The Autumn Budget 2026

Labour’s third Budget has arrived, with John Healey delivering his first as Chancellor. After weeks of speculation, briefings and promises of support, the question is whether this Budget will put the UK economy back on track or simply move the financial pain from one pocket to another.

The Chancellor has once again pointed to external events as a major reason for the decisions being made. Of course, global instability and rising energy costs have an impact, but how long can these factors be used to explain the state of the public finances? Labour has now had three Budgets to set out its direction for the country.

There is some welcome news for households and smaller businesses, particularly through energy bill support and business rates relief. However, there are also further tax increases for landlords and savers, changes to Capital Gains Tax relief and additional taxes on certain sectors.

So, while the government talks about supporting growth and helping people with the cost of living, the question remains: who is ultimately paying for it all?

The Key Take Away Points From Today’s Budget

Income Tax, Savings and Property Income

• Income tax rates on employment income remain unchanged, as do dividend tax rates.
• Income tax rates on savings interest and property rental income will increase by 2% from April 2027.
• Personal allowances and income tax thresholds remain frozen until April 2031.
• Pensioners whose only income is the basic or new State Pension are to be protected from income tax from 2027/28, subject to the detailed rules.

There is no increase in the headline rates of income tax on employment, but higher taxes on savings and property income. Landlords and savers are being singled out once again, despite the fact that rental income and savings interest are not necessarily the same as earned income.

And let us not forget the frozen tax thresholds. As wages and other incomes rise, more people are dragged into higher tax bands without the government having to announce an increase in the headline rates. It is a quiet tax rise, but a tax rise nonetheless.

Cash ISA and First-Time Buyers

• The annual tax-free ISA allowance will remain at £20,000, reversing the previously planned reduction to £12,000 for under-65s.
• Changes to the ISA arrangements for first-time buyers have also been announced. The precise replacement arrangements and their relationship with the existing Lifetime ISA will need to be confirmed.

At least the proposed reduction in the Cash ISA allowance has been reversed. Savers can continue to shelter up to £20,000 annually within their ISAs.

However, with the government changing its mind on savings policy, it is worth asking why taxpayers have to spend so much time trying to keep up with the rules in the first place.

Business Asset Disposal Relief and Founders Relief

• The lifetime limit for gains qualifying for Business Asset Disposal Relief (BADR) will reduce from £1 million to £500,000 from April 2027.
• A new Founder’s Relief is proposed, offering a 10% tax rate on lifetime gains of up to £10 million for the founders of Britain’s most successful businesses, subject to the detailed eligibility conditions.
• A new Young Entrepreneurs Allowance is intended to encourage young people to establish businesses.
• The tax-free trading allowance for small amounts of miscellaneous or casual income will increase from £1,000 to £3,000 per tax year.

The reduction in the BADR lifetime limit will be unwelcome news for business owners planning their eventual exit. After years of taking risks, investing capital and building a business, the tax relief available on selling it is being reduced.

At the same time, the government is proposing a generous Founder’s Relief for a particular category of successful entrepreneurs. The detail will matter enormously here, including who qualifies and how the new relief interacts with existing reliefs.

It is encouraging to see support for young entrepreneurs, but it would be even better if the overall tax environment made it easier for businesses to grow, employ people and remain in the UK.

Employee Share Schemes – Enterprise Management Incentives

• The company option limit for EMI schemes has increased from £3 million to £6 million.
• The gross assets limit has increased from £30 million to £120 million.
• The employee limit has increased from 250 to 500.
• The maximum qualifying option exercise period has increased from 10 to 15 years.
• From 6 April 2027, the separate requirement to notify HMRC of EMI option grants is to be removed, with relevant information included in the annual employment-related securities return.

These changes, announced previously and taking effect on the relevant dates, are welcome for growing businesses. EMI schemes can help smaller and expanding companies attract and retain talented employees by giving them a stake in the business.

For once, there is some good news for businesses looking to reward their staff without having to compete solely on salary.

Corporation Tax and Capital Allowances

• The bank corporation tax surcharge will increase by a further 3% for 15 months from January 2027, to help fund immediate support for household energy bills.
• The main-rate First-Year Allowance is reported to increase from 40% to 50%, providing greater upfront tax relief on eligible business investment.
• The main-rate Writing-Down Allowance is reported to reduce from 14% to 12%.

The increased First-Year Allowance should provide a greater immediate deduction for eligible capital expenditure. However, the reduction in the Writing-Down Allowance means that the benefit will depend on the type of expenditure and the business’s circumstances.

The additional bank surcharge is another targeted tax increase. While banks are being asked to contribute towards the cost of energy support, the wider question is whether the cumulative effect of sector-specific taxes ultimately feeds through into the cost of borrowing and other services.

