Budget 2026: what it means for you and your company

If you run your own company and pay yourself a £12,570 salary plus dividends, the good news is that your basic pay-out routine survives Budget 2026 intact. The bad news, lurking in the detail, is that if you sell your business, earn interest, let a property, or plan to wind your company up after 2028, the numbers have moved against you.

John Healey delivered his first Budget as Chancellor yesterday. He had promised no rise in the headline rates of income tax, National Insurance or VAT, and he kept that promise. Instead, he is squeezing revenue from the edges: savings and rental income, business asset disposal relief, and a slow squeeze on capital allowances.

Below, we take you through every change that matters to you as a company owner, a shareholder and a personal taxpayer. Most changes start on 6 April 2027, so there is time to plan.

Budget 2026 at a glance

Measure	What changes	From	Who feels it
Income tax on personal savings	20/40/45% rises to 24/44/49%	6 Apr 2027	Anyone with interest above their savings allowance threshold
Income tax on property profits (buy-to-let)	22/42/47% rises to 24/44/49%	6 Apr 2027	Personal landlords
Business asset disposal relief	Lifetime limit halved from £1m to £500,000	6 Apr 2027	Shareholders and business owners selling or liquidating
Founders’ relief (new)	10% CGT on up to £10m of lifetime gains, but narrow conditions	6 Apr 2027	High-growth founders (yet to be defined)
Main rate writing down allowance	14% cut to 12%	1 Apr 2027 (companies)	Companies with large plant and machinery pools
Main rate first year allowance	40% raised to 50%	1 Jan 2027	Companies spending above the £1m AIA on plant and machinery
Mileage allowance	55p for first 10,000 miles made permanent; 25p up to 35p beyond 10,000 a year	6 Apr 2027 (35p)	High-mileage directors and staff
Trading allowance	£1,000 tripled to £3,000	6 Apr 2027	Side hustlers
Small business rate relief	Threshold up from £12,000 to £18,000 rateable value	Apr 2027	Small premises in England
National living wage	Up 3.9% to £13.21 an hour	1 Apr 2027	Employers
Company distributions	Rules modernised to stop profit leaving at lower rates	1 Apr 2028	Liquidations and buy-backs
eVED pay-per-mile	3p a mile for EVs, 1.5p for plug-in hybrids	1 Apr 2028	Electric and hybrid company cars
Self-assessment payments	Smaller, more frequent in-year payments	6 Apr 2029	Everyone making payments on account

What did not change

• income tax rates
• the £12,570 personal allowance and bands (frozen until 2030/31)
• dividend tax rates (10.75/35.75/39.35%)
• the £500 dividend allowance
• National Insurance rates
• the £10,500 employment allowance
• corporation tax at 19% and 25% (26.5% marginal rate between £50k and £250k profit)
• the £1m Annual Investment Allowance (AIA)
• CGT rates of 18% and 24%
• the £3,000 CGT exemption
• the IHT nil-rate bands
• the £2.5m business property relief allowance
• the £20,000 ISA limit
• the £60,000 pension annual allowance
• the 25% tax-free lump sum pension drawdown

Your company

Corporation tax

The 19% small profits rate (less than £50k) and 25% main rate (profits over £250k) are locked in, with the 25% cap promised for this Parliament. The 26.5% marginal rate on profits between £50k and £250k therefore also remains in place.

Capital allowances: a quiet squeeze

The headline £1m Annual Investment Allowance is untouched, so most small companies still get 100% tax relief on vans, plant and machinery and IT equipment. But two things change.

The writing down allowance rate falls from 14% to 12% from 1 April 2027. This slows down tax relief on whatever is sitting in your main fixed asset pool, including company cars that never qualified for AIA.

The first year allowance rate rises from 40% to 50% for spending from 1 January 2027. This really only helps companies spending more than £1m a year, where they have used up their AIA.

Staff costs: the national living wage bites again

From 1 April 2027, the national living wage rises 3.9% to £13.21 an hour, and the 18 to 20 age group rate to £11.27 (also 3.9%). Employer’s NI stays at 15% on annual wages above £5,000, and the employment allowance stays at £10,500.

Travel and subsistence payments for working away from the workplace

At present, employers can make the following payments to employees (including directors) for business travel and subsistence when working away from their main place of work, without requiring actual expense receipts. This is an alternative to recording actual receipts. If the actual receipts come to more than the following rates, it would make more sense to claim for the receipts themselves. But if they do not, make the following payments instead.

• Breakfast: £5
• One meal (5 hour rate): £5
• Two meal (10 hour rate): £10
• Late evening meal: £15

From 6 April 2028, the following new rates will apply.

