Autumn Budget 2026 summary

Property and savings income 

The government has announced a further 2% increase in the income tax rates that will apply to property and savings income from April 2027.   

This represents a significant increase for landlords and savers, with the rates applying to these sources of income moving four percentage points above the current main rates of Income Tax. The increase to savings rates will apply in Scotland; however, the taxation of property income is devolved to the Scottish Government.  

New pension tax allowance 

From 6 April 2027, a new Pension Tax Allowance will be introduced such that pensioners with total income at or below that of the full new State Pension will not be brought into Income Tax solely as a result of increases to the State Pension.  The allowance will apply from 6 April 2027 to 5 April 2030.  The new measure is intended to prevent eligible individuals whose income does not exceed the full new State Pension from having to pay small amounts of Income Tax as a result of future State Pension increases and the freeze of the Personal Allowance.  

Trading allowance 

The Trading Allowance will increase from £1,000 to £3,000 from 6 April 2027, tripling the amount of trading income that can potentially be received before a liability arises.  The increase should simplify the position for those generating relatively modest amounts of self-employed or miscellaneous income. 

Reform of payments on account 

The government has announced plans to modernise the Payments on Account system for Income Tax Self Assessment from April 2029.  Taxpayers already within the Payments on Account regime will move towards making smaller, more regular payments throughout the year, rather than the current system of two instalments paid in January and July each year.  The intention is to help taxpayers to budget and reduce the risk of unexpected tax bills and tax debt.  Although the precise mechanics of the proposals are not yet confirmed, the government will consult and continue to work with affected taxpayers prior to implementation. 

Capital Gains Tax 

The announcement to further reduce the Business Asset Disposal Relief (BADR) lifetime limit to £500,000 is another step towards moving the relief into irrelevance with the maximum benefit of qualifying at this threshold just £30,000. This change might result in a few disposals being pushed through before 6 April next year, after which BADR will cease to be a material consideration on disposals. 

However, a new CGT relief will be introduced from 6 April 2027.

Founders' Relief will be a 10% CGT rate on up to £10 million of lifetime gains. The relief is designed to incentivise founders of high growth, innovative companies and could provide a maximum CGT saving of up to £1,400,000. Founders' relief appears to be far more targeted and restricted than BADR.   

A technical consultation was opened following the Budget to seek views on the application of Founders' Relief.  As currently proposed, for individuals to qualify for the relief they must have held 25% of the company's ordinary share capital when the company began trading, have held the shares for at least five years before the disposal and have been UK tax resident for at least five continuous tax years before disposal. Alongside the conditions for the founder, businesses are expected to have to meet certain conditions in relation to turnover, employees and trading status. 

The introduction of the new Founders' Relief represents a potentially significant CGT incentive for certain business owners. It will be interesting to see how this evolves prior to April 2027. Business owners who could potentially benefit from Founders' Relief will want to review the qualifying requirements in advance of any proposed sales. 

No CGT exit charge was introduced for individuals ceasing UK tax residence, nor were changes made to the base cost uplift on death, which will continue to reset asset values to market value in the hands of the recipient. 

ISAs

ISAs have continued to be a hot topic and today, the Chancellor announced scrapping the announcement that cash ISA limits for under-65s are going to be reduced from £20,000 to £12,000. Savers of all ages will retain the ability to add £20,000 each year to their ISAs. 

First Time Buyer ISAs will be introduced from April 2029 and somewhat mimic the existing Lifetime ISAs however they focus purely on a qualifying property purchase and a change in timing of the bonus. The contribution limit will remain at £4,000, with a 25% Government bonus being added at the point of a qualifying first home purchase, up to the value of £450,000. The maximum value of the bonus will be capped at £20,000, which would require savings made into the FTBISA of £80,000. This new product will have no withdrawal charges, and no upper age restriction. 

Lifetime ISA withdrawal charges have been reduced to 20% (reclaiming the bonus already provided), where holders wish to purchase a property above the £450,000 price cap but all other qualifying criteria are met. Other withdrawals will still be charged at 25%. 

