The chancellor announced his budget on 28^th October.  The content includes loads of small changes, pushing the big issues down the line – however here are the main points: –

Help with Fuel Bills this Winter.

VAT on home electricity bills is reduced from 5% to 0% from 1^st October 2026 to 30^th June 2027

Every home in council tax bands A to D is to be given £100 this January.

Standing charges for Gas are to be removed, probably sometime next year, and similar is planned for electricity.

Green levies on fuel bills are to be removed.

A room for all rough sleepers this winter

Good New for Companies

Plans for reporting transactions with Directors/participators have been dropped.

Plans for reporting profit and loss to Companies House have been dropped/postponed.

Savings

Tax on savings and property income was due to increase by 2% from April 2027 – this is increased to be a 4% increase from April 2027 i.e. tax rates to be 24%, 44% and 49%.  The tax reducer for interest on residential property will also be increased to 24%.

There is no change to taxes on Dividends that increased in April 2026 – so remain at 10.75%, 35.75% and 39.35%.

ISA allowances are not being reduced so remain at 20,000pa.

The Life-Time ISA penalty for using it to buy a first home worth over £450,000 is being removed.

A New First -time Buyer ISA is replacing the lifetime ISA in April 2029 – HMRC will pay in 25% based on the final balance, not annually, and HMRC contribution will be capped at £20,000.

Personal Taxes

All tax bands are currently frozen until 2031 which has not changed so stealth taxes continue.

The basic state pension will shortly be higher than the basic personal allowance, so a new Pensioner Tax Allowance is being introduced for the next 3 years, for all those over the state pension age.

The Pensioner Tax Allowance is a tax reducer i.e. reduces the tax bill not taxable income.  Worth up to 20% of the difference between the full new state pension amount and the personal allowance but is reduced by £1 for every £3 earned over the new full state pension amount.  This is regardless of the amount of state pension received.

The trade allowance is increasing from £1,000 to £3,000 from April 2027.

• If sole trader income is under this threshold, then these traders need not register for self assessment.
• Sole traders can claim £3,000 instead of claiming expenses.
• Note this is not per business, but per trader.

The rental income allowance of £1,000 is unchanged.

Payments on account of tax due per your personal tax return, are to become payable monthly during the year instead of 6 monthly on 31^st January and 31^st July – from April 2029.  This will usually be by direct debit, but you can opt for collection via the payroll.  (A change from the plan to force collection via PAYE if possible)

Sole Traders

The small profits threshold, below which credits toward state pensions will not be earned, is increased to £7,355 pa from 6^th April 2027.

Class 2 national insurance contributions, payable to earn pension credits if sole trader income is less than the small profits threshold, is increased to £3.80pw.

Sole traders are to become eligible for paid parental leave.

MTD for Income Tax  

MTD penalties are not going to be introduced for the first year a business is due to be within MTD i.e. only those entering this year will get penalties next year.

Capital Allowances

Many small businesses can use the Annual Investment allowance of up to £1m to claim a tax deduction for the purchase of assets in the year of purchase.  Sole traders and partnerships may alternatively use cash accounting to get such a full tax deduction. But there are some assets that are excluded from both – specifically cars and assets leased out.

New electric cars and charge points purchased before April 2027 are eligible for 100% first year allowance – but no extension to this has been announced so such cars delivered after 1^st /6^th April 2027 may now go into the Main Pool to only benefit from standard writing down allowances unless an extension is announced later.

The writing down allowance for Main Pool assets, e.g. cars with under 50CO2, is to be reduced from 14% to 12% from April 2027.

There is no change to the writing down allowance on special pool assets e.g. cars with over 50CO2, that remains at 6%.

The 40% first year allowance available for main pool assets including assets leased out in UK, but not cars or second-hand assets, applicable from 1^st January 2026 is increased to 50% from 1^st January 2027.

Remember allowances are claimable when assets are put to business use.

Benefits in Kind

The taxable benefit on cars is increasing – by 1% to a maximum 40% by 2030.

Electric cars benefit will increase to 10% by 2030.

Hybrids currently have a range of benefit percentages based on range – but this is disappearing in 2028, when the benefit rises to 18% regardless of range.

Increased fixed rate benefit figures from April 2027 are: –

• Van Benefit charge is increased to £4,310 from £4,170.
• Van Fuel benefit £825 from £798
• Car fuel multiplier £30,000 from £29,200

Cars, vans, fuel, and private medial insurance are to be taxed via the payroll from April 2027.

Expenses

The mileage allowance for business mileage is increasing from April 2027.

• First 10,000 – 55p per mile (increased April 2026 from 45p)
• Over £10,000 – 35p per mile (increasing April 2027 from 25p)

Benchmark subsistence allowances are due to increase from April 2028.

Overseas benchmark allowances are to be rationalised from April 2028.

If you wish to claim expenses in employment that are not reimbursed by your employer then this will have to be done via a separate claim form, submitted with evidence to HMRC, not on a tax return; and the £2,500 threshold is removed.

Employing staff

The minimum wage per hour of work, increases by 3.9% from the first payday after 1st April 2027.  This applies to the gross cash element of a salary package i.e. pension contributions, and benefits in kind etc. can not contribute to this.

Rates are as follows: –

	From April 2026	From April 2027
National Living wage for those 21 and over	£12.71	£13.21
Minimum wage for 18 to 20-year-olds	£10.85	£11.27
Under 18-years-old	£8.00	£8.31
Apprentice rate – for those under 19 or in first year of apprenticeship	£8.00	£8.31

The lower earnings limit for gaining national insurance credits is increased to £133pw.

It will become compulsory to pay PAYE by direct debit from April 2029 – unless paid otherwise by the due date

VAT

Trading platforms are to collect VAT on sales by UK business, if they exceed £90,000pa.  That threshold is per trader, per platform but does not apply to business-to-business sales, private sellers, or second-hand goods.

VAT on home electricity bills is reduced from 5% to 0% from 1^st October 2026 to 31^st July 2027

It will become compulsory to pay VAT by direct debit from April 2029 – unless paid otherwise by the due date.

E-invoicing will become compulsory from 1^st April 2029 for all business-to-business VAT invoices – system to system using Peppol under the authority of HMRC.  Tech details to be published next October.

VAT reverse charge rules, on services supplied by overseas businesses, can not be operated by businesses that are not VAT registered.  So overseas suppliers will be obligated to register for and charge UK VAT on their services to non -VAT registered UK businesses, hence increasing their costs.

Capital Gains Tax and Investment Tax Reliefs

Business Asset disposal relief – 18% tax is now only available on £500,000 in a lifetime, reduced from £1m.

New Founders’ relief – 10% tax for disposals of up to £10m in a lifetime – but with very many conditions e.g. ownership (25%, for 5 years), business (UK, over £10m turnover, and 15 employees) and growth (Turnover, employees or R&D claims)

Investors relief remains.

Business Rates

15% business rates reduction for Pubs and Music venues from January rising to 20% in July.

Small business rates relief extended to ratable values of up to £18,000 for Pubs etc and £15,000 for others- excluding VAPE shops.

Local mayors to retains more business rates – raising to 100%, and to start to get a percentage of local income tax revenues too.

Other Taxes

Bank surcharge increased by 3% for 15 months from January.

Gambling taxes up 5% to 25%

Local mayors given power to impose tourist taxes.

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