• 5 hours or more: £20
• 10 hours or more: £60
• 24 hours or more: £75

Business rates: relief for small premises

In England, the small business rate relief threshold is going up from April 2027, taking an estimated 70,000 more retail, hospitality and leisure businesses out of rates altogether. The threshold will rise from £12,000 to £18,000 of rateable value, so if your premises sit between those figures, your bill could fall to zero. Other retail, hospitality and leisure properties are to get a two-year real-terms freeze, and pubs and music venues get an extra 20% cut.

VAT

Online marketplaces: from October 2027, platforms will collect VAT for UK sellers making over £90,000 a year through the platform itself. So if you sell through Amazon or eBay, you should expect your cash flow to change.

E-invoicing: mandatory VAT e-invoicing will come into effect from April 2029.

Direct Debit: from April 2029, businesses will be required to pay VAT (and PAYE) by Direct Debit.

Electricity: the 0% VAT rate on domestic electricity is extended to 30 June 2027.

Reverse charge on services: the reverse charge on services purchased from overseas is in essence a “distortion” provision aimed at restoring balance between UK suppliers of services that need to charge VAT and non-UK suppliers of services that generally do not. There has always been a gap here, that UK businesses not registered for VAT either do not need to account for VAT on the reverse charge, or do not recognise that their reverse charge purchases count towards the VAT registration threshold of £90,000. The government intends to plug this gap by making overseas suppliers liable to register and account for VAT when they supply services to non-VAT-registered UK businesses. The provision will come into force in April 2027. Non-UK businesses supplying services to UK businesses therefore have five months to prepare for this change.

Company electric cars

The Budget does not extend the 100% first year allowance for electric cars due to end on 31 March 2027. So as things stand (unless this was an oversight and an extension will be announced over the coming days), an electric car bought after 31 March 2027 would only get the 12% rate writing down allowance. The new 50% first year allowance does not apply to cars.

A worked example: a company buys a brand new £50,000 electric car. At present, assuming the company pays corporation tax at 25%, the company saves £12,500 of tax in year one. From next April, tax relief in year one will be restricted to 25% on just 12% of the £50,000, so tax relief of only £1,500. The rest of the relief still comes through in later years, but much more slowly (12% per year).

Clients thinking about an electric company car and wanting the “up-front” 100% tax relief should consider buying before 1 April 2027. Benefit-in-kind rates on electric cars also go up by 1 percentage point in 2030/31.

Other company cars news

Payrolling benefits: from 6 April 2027, company cars, vans, fuel and medical benefits must go through payroll instead of P11Ds. Other benefits follow from April 2028. eba will be holding a webinar for clients to talk them through the changes.

Benefit-in-kind rates: the government has confirmed the company car benefit-in-kind rates for 2030/31. The percentages used to calculate the company car benefit for all types of company car will increase by one percentage point between the 2029/30 and the 2030/31 tax years, subject to an overall maximum of 40%.

Pay-per-mile for EVs: from 1 April 2028, electric cars will pay 3p a mile and plug-in hybrids 1.5p a mile. So an EV doing 12,000 miles a year will cost £360 a year on top of normal running costs. How this will be administered is still uncertain.

The government will increase the van benefit in kind charge, and the car and van fuel benefit in kind charges, in line with the consumer prices index (CPI) from April 2027. The rates applicable from 6 April 2027 will be £30,200 for the car fuel benefit multiplier, £4,310 for the van benefit and £825 for the van fuel benefit.

R&D claims simplification

From 1 April 2027, the government will remove the requirement for companies intending to make R&D tax relief claims from notifying HMRC in advance, as well as rationalising the details required in the additional information form. This is a welcome change, simplifying what has become a very onerous process.

Paying yourself

Salary and dividends: the classic mix still works

The Chancellor confirmed no further changes to tax on dividends or employment income. Dividend rates stay at the higher levels introduced in April 2026, and the personal allowance and NI thresholds are frozen until 2030/31.

Pension contributions: still the best-value extraction

A company pension contribution is deductible for corporation tax and free of income tax and NIC. A £10,000 contribution saves your company up to £2,650 in corporation tax. The salary sacrifice cap confirmed in this Budget (due to come into effect in April 2029) hits employees swapping salary for pension, not direct employer contributions for directors.

Mileage: a welcome boost for those doing business mileage

The temporary 55p a mile rate for the first 10,000 business miles has now been made permanent, and the rate above 10,000 miles rises from 25p to 35p from 6 April 2027. So if you drive 15,000 business miles a year in your own (personal) car:

• Today: (10,000 x 55p) + (5,000 x 25p) = £6,750 tax-free
• From April 2027: (10,000 x 55p) + (5,000 x 35p) = £7,250 tax-free

That is £500 more in your pocket with no tax or NI, and the company deducts the higher cost for corporation tax purposes.