A new ISA targeted as an incentive to invest in a stocks and shares ISA for the first time. No further detail was announced at this stage, with the Chancellor saying detailed design would be developed with the industry. 

Inheritance Tax and pensions  

While there were no significant changes to pensions announced this year, pensions will continue to be part of the estate for Inheritance Tax from April 2027.  

Where death is after 75, this will mean both Inheritance Tax and Income Tax could apply to unused pension funds. This remains a significant planning topic for those that expect to have excess pension funds on death. 

However, the government has stated they will remove the two-year deadline for beneficiaries to receive death benefits from pensions tax-free. This will apply to payments made on or after 28 October 2026.

Capital Allowances 

Full expensing will be extended and can be claimed for qualifying plant and machinery expenditure. Full expensing allows for a 100% deduction of the cost of qualifying plant and machinery in the year it was bought. The plant and machinery must be purchased new and unused.  

The main rate first-year allowance for qualifying plant and machinery expenditure will increase from 40% to 50% for expenditure incurred on or after 1 January 2027. The plant and machinery must be purchased brand new, however there is a relaxation compared to full expensing in that the allowance is available for plant and machinery acquired for the purposes of leasing.  

There have been no changes to the Annual Investment Allowance or to other first-year allowances.  

The rate of writing-down allowances available on main rate plant and machinery will reduce from 14% to 12% with effect from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.  

In response to the consultation on the tax treatment of pre-development costs, the government has committed to consider improving its guidance on the process of determining whether capital expenditure is eligible for capital allowances.  The response document also comments that if necessary to provide further certainty beyond what changes to guidance allows, the government will explore legislative changes to provide more certainty and clarity for businesses.  This does not appear to offer any significant change in this area, though does leave the possibility of legislative change open. 

Employment tax / BIK changes

There was plenty for employers to digest in the Budget, from increases to the minimum wage to changes affecting mileage, benefits and business travel. 

From 1 April 2027, National Living Wage and National Minimum Wage rates will increase by 3.9%. 

Employers should consider the wider impact on pay structures, particularly for employees already earning slightly above the minimum. Careful consideration should be taken by Employers who operate salary sacrifice arrangements to ensure that their workforce do not breach the updated pay rates.   

There is some welcome news for employees who use their own car or van for work. Tax-free mileage rates are increasing to 55p for the first 10,000 business miles and 35p thereafter, with the increases being introduced in stages. 

The Government has also confirmed that mandatory payrolling of benefits will be phased in. Cars, vans, fuel and medical benefits will move across from 6 April 2027, with remaining benefits following from 6 April 2028, giving employers a little more time to prepare. 

Elsewhere, employer-paid Immigration Skills Charges and Certificate of Sponsorship fees will no longer be treated as taxable benefits in kind for payments made from 28 October 2026. Employment expense claims will increasingly move towards PAYE from April 2028, while new direct debit requirements for PAYE liabilities will follow from April 2029. 

Finally, domestic and overseas subsistence rates are set to be simplified from April 2028, while company car benefit rates will rise again in 2030/31, including an increase to 10% for zero-emission vehicles.

The Chancellor announced what initially sounded like a new tax-advantaged employee share scheme. In fact, it turns out to be a rebranded Company Share Option Plan (CSOP), with the catchy name 'EMI2'. 

The Enterprise Management Incentive (EMI) scheme allows employees to receive share options worth up to £250,000 per option holder, with any CSOP options counting towards that limit. EMI offers a range of tax advantages, making it the most tax-efficient share option scheme for both employees and employers. But there are conditions to meet, and where EMI isn’t available, CSOP can offer an alternative. 

Currently, CSOP allows options worth up to £60,000 per option holder. Options must be held for at least three years to benefit from the full tax advantages, with no income tax or National Insurance contributions (NICs) payable on exercise. Instead, CGT is due when the shares are sold, on the gain between the exercise price and the sale proceeds. 

The rebrand is partly intended to address CSOP’s relatively low take-up compared with EMI and the individual limit will double to £120,000, and CSOP options will no longer count towards the EMI limit. That means an option holder could hold a combined £370,000 of tax-advantaged share options across the two schemes. 