Business Rates and Small Businesses

• The Small Business Rate Relief threshold for eligible retail, hospitality and leisure businesses will rise from £12,000 to £18,000.
• Eligible high-street hospitality venues, including pubs, social clubs and live music venues, are to receive a 20% reduction in business rates from April 2027.
• Adult gaming centres and vape shops are excluded from the hospitality relief.
• The government intends for 100% of business rates revenue to be retained locally by the end of the decade.
• Online marketplaces will be required to collect and account for VAT on behalf of third-party UK sellers.

There is some welcome relief here for smaller businesses struggling with the cost of operating on the high street. Pubs, restaurants, shops and other eligible venues have faced considerable pressure from rising wages, energy bills and other operating costs.

However, a reduction in one bill does not necessarily compensate for increases elsewhere. Employers are still dealing with higher staffing costs, and business owners need a stable and predictable tax system if they are to invest with confidence.

The proposed changes to online marketplace VAT also underline the government’s intention to tighten compliance and ensure that sellers meet their tax obligations.

Gambling Tax

• Machine Games Duty on higher-stakes gaming machines will increase from 20% to 25%, with traditional pubs and seaside arcades excluded from the increase.

Another sector-specific tax increase. The government is seeking additional revenue from higher-stakes gaming machines, while exempting certain traditional venues.

The detail of the exclusions will be important for operators, particularly those running multiple types of gaming machines or entertainment venues.

Energy Bills and Cost of Living

• The reduction in VAT on domestic electricity bills is extended to July 2027, with an estimated reduction of approximately £50 in the annual price cap.
• Household gas standing charges are to be abolished, with the effect on individual bills depending on how costs are recovered.
• Households in council tax bands A to D are to receive a £100 energy payment this winter, paid directly into their bank accounts.
• The 5p-per-litre fuel duty cut and freeze are extended until July 2027.

There is some welcome relief for households, particularly at a time when energy costs remain a concern. The £100 payment and the extension of electricity support will help eligible households in the short term.

But the real question is whether these measures address the underlying cost of living or simply provide temporary relief. Abolishing standing charges does not necessarily mean that the cost disappears; depending on the new charging structure, some costs may be recovered through unit rates instead.

In other words, the bill may look different, but that does not automatically mean everyone will pay less.

Wages and Business Mileage

• Workers aged 18 to 20 will receive a 3.9% increase in the minimum wage, matching the percentage increase for workers aged 21 and over.
• This is a smaller increase than the cumulative 26% rise experienced by 18- to 20-year-olds over the previous two years.
• From 6 April 2027, the tax-free mileage reimbursement rate for business travel in an employee’s own vehicle will be 55p per mile for the first 10,000 business miles in the tax year and 35p per mile for any additional business miles.

Higher wages are good news for employees, but employers must find the money to pay them. For small businesses already facing higher employment costs, each additional increase adds to the pressure.

The challenge is to improve living standards without making it increasingly expensive for businesses to employ people, particularly younger workers who are trying to enter the job market.

Self-Assessment and HMRC Compliance

• The administration of Self-Assessment is to be reformed so that affected taxpayers can make smaller, more regular payments rather than facing larger annual bills.
• HMRC is to receive additional funding and expanded powers to strengthen tax compliance and recover overdue tax, including measures to recover amounts owed from non-responsive taxpayers’ accounts.

Smaller, more regular payments may help taxpayers manage their cash flow, provided the reforms are implemented sensibly and do not create additional administrative burdens.

However, the expansion of HMRC’s enforcement powers is a reminder that taxpayers and businesses need to ensure their affairs are in order. The detailed rules and safeguards will be important, particularly where HMRC seeks to recover disputed or overdue amounts.

Welfare and Economic Resilience

The Budget continues to place significant emphasis on support for households and welfare spending, alongside measures intended to stimulate business growth.

But where is the balance between immediate support and long-term resilience?

A sustainable economy needs productive businesses, people in work, investment, and public finances capable of withstanding the next economic shock. If the government continually has to introduce new payments and reliefs while increasing taxes elsewhere to fund them, it is fair to ask whether the underlying problems are actually being solved.

Summary

John Healey’s first Budget raises a simple question: is he repairing the Conservatives’ broken-down system, or breaking it further?

Labour has blamed external events, prioritised welfare and offered some welcome relief. But with higher taxes on landlords and savers, reduced relief for business owners and rising costs for employers, the concern remains that everything under Labour’s Budget is becoming more expensive.

If you would like to discuss the changes and how they will affect you and your business, please contact us.