Budget 2026: What does John Healey’s first Budget mean for businesses and individuals?

Chancellor John Healey delivered his first Budget on 28 October 2026 against a backdrop of higher energy prices, increased government borrowing costs and continuing cost pressures on households and businesses. The Chancellor described the Budget as providing “breathing space” for families and businesses while attempting to encourage investment and growth. There were no increases to the headline rates of Income Tax, National Insurance or VAT.

Entrepreneurs and founders

One of the most eye-catching measures was the introduction of a new Founders’ Relief. From 6 April 2027, qualifying founders will be able to pay Capital Gains Tax at a reduced 10% rate on up to £10 million of qualifying lifetime gains when disposing of shares in high-growth, innovative UK companies.

However, the definition is much narrower than the name “Founders’ Relief” initially suggests. It is really aimed at founders or significant early investors in high-growth, innovative UK companies, rather than the typical owner-managed business.

Among other requirements, founders must initially have held at least 25% of the company, held their shares for at least five years, and the company must have reached at least £10 million turnover and 15 employees. It must also satisfy demanding growth or R&D tests. The relief is therefore unlikely to be available to most conventional owner-managed businesses.

The business asset disposal relief (BADR) lifetime limit will reduce from £1 million to £500,000 from April 2027.

Young Entrepreneurs Allowance: The Government will pilot a new scheme to help young people start businesses by contributing towards their living costs during their first year of trading. The amount available, age criteria and detailed eligibility requirements have yet to be announced.

The Trading Allowance will increase from £1,000 to £3,000 from 6 April 2027, which will be particularly helpful for people starting very small businesses or earning additional income alongside their main employment. The Trading Allowance allows individuals to receive a certain amount of gross trading income before they have to pay Income Tax on it. Under the new £3,000 limit, someone earning up to £3,000 a year from a small trade or side business could potentially have no taxable profit from that activity.

Changes impacting businesses

Minimum and Living Wage increase

The National Living Wage and National Minimum Wage will increase by 3.9% from 1 April 2027. For workers aged 21 and over, the National Living Wage will rise to £13.21 per hour, while the rate for 18 to 20-year-olds will increase to £11.27 per hour.

Mileage rates made permanently more generous

There is welcome news for employees and the self-employed who use their own vehicles for business.

The tax-free mileage rate of 55p per mile for the first 10,000 business miles, increased from 45p earlier this year, will now become permanent. The rate for mileage above 10,000 miles will also rise from 25p to 35p.

This is particularly relevant to owner-managed businesses with mobile workforces, such as care businesses and trades, as well as employees who regularly travel to clients using their own cars.

Fuel duty and red diesel

The existing 5p cut in fuel duty will be extended to 1 July 2027 There is additional support for agricultural and other qualifying businesses using red diesel. The 3.7p-per-litre reduction in red diesel duty is being extended for a further six months, again to 1 July 2027. 

EMI2 Scheme: For growing companies, the Government is expanding tax-advantaged employee share ownership. The new EMI2 scheme, replacing CSOP, will double the value of tax-advantaged options an employee can hold from £60,000 to £120,000 from April 2027.

Capital allowances: better relief upfront, but slower thereafter The main writing-down allowance will fall from 14% to 12% from April 2027. At the same time, the main First Year Allowance will increase from 40% to 50% from 1 January 2027.

For businesses contemplating significant capital expenditure, the timing and type of expenditure will therefore become increasingly important.

Business rates support for the high street

There was considerably better news for many retail, hospitality and leisure businesses.

From April 2027, the rateable value threshold for 100% Small Business Rates Relief for qualifying retail, hospitality and leisure properties in England will increase from £12,000 to £18,000, while tapered relief will extend up to £21,000, increased from £15,000.

For Devon’s hospitality and leisure sector, this is likely to be one of the more immediately relevant announcements in the Budget.

Changes to VAT for Online Retailers

From October 2027, online marketplaces will have increased responsibility for collecting and accounting for VAT on behalf of sellers using their platforms.

Under the new rules, if your UK business is VAT-registered, or has total sales over £90,000 on any of the platforms where you trade, like Amazon, eBay and Temu, the online marketplace will collect VAT on relevant sales made through its platform.

Banks to help pay for the energy support

A number of measures are aimed at easing the renewed pressure on household energy bills. Part of that household support will be funded by an increase in the Bank Corporation Tax Surcharge.

The surcharge will temporarily double from 3% to 6% for 15 months, running from 1 January 2027 to 31 March 2028.

Higher taxes for landlords and savers

One of the less welcome measures is a further move towards greater taxation of investment income.

From 6 April 2027, the Income Tax rates applying to both property income and savings income will rise by two percentage points. This means basic rate tax payers will pay 24%. higher rate 44% and additional rate 49%.

This will inevitably increase the tax burden on individual landlords. For higher-rate taxpayers in particular, it further increases the difference between holding investment properties personally and through a limited company.

Other changes for individuals

• First-time buyers: a new Government 20% equity loan to qualifying buyers who would otherwise be unable to purchase their first home.  
• Changes affecting pensioners : A new Pension Tax Allowance will be introduced from April 2027. Its purpose is to ensure that pensioners whose income is at or below the value of the full new State Pension are not brought into Income Tax simply because increases in the State Pension exceed the frozen Personal Allowance.
• Removal of Carer’s Allowance earnings cliff edge.
• Parental pay is to be extended to groups who have historically fallen outside the system, including self-employed fathers, partners and adopters.