CSOP options currently have a maximum term of 10 years from grant, whereas the EMI limit increased to 15 years from April 2026. EMI2 will bring the CSOP time limit into line with EMI at 15 years. It will also include provisions to ensure options don’t lose their tax-advantaged status simply because the company moves to ownership by an Employee Ownership Trust. 

EMI2 and these changes will apply to options granted on or after 6 April 2027.  

The reduction in the BADR lifetime limit to £500,000 will also have implications for EMI option holders. The existing concession allowing qualifying EMI options to benefit from BADR remains, but larger gains may now see a greater proportion fall outside the relief and be subject to the general 24% CGT rate. 

Another, less headline-grabbing change is the extension of the time limit from 90 to 120 days for exercising an EMI option after a disqualifying event. A disqualifying event might be the company or employee ceasing to qualify for EMI. Not ground-breaking, perhaps, but the extra time could offer useful flexibility. 

From 6 April 2027, there will no longer be a requirement to notify HMRC separately when EMI options are granted. Instead, grants will be notified through the annual EMI return, due by 6 July after the end of each tax year. Less administration is welcome, but there’s a question we’d like answered. What happens if an option is both granted and exercised during the year, before HMRC has been notified? If, in theory, an EMI option only qualifies once it has been notified to HMRC, does that mean a non-qualifying option has been exercised? We’ve asked HMRC for clarity on this point and would welcome further guidance. 

The new Founders’ Relief could also indirectly affect employee share options. Share options themselves will not qualify, but with many schemes designed to pay out on an exit, the new relief could influence when founders choose to complete a transaction.

There were a few notable VAT and customs announcements in the Budget this year, with businesses having several future changes to prepare for.  

The Budget included several measures aimed at easing household costs. The temporary 0% VAT rate on qualifying domestic electricity has been extended to 1 July 2027, alongside an extension of the 5p per litre cut in fuel duty to the same date. Tariffs have also been suspended on a range of food products, including plant-based drinks, baked beans, dried fruit and chocolate, with the aim of reducing the cost of imported food.  

The Budget has also confirmed that mandatory VAT e-invoicing will be introduced from 1 April 2029 and provided more detail on the roadmap for this. This will require structured electronic invoices rather than simply PDFs, with the exchange of invoices between systems being handled via the Peppol network. The detailed rules will be published by April 2028 at the latest, giving businesses time to get their systems ready.  

There are also changes for online marketplaces, which from October 2027 will take greater responsibility for collecting VAT on certain sales made by UK businesses. Overseas businesses should also note changes to the VAT reverse charge from April 2027, which may result in additional UK VAT obligations when supplying services to non-VAT-registered UK businesses.  

Although not a new update, the £135 customs duty relief for low-value imports will be removed from October 2028, while a wide range of tariff suspensions have been introduced or extended to reduce duty costs on imported goods.  

There are also several more targeted VAT measures, including changes concerning social housing, donated medicines, EV charging and private hire vehicles.  

So, no headline VAT rate change, but plenty of important changes for businesses to start thinking about.

The Budget provides welcome stability for the UK's core innovation tax incentives, with no fundamental changes to R&D, Patent Box, or other Expenditure Credit tax reliefs. However, there are some important administrative changes for R&D, alongside broader measures intended to support targeted areas and maintain UK competitiveness. 

R&D tax relief 

The underlying R&D tax relief regime remains broadly unchanged, with the rate of relief via the merged R&D expenditure credit (MRDEC) or enhanced R&D intensive support (ERIS) at up to 16.2% and 27% respectively. However, the most notable development is the government's decision to remove the R&D claim notification form requirement from 1 April 2027. This should be a welcome simplification for businesses, removing an additional administrative requirement which has previously led to missed deadlines for qualifying R&D claims. 

The additional information form (AIF) will remain, but the government intends to simplify it from autumn 2027.  

Overall, the direction of travel appears positive for claimants and advisers with greater stability in the underlying regime, coupled with some simplification of the claims process. 

Patent Box 

There are no substantive changes to the UK Patent Box regime announced in the Budget. 

