The Chancellor, John Healey, delivered his first Budget on Wednesday 28 October 2026. If you were bracing yourself for big tax rises, you can breathe out a little. The headline rates of income tax, National Insurance and VAT have not changed, and Corporation Tax stays capped at 25%.
That said, there are still changes worth knowing about, particularly if you employ staff, run a limited company, earn rental income or plan to sell your business one day. Here we go through the main points and put the new figures next to previous years so you can see how things have moved.
National Living Wage and Minimum Wage
All of the minimum wage rates are going up by 3.9% from 1 April 2027. For workers aged 21 and over, the National Living Wage rises from £12.71 to £13.20 an hour. Workers aged 18 to 20 go from £10.85 to £11.27.
This is a smaller rise than we have seen in the last few years, especially for younger workers. Here is how the rates have changed since 2024.
| Age group | April 2024 | April 2025 | April 2026 | April 2027 |
|---|---|---|---|---|
| 21 and over (National Living Wage) | £11.44 | £12.21 | £12.71 | £13.20 |
| 18 to 20 | £8.60 | £10.00 | £10.85 | £11.27 |
| 16 and 17 | £6.40 | £7.55 | £8.00 | Up 3.9%* |
| Apprentices | £6.40 | £7.55 | £8.00 | Up 3.9%* |
*The government has said every rate rises by 3.9%, but the exact pence figures for under-18s and apprentices have not been published yet. A 3.9% rise on £8.00 works out at roughly £8.31. We will confirm the final rate once it is out.
To put the adult rate into pounds and pence, someone working 37.5 hours a week all year would earn £25,740 on the new rate, compared with £24,784.50 now. That is about £955 more a year before tax. If you employ staff on or near the minimum, now is a good time to look at your wage bill for next year, remembering that employer National Insurance and pension contributions go up with it.
The Real Living Wage
The National Living Wage is the legal minimum. The Real Living Wage is different. It is a voluntary rate set by the Living Wage Foundation and paid by employers who sign up to it. The new rates were announced on 15 October and accredited employers have until 1 May 2027 to pay them.
| Real Living Wage | 2025/26 | 2026/27 |
|---|---|---|
| UK (outside London) | £13.45 | £14.10 |
| London | £14.80 | £15.45 |
If You Employ Staff
There is no change to employer National Insurance. It stays at 15% and the Employment Allowance stays at £10,500. A few other things are worth putting in the diary though.
- Payrolling benefits. From April 2027, company cars, car fuel, vans, van fuel and private medical cover have to go through payroll instead of on a P11D. This was announced before but it is now only a few months away.
- Salary sacrifice pensions. From April 2029, pension contributions made through salary sacrifice above £2,000 a year will no longer be free of National Insurance.
- Paternity pay for the self-employed. For the first time, self-employed fathers and partners will be able to get statutory paternity pay.
Mileage Rates
Good news if you or your staff use your own car for work. The tax-free mileage rates have been increased permanently.
| Cars and vans | Before the Budget | After the Budget |
|---|---|---|
| First 10,000 business miles | 55p | 55p (now permanent) |
| Each mile over 10,000 | 25p | 35p |
If You Run a Limited Company
Corporation Tax has not changed. The small profits rate is 19% on profits up to £50,000, the main rate is 25% on profits over £250,000, and marginal relief applies in between. The government has also repeated its promise to keep the main rate at no more than 25% for the rest of this Parliament.
Dividend Tax
There was nothing new on dividends in this Budget. The increase you need to know about came in this April, when the basic and higher rates went up by 2%. If you pay yourself through a mix of salary and dividends, it is worth checking your plan for next year with us.
| Dividend tax | 2024/25 | 2025/26 | 2026/27 | 2027/28 |
|---|---|---|---|---|
| Tax-free dividend allowance | £500 | £500 | £500 | No change |
| Basic rate | 8.75% | 8.75% | 10.75% | No change |
| Higher rate | 33.75% | 33.75% | 35.75% | No change |
| Additional rate | 39.35% | 39.35% | 39.35% | No change |
Buying Equipment
The tax relief on equipment has moved in two directions. The yearly writing down allowance on the main pool drops again, while the first-year allowance for new main rate equipment goes up. The £1 million Annual Investment Allowance and full expensing for companies both stay as they are, so most of our clients will still get full relief on what they buy in the year they buy it.
