been decided (HMRC factsheet).
• Self-employed fathers, partners and adopters in Great Britain become eligible for parental pay from April 2029 (Budget 2026 document, para 6.12).

Limited company directors

Now law

• Nothing new. Dividend tax rates (10.75%, 35.75% and 39.35%) and the £500 dividend allowance stay the same for 2027-28 (Annex A).

Announced, not law yet

• The Business Asset Disposal Relief lifetime limit falls from £1 million to £500,000 for disposals on or after 6 April 2027. The rate stays at 18% (OOTLAR 1.33).
• A new Founders' Relief will charge 10% Capital Gains Tax on up to £10 million of gains, but only for founders of fast-growing companies. Among the tests, the company needs turnover of at least £10 million and at least 15 full-time staff. Starts 6 April 2027, and the consultation closes on 30 November 2026 (HMRC policy paper).
• Corporation tax stays at 25% (main rate) and 19% (small profits rate) for the year from 1 April 2028 (OOTLAR 1.38).
• The rules on what counts as a distribution will be rewritten from April 2028. This includes company buybacks of shares and holding-company arrangements that turn profits into capital gains. Ordinary dividends and genuine sales of a business are not meant to be affected (HM Treasury explainer).
• The proposed extra reporting of payments to shareholders in close companies will not go ahead for now (consultation outcome).

Landlords

Announced, not law yet

• Income tax on property income is already due to rise in April 2027. The Budget adds a further 2 percentage points, giving rates of 24%, 44% and 49% from 6 April 2027. The Budget says these rates will apply across England, Wales and Northern Ireland, and that the Scottish and Welsh governments can set property income rates under their existing income tax powers (OOTLAR 1.2).
• A new annual High Value Council Tax Surcharge for owners of homes in England worth £2 million or more starts in April 2028 (HMRC policy paper).
• HMRC is consulting on making letting agents and tenancy deposit schemes report more rental data (consultation).

Employers

Now law

• Employees can be paid 55p a mile tax-free for the first 10,000 business miles (section 2).

Announced, not law yet

• Benefits in kind move into payroll: company cars, vans, fuel and medical benefits from 6 April 2027, and most others from 6 April 2028. Loans and living accommodation are left out for now (HMRC policy paper).
• The mileage rate above 10,000 miles rises to 35p from 6 April 2027 (OOTLAR 2.7).
• The National Living Wage rises to £13.21 an hour from 1 April 2027 (Budget 2026 document, para 6.128).
• National Insurance thresholds and the £10,500 Employment Allowance stay frozen (OOTLAR 2.1).
• From April 2029, VAT and PAYE bills must be covered by a Direct Debit instruction (consultation outcome). From the same date, VAT invoices must be electronic (HMRC policy paper).
• In England, Small Business Rates Relief for qualifying retail, hospitality and leisure premises will give 100% relief up to a rateable value of £18,000 from 1 April 2027 (now £12,000), with tapered relief up to £21,000 (Budget 2026 document, business rates).

Everyone and savers

Now law

• The Lifetime ISA withdrawal charge falls from 25% to 20% where you use the money to buy a first home priced above the cap. This applies to withdrawals from 29 October 2026 (SI 2026/1130).
• The Personal Allowance (£12,570) and the basic rate band (£37,700) stay frozen until 2030-31. This was already law before the Budget (Finance Act 2026, section 10).

Announced, not law yet

• Income tax on savings interest rises to 24%, 44% and 49% from 6 April 2027, across the UK. The Personal Savings Allowance (£1,000 or £500) and the £5,000 starting rate for savings stay (OOTLAR 1.1).
• The cash ISA limit stays at £20,000 for all adults. A cut to £12,000 for under-65s had been planned for April 2027 (OOTLAR 2.5).
• From 1 April 2028, taxpayers will have a legal duty to correct mistakes in returns once they find them (HMRC policy paper). From 2029-30, HMRC will be able to take regular amounts from the bank accounts of people who can pay smaller tax debts but repeatedly ignore HMRC (factsheet).

No date has been announced yet for the next fiscal event.

What we changed in the Tax Playbook

Every idea in the A.X.E.L Tax Playbook with a rate, threshold or allowance in it was rechecked against Budget 2026 on the official pages, and each one that an announcement affects now says so, with the date it takes effect and whether it is law yet. Changed ideas went through an independent second check before going back on. To see which ideas fit your own figures, try the free tax check-up.

Axel

Full-stack developer and founder of AXEL.TRADE, with 10+ years running businesses. Based in Manchester, building websites and the A.X.E.L platform for tradesmen and small businesses.