The footprints we leave today shape tomorrow, but will the Budget 2026 announcements pave the way for a brighter future?

With the cost of living continuing to dominate the headlines, the Chancellor placed significant emphasis on energy costs in Budget 2026. The announcements included measures to support households, reduce costs for energy-intensive businesses and provide some relief from rising living expenses.

• Extension of the electricity VAT cut: The reduced VAT rate on electricity will be extended until July 2027.
• Household payment: From January 2027, English households in Council Tax bands A to D will receive a £100 payment directly into their bank accounts. Funding will be provided to the devolved governments to support equivalent arrangements.
• Standing charges: The abolition of gas standing charges with the intention of reforming the electricity standing charges.
• Heating oil tariffs: Tariffs on kerosene heating oil will be suspended until December 2028.
• Energy-intensive manufacturers: Approximately 10,000 energy-intensive manufacturing businesses will receive an electricity discount of between 20% and 25%, starting in April 2027. The package will also include a backdated payment covering the 2026–27 financial year.
• Fertiliser tariffs: Tariffs on fertiliser will be suspended until December 2027.

Mr Healey also expressed support for further devolution, relying upon innovative local authorities to help reindustrialise the UK.

The Office for Budget Responsibility (OBR) forecasted that the UK will pay an average of £14 billion more per year in debt interest than it projected in its Spring 2026 analysis. With the financial outlook remaining challenging for the foreseeable future, this raises questions about the sustainability of increased public spending without corresponding growth in tax revenues; you have been warned….

Key Announcements

Individuals 

• Pension Tax Allowance: A new tax-free allowance will be introduced for individuals whose income does not exceed the level of the new State Pension, ensuring that low-income retirees do not pay income tax.
• Individual Savings Accounts (ISAs): The planned reduction in the cash ISA allowance will not proceed. The annual allowance will remain at £20,000.
• First-time buyers: A new First Time Buyer ISA will be introduced from April 2029.
• Tax on savings and property income: Tax rates on savings and property income will increase by two percentage points across all tax bands from April 2027 [24%, 44% and 49%].
• Tax-free mileage rates: The tax-free mileage rates will be permanently increased to 55p per mile for the first 10,000 miles and 35p per mile thereafter from 6th April 2027.
• Immigration-related employment costs: From 28 October 2026, the benefit-in-kind charge associated with the Immigration Skills Charge and Certificate of Sponsorship fees will be removed.
• Zero-emission vehicles: The benefit-in-kind percentages for zero-emission vehicles will increase by one percentage point in the 2030–31 tax year. The corresponding increase for all other vehicles will be capped at 40%.
• Van benefits: For the 2027–28 tax year, the van benefit charge will be £4,310 and the van fuel benefit charge will be £825.
• National Insurance changes for 2027-28:
  • Class 1 Lower Earnings Limit (LEL): £6,916.
  • Class 2 Small Profits Threshold (SPT): £7,355.
  • Class 2 National Insurance rate: £3.80 per week.
  • Class 3 National Insurance rate: £19.05 per week.
• Making Tax Digital: Taxpayers joining Making Tax Digital (MTD) from April 2027 will not receive penalties for late submission of their first four quarterly updates. Certain groups will also be excluded from the requirement to join, including individuals eligible for qualifying care relief, non-UK-resident foreign entertainers and sportspeople, and expected non-resident customers.
• Payments on Account: From April 2029, taxpayers who already make Payments on Account will make smaller, more regular contributions towards their tax bills throughout the year.
• Pension death benefits: The two-year rule will be removed, meaning beneficiaries will no longer become liable to tax solely because tax-free pension and lump-sum death benefits are paid more than two years after the member’s death.
• US limited liability companies (LLCs): Provisions will be introduced from early 2028 to provide relief from double taxation for UK investors in US LLCs.

Businesses

Corporation tax

The main corporation tax rate will remain at 25%, and the small profits rate 19%, for the financial year beginning 1 April 2028.

All remaining unrelieved surplus advance corporation tax (ACT) balances will be extinguished when the regime ends on 1 April 2031.

Business investment and capital allowances

Businesses investing in plant and equipment will be affected by changes to capital allowances from April 2027:

• The main rate of writing-down allowances will fall by two percentage points, from 14% to 12%.
• The main First Year Allowance (FYA) rate will increase from 40% to 50%.

Trading allowance

The tax-free Trading Allowance will increase to £3,000 from April 2027.

Subsistence rates

From 2028-29 the benchmark rates will be increased to:

• Over 5 hours: £20 (from £5)
• Over 10 hours: £60 (from £10)
• Over 24 hours: £75

Overseas scale rates to be updated from April 2028 also.

Employee share schemes

Changes to the Company Share Option Plan (CSOP) will take effect from 6 April 2027:

• The option limit will increase to £120,000.
• The interaction between CSOP and the Enterprise Management Incentives (EMI) option limit will be removed.
• The exercise period will be extended to 15 years.

The exercise window for EMI options following a disqualifying event will also be extended to 180 days.

Capital Gains Tax and business founders

Two significant changes will affect entrepreneurs and business owners.

Business Asset Disposal Relief (BADR)

The lifetime limit for capital gains eligible for BADR will reduce from £1 million to £500,000 from April 2027.

Capital Gains Tax Founders’ Relief

A new Founders’ Relief will be introduced from 6 April 2027. It will provide a reduced Capital Gains Tax rate of 10% on up to £10 million of lifetime gains.
The stated aim is to encourage entrepreneurship and support individuals who take risks to establish and grow innovative, high-growth businesses in the UK.

See below for the UK government’s prospectus detailing its intended actions to help innovative businesses to grow and compete globally from the UK.

https://www.gov.uk/government/publications/entrepreneurship-in-the-uk-start-scale-stay

Annual Tax on Enveloped Dwellings (ATED)

The annual ATED charges will increase by 3.5% from 1 April 2027.

National Minimum Wage and National Living Wage

The National Living Wage and National Minimum Wage rates will increase by 3.9%.

Parental pay for self-employed individuals

From April 2029, self-employed fathers, partners and adopters will become eligible for parental pay.

Business Rates

Business From April 2027, the Small Business Rate Relief threshold for retail, hospitality and leisure (RHL) businesses will increase to £18,000.

Business rates for other retail, hospitality and leisure properties will be frozen for two years.