In August we told you not to act on Budget speculation and to wait for the detail. The detail arrived on 28 October, and for most owner-managers the headline rates didn't move. What did move sits around them: a halved limit on Business Asset Disposal Relief (BADR), higher tax on rent and interest, and a bigger trading allowance. All three start on 6 April 2027, which leaves five months to decide what to do.
TL;DR: Budget 2026 left corporation tax, dividend tax and the VAT threshold unchanged. From 6 April 2027 the BADR lifetime limit halves to £500,000, property and savings income rates rise to 24%, 44% and 49%, and the trading allowance triples to £3,000. Most measures still need Finance Bill 2026-27 to pass.
What Did Budget 2026 Leave Unchanged?
The main business rates held. Corporation tax stays at 25%, with the small profits rate at 19%, and both are now set for the financial year starting 1 April 2028 (HMRC Budget 2026 overview, 2026). Dividend tax stays at 10.75%, 35.75% and 39.35% for 2027-28, with the £500 allowance, and the capital gains annual exempt amount stays at £3,000 (HMRC Annex A, 2026).
The VAT registration threshold stays at £90,000 and the Employment Allowance at £10,500, on the same Annex A tables. So if your salary and dividend mix works for 2026-27, nothing in the Budget forces a change for next year.
One caution applies to everything below. Most of these measures are going through Finance Bill 2026-27, so treat the dates as announced rather than as law.
Selling Your Business? The BADR Limit Halves
From 6 April 2027 the BADR lifetime limit falls from £1 million to £500,000 for qualifying disposals. The 18% rate doesn't change, and relief you've already claimed counts towards the new limit. HMRC expects about 13,000 of roughly 51,000 claimants to be affected (HMRC, 2026).
The most this can cost a higher-rate seller is £30,000: £500,000 of gain taxed at 24% instead of 18%. That's real money, but a rushed sale at a weaker price can easily cost more.
Signing before April doesn't automatically protect you either. An unconditional contract made before 6 April 2027 but completed later falls under the £500,000 limit unless the parties can show it wasn't made to gain a tax advantage from the timing. Connected parties must show it was wholly commercial, and gains over £100,000 need a statement. Separate rules catch certain share reorganisations.
In our experience the bigger surprise is history. Old Entrepreneurs' Relief claims count against the same limit, so some sellers have less headroom than they think.
The new Founders' Relief offers 10% on up to £10 million of lifetime gains from 6 April 2027, but it's aimed at high-growth companies and its terms are out for consultation until 30 November.
What Happens to Tax on Rent and Savings Interest?
Rates on both rise to 24%, 44% and 49% from 6 April 2027. That's two points above the 22%, 42% and 47% already legislated, and four above today's 20%, 40% and 45%. The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland, and Scotland and Wales can set their own (HMRC, 2026).
A landlord with £20,000 of rental profit, all taxed at the higher rate, would pay £8,800 instead of £8,000. HMRC estimates 2.4 million landlords and 6 million savers will be affected by 2031-32.
These rates apply to individuals and partners, not to companies. One question clients always ask is whether that makes it time to move property into a company. Not on this alone, because a transfer can trigger Capital Gains Tax and Stamp Duty Land Tax. The Budget papers we've read also don't state the rate of relief on mortgage interest under the new rates, so wait for the Finance Bill text before modelling a mortgaged property.
Side Income and Making Tax Digital: The New Rules
The trading allowance rises from £1,000 to £3,000 from 6 April 2027, and the Self Assessment reporting threshold for trading income moves with it. Nothing changes for 2026-27, so anyone over £1,000 this year still has to report it.
On Making Tax Digital (MTD) for Income Tax, the Budget waived late-submission penalty points on 2027-28 quarterly updates for people required to join in April 2027. You'll still have to send those updates before you can file your return. If you joined in April 2026 the waiver doesn't cover you, so points can apply from 2027-28 (HMRC penalty guidance, 2026).
No one collects penalties for missing a 2026-27 update, but the updates are still required. The second is due on Saturday 7 November, and it's a summary of income and expenses, with no tax calculated and nothing to pay (HMRC, 2026). MTD extends to sole traders and landlords with income over £30,000 from 6 April 2027, and HMRC says some recognised software is free.
Should You Change Your Equipment Spending?
Probably not. The main-rate first-year allowance rises from 40% to 50% for spending on or after 1 January 2027, and the main-rate writing-down allowance falls from 14% to 12% from 1 April 2027 for companies and 6 April 2027 for unincorporated businesses, with a hybrid rate for periods that straddle the date (HMRC, 2026).
Most new investment is already covered by the £1 million Annual Investment Allowance or full expensing. The 50% rate mainly helps unincorporated businesses and those buying plant for leasing. The change you may notice is on older balances: a £100,000 main pool will give £12,000 a year rather than £14,000.
Three Changes That Can Wait Until 2029
These admin changes need planning rather than action. From April 2029, Self Assessment taxpayers who make payments on account will pay more regularly during the year. Payments will be automated by default, and eligible taxpayers can opt to pay through PAYE, but the frequency hasn't been set (HMRC, 2026).
The same month, businesses must set up a Direct Debit instruction for VAT and PAYE return liabilities, subject to exceptions, which confirms the proposal we covered in August. From 1 April 2029, VAT invoices must also be issued as e-invoices, with full scope due 12 to 18 months earlier (HMRC roadmap, 2026).
What we see most often is sole traders holding tax money in the business account until January. That habit needs to go before 2029, because the cash will leave earlier.
What Should You Do Before 6 April 2027?
Start with the earliest date that applies to you.
| If you are... | Do this | By |
|---|---|---|
| On MTD for Income Tax now | Send your second quarterly update | 7 November 2026 |
| A high-growth founder | Read the Founders' Relief consultation | 30 November 2026 |
| Buying plant outside the AIA | Check whether spending after 1 January earns 50% | 1 January 2027 |
| Selling or retiring within two years | Total your past BADR and Entrepreneurs' Relief claims, then take advice before signing | Now |
| A landlord or holding large personal savings | Rerun your 2027-28 tax forecast at the new rates | 6 April 2027 |
| A sole trader or landlord with income over £30,000 | Choose MTD software and sign up | 6 April 2027 |
If you sell through online marketplaces, from October 2027 they'll collect VAT on most consumer sales by UK VAT-registered sellers, and by other UK businesses with £90,000 of annual sales on that platform. Our tax services cover all of the above.
Frequently Asked Questions
Are the Budget 2026 changes law yet?
Mostly not. The BADR limit, the property and savings rates, the trading allowance and the capital allowances changes are all going through Finance Bill 2026-27, so the detail could still change. The Direct Debit requirement will be legislated in a future Finance Bill.
Should I sell my business before 6 April 2027 to keep the £1 million limit?
Not for tax alone. The saving is capped at £30,000, and a contract signed before April but completed later may not qualify. If a sale was already planned, take advice before you sign.
Did dividend tax go up in Budget 2026?
No. The rates of 10.75%, 35.75% and 39.35% and the £500 allowance carry into 2027-28. The increase you may remember took effect on 6 April 2026, following Budget 2025, and our dividend tax guide covers those rates.
Does the £3,000 trading allowance apply this tax year?
No. It starts on 6 April 2027. For 2026-27 the allowance is still £1,000, so if you're not already in Self Assessment, gross trading income above that means registering by 5 October 2027.
Want to know what Budget 2026 means for your own numbers? Talk to our team - we'll review your exit plans, rental income and 2027-28 tax forecast with you and tell you which of these dates actually apply.