Budget 2026: What It Means for Business Owners

The Chancellor has described this as a “Budget for working people”, aimed at giving households and businesses greater breathing space from ongoing cost-of-living pressures while supporting investment, entrepreneurship and economic growth.

For business owners, the headline message is that there are no changes to the main rates of income tax or capital gains tax. The personal allowance remains unchanged, capital gains tax rates remain unchanged (although important relief changes have been announced), and the annual CGT exemption is retained.

Detailed item by item changes can be found in our resources section here: Autumn Budget details

Corporation Tax and Investment

The corporation tax rate remains capped at 25%, and Full Expensing remains available.

From April 2027, the writing down allowance will reduce from 14% to 12%.

The First-Year Allowance will increase from 40% to 50% from January 2027.

Businesses investing in plant and machinery should continue to benefit from generous upfront reliefs.

R&D Relief Simplification

The Government has announced measures to simplify the R&D regime, including:

• Abolishing the claim notification requirement from April 2027.
• Simplifying the Additional Information Form from Autumn 2027.

These changes should reduce administration for businesses undertaking qualifying R&D activities.

Rising Employment Costs

The Budget includes further increases to both the National Living Wage (NLW) and National Minimum Wage (NMW) from April 2027 by 3.9%.

Whilst welcome for employees, these increases will add further cost pressures for many employers, particularly in retail, hospitality, leisure, care and other labour-intensive sectors.

New Founders’ Relief

A new Founders’ Relief will be introduced from April 2027, providing a 10% capital gains tax rate on up to £10 million of lifetime gains.

The relief is aimed at founders and early investors who have built and scaled successful high growth innovative UK companies. Broadly, qualifying individuals must:

• Have held at least 25% of the company when trading commenced.
• Have held their shares for at least five years.
• Have been UK resident for at least five continuous years before disposal.

The company must also meet a number of qualifying conditions, including minimum trading, turnover, employment, growth and innovation requirements.

The detailed legislation is yet to be published and the qualifying conditions are expected to be significantly more restrictive than the current BADR regime, however this could provide a significant new tax incentive for founders planning a future exit.

BADR Lifetime Limit Reduced

The lifetime limit for Business Asset Disposal Relief (BADR) will reduce from £1 million to £500,000 from April 2027.

Business owners considering a sale or succession event may wish to review their plans in light of this change.

Review of Distribution Rules

The Government will review the taxation of company distributions, publish draft legislation for technical consultation in 2027, with reforms expected from April 2028.

The proposals are expected to affect:

• Share buy-backs
• Purchase of own shares
• Capital reductions
• Liquidations
• Demergers
• Family succession planning

The Government has indicated that genuine family succession arrangements will continue to be supported.

Enhanced Share Incentives

The Budget includes a number of welcome changes to employee share schemes from April 2027.

EMI

• Exercise period extended from 90 days to 180 days following a disqualifying event.
• EMI options preserved following a move to employee ownership.
• Shares and options can be retained for longer without adverse tax consequences.

EMI2 (formerly CSOP)

• Option limit doubled from £60,000 to £120,000.
• Exercise period extended from 10 years to 15 years.

These changes should make employee share ownership more attractive for growing businesses.

Mileage Rates Increased

The approved mileage allowance rates will increase, impacting employees and owner-managers who use their personal vehicles for business travel. The temporary increase to 55p on the first 10,000 miles is now permanent with an increased 35p rate thereafter.

Businesses may wish to review travel and expense policies in light of the changes.

Property and Savings Income Tax Increases

One of the more significant tax increases in the Budget is a further rise in tax rates on property income and savings income.

This represents a further 2% increase on top of the 2% increase already announced, resulting in a total increase of 4 percentage points compared with current rates.

Current Rate	From April 2027
20%	24%
40%	44%
45%	49%

This will be particularly relevant for business owners who also hold investment portfolios or property investments personally.

Cash ISA Allowance Retained

In welcome news for savers, the Government has confirmed that the £20,000 annual Cash ISA allowance will be retained, reversing earlier proposals to reduce the limit.

Individuals can therefore continue to utilise existing ISA allowances as part of their tax-efficient savings and investment planning.

Support for Smaller Businesses

The Budget also includes several measures aimed at supporting smaller businesses:

• Trading and miscellaneous income allowance increased from £1,000 to £3,000.
  • We note no similar increase has been specifically proposed in respect of the £1,000 Property allowance.
• Business rates frozen for two years.
• Expanded business rates support for retail, hospitality and leisure businesses.

HMRC Debt Collection Powers Expanded

The Government has confirmed that HMRC will be granted enhanced powers to recover unpaid tax debts directly from bank accounts where taxpayers repeatedly fail to engage or settle outstanding liabilities despite having the means to do so.

While aimed at persistent non-compliance, the changes reinforce the importance of dealing with tax arrears promptly and engaging with HMRC where payment difficulties arise.

Digitalisation of the Tax System

The Government also confirmed plans for:

• Mandatory VAT e-invoicing from April 2029.
• More frequent in-year tax payments for many Self Assessment taxpayers.
• Continued investment in HMRC’s digital compliance and enforcement capabilities.

Businesses should expect increasing digitalisation of accounting and tax compliance processes and may wish to begin reviewing their systems and software requirements ahead of implementation.

Key Takeaways

For most owner-managed businesses, the key announcements are:

• New Founders’ Relief with a 10% CGT rate on up to £10 million of gains.
• Reduction of the BADR lifetime limit to £500,000.
• Enhanced EMI and employee share incentive arrangements.
• A 4% increase in tax rates on property and savings income.
• A 3.9% increase in the National Minimum and National Living Wage.
• Increased mileage allowance rates.
• Retention of the £20,000 Cash ISA allowance.
• Expanded HMRC debt collection powers.
• Continued support for investment through full expensing.
• Simplification of the R&D relief regime.

Overall, the Budget represents a mixed picture for business owners, combining welcome incentives for growth and entrepreneurship with higher employment costs and increased taxation of investment income. As always, proactive planning will be key to making the most of the opportunities presented and managing the potential impact of the changes.