| Capital allowances | Up to March 2026 | From April 2026 | After the Budget |
|---|---|---|---|
| Main pool writing down allowance | 18% | 14% | 12% from April 2027 |
| First-year allowance (main rate) | None | 40% (from 1 January 2026) | 50% |
| Annual Investment Allowance | £1,000,000 | £1,000,000 | £1,000,000 |
Selling Your Business
This is the one that may sting. Business Asset Disposal Relief is the relief that lowers the Capital Gains Tax you pay when you sell or close a business. The amount of gains it covers over your lifetime is being cut in half, from £1 million to £500,000, from April 2027. The rate has already been rising year on year.
| Business Asset Disposal Relief | 2024/25 | 2025/26 | 2026/27 | From April 2027 |
|---|---|---|---|---|
| Tax rate | 10% | 14% | 18% | 18% |
| Lifetime limit | £1,000,000 | £1,000,000 | £1,000,000 | £500,000 |
If you were thinking of selling, retiring or bringing in a new owner in the next year or two, please speak to us before April 2027. The government is also changing how money taken out of a company is taxed in some restructures from April 2028, although it says genuine sales and family handovers will be protected. We will keep you posted as the detail comes out.
If You Are Self-Employed
There is no change to income tax rates or to Class 4 National Insurance, which stays at 6% on profits between £12,570 and £50,270 and 2% above that. The personal allowance stays at £12,570 and the thresholds remain frozen until 2031. As your income goes up over time, more of it will be taxed, even though the rates themselves are not moving.
Here is what has changed or is coming up.
- Payments on account. From April 2029, if you already make payments on account, you will pay smaller amounts more often through the year instead of two large payments in January and July. The idea is to avoid nasty surprises when the tax bill lands.
- A bigger trading allowance for new ventures. The tax-free amount you can earn from a new venture is going up from £1,000 to £3,000. We are waiting for the full rules and start date.
- Paternity pay. As mentioned above, self-employed fathers and partners will now be able to claim it.
Making Tax Digital
Nothing new was announced, but the next stage is close. If you are a sole trader or landlord with income over £30,000, you will need to keep digital records and send quarterly updates to HMRC from April 2027.
| Making Tax Digital for Income Tax | Applies if your income is over |
|---|---|
| From April 2026 | £50,000 |
| From April 2027 | £30,000 |
| From April 2028 | £20,000 |
If this catches you next April and we have not spoken about it yet, please get in touch so we can get you set up in good time.
Landlords and Savers
The tax rates on rental income and savings interest were already due to rise by 2% from April 2027. This Budget adds a further 2% on top, so the total increase is 4%. The government says 84% of income tax payers will not be affected, mainly because the Personal Savings Allowance still covers the first slice of most people’s interest.
| Tax on property and savings income | 2026/27 | 2027/28 (as planned before) | 2027/28 (after the Budget) |
|---|---|---|---|
| Basic rate | 20% | 22% | 24% |
| Higher rate | 40% | 42% | 44% |
| Additional rate | 45% | 47% | 49% |
On a brighter note, the planned cut to the cash ISA allowance has been dropped, so you can still put up to £20,000 a year into a cash ISA.
Business Rates and VAT
- Small Business Rate Relief is being made more generous. The threshold rises from £12,000 to £18,000, which the government says will mean around 70,000 more shops, pubs and leisure businesses pay no business rates at all.
- Retail, hospitality and leisure properties in England that do not qualify will see their rates frozen for two years. Pubs, music venues and social clubs get an extra 20% off.
- The VAT registration threshold stays at £90,000.
- Selling online. From October 2027, marketplaces like Amazon and eBay will collect VAT on behalf of UK sellers who make more than £90,000 of sales through them.
- VAT e-invoicing is on its way. The government has set out a plan to make it compulsory from April 2029.
Help With Household Bills
- Households in England in council tax bands A to D will receive a £100 Household Energy Payment straight into their bank account from January 2027.
- VAT stays off household electricity bills until July 2027.
- The 5p cut in fuel duty has been extended to 1 July 2027.
What Has Not Changed
Sometimes the most useful thing to know is what you do not need to worry about. These all stay the same:
- Income tax rates and the £12,570 personal allowance
- National Insurance rates for employees, employers and the self-employed
- Corporation Tax rates
- The main rates of Capital Gains Tax
- The VAT rate and registration threshold
- The inheritance tax nil-rate band and the seven-year rule on gifts
Download Our Tax Tables 2026/27
All the main tax rates and allowances for this tax year in one place, with the Budget 2026 changes for next April highlighted. Keep it handy for reference.
Prestige Business Management Works for You
Budgets can leave you with more questions than answers. If you would like to know how any of this affects you or your business, whether that is your wage bill for next year, how you take money out of your company or getting ready for Making Tax Digital, we are here to help. Call us today on 0203 773 2927.