Patent Box therefore remains an important part of the UK's innovation incentives landscape, enabling qualifying companies to apply a 10% corporation tax rate to relevant profits derived from qualifying patented inventions. 

Alongside R&D tax relief, Patent Box continues to provide an important incentive across the innovation lifecycle, with R&D tax relief supporting investment in qualifying activities undertaken, and Patent Box providing a benefit where successful innovation is subsequently commercialised. 

For innovative businesses that have historically focused primarily on R&D tax relief, the continued stability of Patent Box also provides an opportunity for them to consider whether (a) the intellectual property developed could be patented, and (b) whether the company could make a Patent Box claim.   

Broader innovation and investment measures 

The wider Budget message is one of encouraging investment, growth and UK competitiveness, with the following targeted measures announced: 

From 6 April 2027, the government intends to introduce a new Founders' Relief, giving qualifying founders of high-growth, innovative companies a 10% capital gains tax rate on up to £10 million of lifetime gains. Although a technical policy paper has been released which will be used to finalise details in due course, company eligibility is currently expected to include requirements around ownership, company turnover and employment thresholds, together with specified growth and innovation tests. Claiming R&D tax relief may therefore become an important part of the UK’s tax system for those founder entrepreneurs. 

For those businesses that make audio visual expenditure credits and video games expenditure credit claims, the government intends to amend the corporate interest restriction (CIR) rules so that, from 1 January 2027, these credits are excluded from the calculation of taxable earnings for CIR purposes. 

The Life Sciences sector will welcome the news that medical products and technology firm Convatec will invest more than £500 million over the next decade in a new global R&D hub in Manchester, supported by government funding through the Life Sciences Transformational R&D Investment Fund. The investment is designed to strengthen its research and manufacturing capabilities and accelerate the development and evaluation of innovative products. 

For those businesses that operate in the UK advanced chip design market, the government has confirmed that it will invest £18 million to establish a UK Advanced Chip Design Academy, led by the University of Edinburgh. Running from October 2026 to March 2032, the Academy is designed to strengthen the UK's advanced semiconductor design capabilities and support the development of specialist skills. 

What does this mean for innovative businesses? 

For R&D and Patent Box, the Budget is principally one of stability rather than fundamental reform, which should be welcomed by UK businesses following several years of significant change. The future removal of the claim notification form and simplification of the additional information form are also positive steps towards making the R&D claims process less cumbersome while maintaining appropriate compliance. 

More broadly, the announcements provide an opportunity for innovative businesses to consider R&D, intellectual property and commercialisation together, while the wider measures supporting investment and competitiveness reinforce the government's continued focus on innovation as a key driver of long-term UK growth.  

The Chancellor announced further investment in HMRC compliance activity to crack down on tax evasion, avoidance and to close the tax gap. The key announcements are: 

• A pledge to recruit and train a further 670 HMRC compliance officers (on top of the additional 5,500 already announced to be recruited by 2029/30). 
• This will lead to an increase in HMRC enquiries and investigations, albeit it will take some time to recruit and train the staff.  While the focus of the new compliance staff is not yet clear, it is likely a number will be focussed on compliance amongst small and medium enterprises which comprise the largest part of the tax gap. 
• New powers for HMRC to collect lower value tax debts directly from the bank accounts of taxpayers who can afford to pay but repeatedly fail to do so. 
• The government has pledged to consult on the relevant safeguards to be put in place. These new powers go alongside a pledge to invest a further £70m over five years in existing partnerships with private sector debt collectors. 
• Modernising HMRC’s civil information and inspection powers. 
• HMRC already has wide-ranging information collection powers (in particular with formal information notices). The government has announced in the Budget a plan to modernise these powers to revise the definition of 'computer records' to reflect the way information is stored. At present there is no detail on how the powers will change. 
• As already known, the government intends to introduce new requirements for taxpayers to correct tax returns and documents when errors are identified. 
• These new powers, expected to take effect from 1 April 2028, could be game-changing for HMRC and taxpayers as it is likely that a failure to correct (i.e. disclose) a known error will be treated as 'deliberate'. This could potentially enable HMRC to assess 20 years of tax irrespective of the original cause of the error, charge higher penalties and in some circumstances publish taxpayers' details. 
• HMRC has announced a renewed focus on 'wealthy' taxpayers, being those with income over £200,000 or assets over £2million in the last three years. They have published a new report on modernising their approach to the wealthy population including bringing together more data sources to gain a better overall understanding of individuals’ wealth. 
• HMRC have announced they will group taxpayers with similar characteristics (e.g. sectors such as sport, financial services). In practice taxpayers defined as 'wealthy' can expect far more scrutiny of their tax affairs. 