You: the personal taxpayer

Savings interest: up four percentage points in one go

From 6 April 2027, tax on savings interest rises to 24%, 44% and 49% for basic, higher and additional rate taxpayers respectively. We already knew, from last year’s Budget, that the rates were increasing by 2p, but it is now going to be a 4p in the £1 increase. The £1,000 (basic rate) and £500 (higher rate) personal savings allowances, the amount of interest you can earn before tax kicks in, remain unchanged.

A worked example: James is a higher-rate taxpayer and keeps £200,000 on deposit at 4%, earning £8,000 of interest. After his £500 personal savings allowance, £7,500 is taxable.

• 2026/27 at 40%: £3,000
• 2027/28 at 44%: £3,300

James pays £300 more for doing nothing differently. Using his and his partner’s £20,000 ISA allowances each year would chip away at that.

Rental income: landlords get rate increases for the second year in a row

Property income from 6 April 2027 will be taxed at 24%, 44% and 49% in England, Wales and Northern Ireland, the same rates as for interest earned. This represents a further 2p in the £1 rise on current 2026/27 rates. If you hold several properties personally, it may be time to revisit whether they belong in a company.

Side hustles: the trading allowance triples

From 6 April 2027, the trading allowance rises from £1,000 to £3,000, and the self-assessment reporting threshold rises with it. So if your partner makes £2,800 a year selling candles online, that income becomes tax-free and does not need reporting.

ISAs and savings products

The planned cut of the cash ISA limit to £12,000 has been scrapped. The full £20,000 remains, for all ages.

A new first-time buyer ISA replaces the lifetime ISA (LISA) for new savers from April 2029. As with the LISA, the new ISA will have a £4,000 annual contribution limit and offer a 25% government bonus on the final balance, capped at £20,000, when purchasing a first home worth up to £450,000. Unlike the LISA, there will be no retirement bonus or withdrawal charge, and there will be no upper age limit. Existing LISA holders can continue saving under current rules, while the withdrawal charge for purchases above £450,000 will fall from 25% to 20% from 29 October 2026.

A new pension tax allowance for retirees

From 6 April 2027 to 5 April 2030, pensioners whose total income is no more than the full new state pension will pay no income tax. The new allowance will taper away at £1 for every £3 of income above that level, so most retired shareholders with dividend income will not benefit. However, anyone whose only income is the state pension will not have to pay income tax.

Inheritance tax: no new changes, but April 2027 is coming

This Budget left IHT alone. The nil-rate band (£325,000), the additional residence nil-rate band (£175,000) and the £2.5m 100% business and agricultural property relief allowance all stay. The big change already in law still hits on 6 April 2027, when unused pension funds enter your estate. A £600,000 SIPP passed on to your loved ones could carry an IHT bill of up to £240,000 at 40% (currently £0).

Self-assessment payments

From April 2029, taxpayers with payments on account to make will be required to pay monthly, not twice a year as at present. This will be via Direct Debit or collected through PAYE. HMRC will introduce new web and app functionality in 2028, allowing taxpayers to estimate their tax liability and make voluntary payments ahead of the change, tracking how their payments are covering their forecast liability. More on this from eba in due course.

Selling up, winding up or passing on

This is where the Budget hits owner-managers hardest.

Business asset disposal relief: the limit halves

For disposals on or after 6 April 2027, the business asset disposal relief (BADR) lifetime limit falls from £1m to £500,000. The BADR rate stays at 18%, and gains above the limit are taxed at 24%.

Here is what selling your company for a £1m gain looks like, ignoring the £3,000 annual exemption.

£1m gain	Before 6 April 2027	On or after 6 April 2027
Gain taxed at 18% (BADR)	£1,000,000 = £180,000	£500,000 = £90,000
Gain taxed at 24%	nil	£500,000 = £120,000
Total CGT	£180,000	£210,000

That is £30,000 more for selling a few weeks later. Couples who both own shares each have their own £500,000 limit, so shareholdings matter. A sale with a £400,000 gain is unaffected either way. Beware: there are anti-forestalling rules for contracts signed before 6 April 2027 but completed afterwards, so talk to us before you sign anything.

Founders’ relief: generous, but probably not for you

The eba team, watching the Budget, got quite excited when the Chancellor announced the new founders’ relief, thinking that it would repair the damage of cutting BADR for entrepreneurs who had set up their own companies. That excitement was short-lived, once we looked at the detail.

The new founders’ relief will tax qualifying gains at just 10% on up to £10m of lifetime gains from 6 April 2027. That sounds wonderful, but the target is founders and early investors in high-growth companies.

