UK Autumn Budget 2026: Top implications for businesses
The Chancellor, John Healey, delivered his first Budget, badged as a Budget to provide breathing space today whilst laying the foundations for the future.
Whilst there were no changes to the headline rate of Corporation Tax, the Budget included changes to capital allowances, tax-advantaged employee share schemes, the administration of the R&D scheme, and the VAT treatment of the land sold for social housing.
The lifetime limit for Business Asset Disposal Relief will be halved, alongside the introduction of a new Founders’ Relief for capital gains tax.
Taken together, the measures seek to encourage investment and growth while making a number of targeted changes to how businesses are taxed.
Below, we explore the key implications and what they mean for businesses.
EMI2 brings more flexibility for employee share schemes
The Company Share Option Plan (CSOP) will become EMI2 from Budget day, with the individual option limit doubling from £60,000 to £120,000 from 6 April 2027 and the exercise period extending to 15 years. The existing interaction with EMI will also be removed, meaning some employees may be able to hold options under both schemes.
Together with changes to EMI, the expanded regime will give businesses greater flexibility to use tax-advantaged share incentives to attract, retain and reward key employees.
Changes to capital allowances
The main first-year allowance will increase from 40% to 50% for qualifying expenditure from 1 January 2027, while the main writing-down allowance will reduce from 14% to 12% from April 2027.
The changes increase the upfront relief available on qualifying investment but slow the rate of relief for expenditure remaining within capital allowance pools. Businesses planning significant capital expenditure should consider how the changes interact with full expensing and the Annual Investment Allowance.
R&D tax relief
There are no substantive changes to the R&D tax relief regimes, but the government has announced measures intended to simplify the claims process.
The R&D Claim Notification Form will be removed from 1 April 2027 and the Additional Information Form simplified from autumn 2027, which should reduce some of the administrative burden for businesses making R&D claims.
Changes to company distribution rules
Following the government’s consultation on modernising the distributions and repayments of capital from companies, new rules will apply from 6 April 2028 to bring greater consistency to the taxation of amounts extracted from companies.
The reforms will affect areas including capital repayments following share reorganisations, share buybacks and demergers, while the Government has confirmed that genuine commercial transactions, including family successions, will be protected.
The changes could be particularly important for owner-managed and family businesses considering reorganisations, succession planning or extraction of value from a company.
New zero-rate of VAT for social housing land
From 1 April 2027, a new zero rate of VAT will apply to qualifying land sold to registered social housing providers.
The measure should simplify the VAT treatment of land used for social housing and reduce the need for arrangements such as “golden brick” structures, which are currently used to achieve VAT-efficient outcomes. The change will be particularly relevant to landowners, developers and social housing providers involved in existing or planned social housing developments.
Business rates support for the high street
The Budget announced further business rates support for retail, hospitality and leisure businesses in England. From April 2027, the Small Business Rates Relief thresholds will increase, taking more qualifying businesses out of business rates altogether, while qualifying RHL businesses will benefit from a two-year real-terms freeze in bills.
Pubs, social clubs and most live music venues will also receive additional support.
Conclusion
Overall, the Budget contains a mixture of incentives for investment and growth alongside targeted changes to the tax system.
For businesses, the key will be understanding which of the changes create opportunities and where existing plans may need to be revisited.
If the Budget has raised any questions for you, submit your questions to our panel ahead of our post-budget briefing Friday at 9:30am and book your place.
Alternatively, if you would like any further information or guidance on this topic, please don’t hesitate to get in contact with Amanda Ollason or your usual AAB contact.
UK Autumn Budget 2026: Top implications for individuals
The Chancellor, John Healey, delivered his first Budget, badged as a Budget to provide breathing space today whilst laying the foundations for the future.
Whilst the Chancellor kept to the government’s commitment not to increase the headline rates of tax on earnings, and no change was made to the headline rate of capital gains tax, further increases in the rates of income tax applying to property and savings income were announced.
There were also changes to capital gains tax reliefs, with the lifetime allowance for Business Asset Disposal Relief being reduced, alongside the introduction of a new Founders’ Relief.
There were no further significant changes announced to inheritance tax or the pensions regime.
Below, we explore the key implications and what they mean for individuals.
New Founders’ Relief as BADR lifetime limit is halved
From 6 April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) will halve from £1 million to £500,000. At the same time, a new Founders’ Relief will offer a 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies.
The changes create a significant distinction between the tax treatment of business owners generally and those able to qualify for the new Founders’ Relief.
Higher tax on savings and property income
Tax rates on savings and property income will rise by a further two percentage points from 6 April 2027, on top of the increases announced last year. This will take the basic, higher and additional rates to 24%, 44% and 49% respectively.
The savings rates apply across the UK, while the property income rates apply in England, Wales and Northern Ireland. The changes will be particularly relevant for individuals with significant savings income and landlords receiving taxable rental income.
UK open for business
The Budget announced changes intended to make it easier for highly skilled international workers to come to and remain in the UK, including expansion of the High Potential Individual visa and changes to the Graduate visa.
Combined with the Foreign Income and Gains (FIG) regime available to qualifying new UK residents, the changes reinforce the UK’s offering to internationally mobile individuals and entrepreneurs.
Family business succession
The government has confirmed that its reforms to the taxation of company distributions will protect genuine commercial transactions, including family successions. The detail will be important for family-owned businesses considering how and when ownership should pass to the next generation.
With the BADR lifetime limit also reducing to £500,000 from April 2027, business owners contemplating succession or a future disposal should consider the interaction of these changes as part of their longer-term planning.
Self Assessment payments to become more frequent
From April 2029, taxpayers who currently make self assessment payments on account will move from the existing system to smaller, more regular payments throughout the year, bringing tax payments closer to when income is earned.
The change will not increase the overall tax liability, but could have important cash-flow implications for self-employed individuals, landlords and others within the Payments on Account regime.
Trading allowance to rise to £3,000
From 6 April 2027, the Income Tax Trading Allowance will triple from £1,000 to £3,000, reducing the tax and administrative burden for individuals earning relatively small amounts from trading and miscellaneous activities.
The limit applies to qualifying income before expenses and across qualifying activities, rather than separately to each activity.
Cash ISA limit retained
The proposed reduction in the cash ISA allowance will not go ahead, with the £20,000 limit retained. The Budget also announced a new First Time Buyer ISA from April 2029 and changes to the Lifetime ISA rules.
Conclusion
The introduction of a more generous Founders’ Relief is welcome, but as is often the case, the devil will be in the detail.
The changes to the income tax rates, savings, and rental income will mean it will be more important than ever to consider the ownership of income-generating assets, to reduce income tax exposures.
We will also need to wait for the details on the acceleration of self-assessment payments on account, and the reduction in the thresholds for Making Tax Digital from April 2027 should not be forgotten.
The changes to inheritance tax announced in 2024, bringing most unused pension funds within the scope of inheritance tax, have not yet come into effect. For further details, please visit our inheritance tax hub.
If the Budget has raised any questions for you, submit your questions to our panel ahead of our post-budget briefing this Friday at 9:30am and book your place.
Alternatively, if you would like any further information or guidance on this topic, please don’t hesitate to get in contact with Jill Walker or your usual AAB contact.