Increasing the bank surcharge from 3% to 6% for 15 months may provide the Chancellor with a much-needed revenue boost to support households and businesses with energy bills. However, even a temporary increase adds to the tax burden facing UK banks at a time when competition for international investment remains fierce. 

Research from UK Finance already shows that banks face a higher overall tax burden in London than in competing financial centres including Frankfurt, Dublin and New York. Further increasing this burden could make the city less attractive for investment, particularly when banks have choices about where they locate profitable activities. 

While the measure is time-limited, the Chancellor must balance the immediate benefits of supporting households and businesses against the potential implications for investment, lending and economic growth. Maintaining a competitive environment for financial services will be essential to ensuring the UK remains an attractive destination for international investment. 

Today's announcement of further business rates relief will be welcome news for smaller high-street retailers facing rising employment costs, energy bills and squeezed margins. Freezing of rates for other retail, hospitality and leisure properties is also welcome.

However, the government must continue to look at ways of facilitating the regeneration of the high-street. Larger retailers remain major employers and investors in our town centres. Reforms that leave them facing disproportionate costs risk undermining the very high streets the Chancellor is trying to support. 

Ultimately, retailers make investment and hiring decisions based on the cumulative cost of doing business, not individual tax measures. While today's announcement is a positive step, broader reform of the business rates system will be essential to give retailers of all sizes the confidence to invest, recruit and grow.

Fiscal devolution

Alongside the Budget, the government published its fiscal devolution roadmap, but giving places greater control over revenue streams aiming to unlock regional growth does not automatically address pressures such as adult social care, children's services, SEND or homelessness.  

The allocation of £150m to build up staff and expertise recognises the wider issue of the capacity for the public sector to unify and deliver. The opportunity is to move from administering funding to actively shaping the economic and financial future of places, and local government needs to start building the capability to that now.   

The plan is ambitious, in that the government believes reforms can be delivered within this Parliament and with further details to follow in the Local Government Finance Settlement, there is a clear direction of travel for greater local accountability for the public sector to grasp. 

Align this to greater access to funding for new affordable housing and regional investment means there are specific issues around developing stronger mechanisms for investment appraisal and evaluation, as well as measuring outcomes and social value.

Investment in social housing 

The Chancellor's Budget included a boost for social housing, with an additional £1.5bn committed to the social and affordable housing programme. Alongside this, all land sold to social housing providers will now be treated as zero rated for VAT. 

Combined with greater access to affordable borrowing and increased devolution of funding and investment decisions, these measures could help accelerate affordable housing delivery while supporting local growth. The government's focus on council housebuilding reinforces the important role local authorities must play, but achieving the scale of delivery needed will require effective collaboration across councils, housing associations and other delivery partners. Realising that potential will depend on strong housing and capital strategies, deliverable development pipelines and robust governance arrangements across the sector.

Healthcare

Today’s announcement on health spending comes as no surprise. 

The health, alongside defence, budget was always one of planned investment. Increased budgets, though, come with increasing expectations, both in productivity and in performance. This month, HM Treasury published efficiency and savings performance for 2025/26, setting out that Departments delivered £16bn of efficiency and savings - £10bn of which came from the Department of Health and Social Care. Whilst this shows promise, demand pressure on health services remains high. 

Technology remains one of the key enablers of improvement, but as discussed at NHS England's Board Meeting of 1 October1, it is moving at a slower than anticipated pace and there is a lack of detailed operational plans. It is therefore now critical that the NHS moves this agenda forward, the question is how.