Currently still under consultation until 30 November 2026, the government is proposing that founders’ relief will only apply to shareholders who have owned 25% or more of the shares since commencement of trading and where the company’s turnover is £10m or more with fifteen or more full-time staff. Both turnover growth and headcount growth will need to have averaged at least 25% over three consecutive years during the past ten years, and there will need to have been at least £1.5m of qualifying R&D expenditure claimed for periods ending in the three years prior to sale.

So it will be about as much use as a chocolate fireguard to most business owners.

Winding up your company: watch out for 2028

The government will modernise how distributions to individual shareholders are taxed, so profits cannot be taken out at lower rates than intended. Draft rules come in 2027, and changes start in April 2028. Genuine changes of ownership, including family succession, will keep the current capital treatment.

A worked example: Lisa is retiring and plans to wind up her company, which holds £300,000 of cash. Through a members’ voluntary liquidation with BADR, she would pay about £54,000 at 18% and be able to take the cash out of the company. If the same £300,000 were taxed as a dividend (as proposed), the tax bill for her to take the cash out of the company would be about £104,000. We do not yet know exactly which transactions the new rules will catch, but if you are thinking of winding up in the next two or three years, plan now.

HMRC admin: what is coming down the track

Making Tax Digital: sole traders and landlords with income over £30,000 join MTD from April 2027. As a gesture of goodwill, there will be no late submission penalty points for 2027/28 quarterly updates for that group.

Tougher debt collection: from 2029/30, HMRC will be able to take lower-value tax debts directly from the bank accounts of people who can pay but repeatedly do not engage.

More inspectors: 670 extra compliance officers on top of the 5,500 already promised. Expect more enquiries, not fewer.

Employment expenses: around 160,000 employees will be able to claim expenses relief without filing a tax return.

Your Budget to-do list

• Selling in 2027? If your gain is over £500,000, talk to us about completing before 6 April 2027.
• Winding up soon? Model a members’ voluntary liquidation before the distribution rules change in April 2028.
• Cash on deposit? Fill your ISAs and check whether some cash is better held in the company or a pension.
• Personal landlord? Review whether your properties should sit in a company before the 2027 rate rise.
• Big equipment purchase? Check timing against the new 50% first year allowance from 1 January 2027.
• High mileage? Make sure your mileage claims reflect the 35p rate from April 2027.
• Employer? Budget for the £13.21 national living wage and get ready to payroll benefits from April 2027 (eba will be in touch soon about this).
• Pensions and IHT? Review your will and pension nominations before unused pensions enter your estate in April 2027.

Most of these measures still need to pass through Finance Bill 2026-27, and the founders’ relief and distribution rules are still being consulted on, so details may change. As always, the eba team is here to help you work out what it means for you. If you would like to talk any of it through, get in touch.

Frequently asked questions

Did Budget 2026 change income tax, National Insurance or VAT rates?

No. The Chancellor kept his promise not to raise the headline rates of income tax, National Insurance or VAT. The £12,570 personal allowance and the income tax bands remain frozen until 2030/31, and dividend tax rates are unchanged. The revenue is being raised instead from savings interest, rental income, business asset disposal relief and capital allowances.

What is happening to business asset disposal relief?

For disposals on or after 6 April 2027, the business asset disposal relief lifetime limit falls from £1m to £500,000. The relief rate stays at 18%, and any gain above the limit is taxed at 24%. On a £1m gain that is £210,000 of CGT after April 2027, against £180,000 before, so £30,000 more. Each spouse who owns shares has their own £500,000 limit.

How much more tax will I pay on savings interest from April 2027?

Tax on savings interest rises by 4p in the pound, to 24%, 44% and 49% for basic, higher and additional rate taxpayers. The £1,000 and £500 personal savings allowances are unchanged. A higher-rate taxpayer with £7,500 of taxable interest pays £3,300 instead of £3,000, so £300 more. ISAs remain tax-free, with the full £20,000 allowance kept.

Are dividend and corporation tax rates changing?

No. Dividend tax rates stay at 10.75%, 35.75% and 39.35%, with the £500 dividend allowance unchanged. Corporation tax stays at 19% for profits up to £50k and 25% above £250k, with the 26.5% marginal rate in between. The classic salary plus dividends approach for company directors is unaffected.

When do most of the Budget 2026 changes take effect?

Most changes start on 6 April 2027, including the savings and rental rate rises, the lower business asset disposal relief limit and the higher mileage rate. Some come later: the new rules on company distributions start in April 2028, the EV pay-per-mile charge from 1 April 2028, and monthly self-assessment payments from April 2029. That leaves time to plan.

• Budget 2026
• Company owners
• Capital gains tax
• Business asset disposal relief
• Tax planning