On Wednesday 28 October 2026, John Healey delivered his first Budget as Chancellor, and the first of Andy Burnham's government. He billed it as a "breathing space" Budget for households and businesses facing higher prices.

Earlier this month, in our Budget preview, we set out what had been ruled out, what was already law and where the speculation was pointing. This follow-up covers what was actually announced, with a focus on the measures that matter most to company owners, founders, investors and families.

Most of the tax changes below will be legislated in Finance Bill 2026-27, and some details may still change as it passes through Parliament.

Overall, some helpful changes especially for the hospitality sector. Businesses may feel further pressure with the changes to minimum wage. It is not a dramatic budget!

The headlines at a glance

Area What was announced From
Business Asset Disposal Relief Lifetime limit cut from £1 million to £500,000 Disposals from 6 April 2027
New Founders' Relief 10% CGT rate on up to £10 million of lifetime gains for qualifying founders and significant early investors Disposals from 6 April 2027
EMI2 (formerly CSOP) Individual option limit doubled from £60,000 to £120,000; exercise period extended to 15 years 6 April 2027
Trading Allowance Increased from £1,000 to £3,000 6 April 2027
Capital allowances Main rate first-year allowance raised to 50%; main rate writing down allowance cut to 12%; full expensing maintained 1 January 2027 / 1 April 2027
Cash ISAs Planned cut to £12,000 scrapped; limit stays at £20,000 6 April 2027
First Time Buyer ISA Replaces the Lifetime ISA for new savers April 2029
Pension Tax Allowance Pensioners with total income up to the full new State Pension won't pay income tax 6 April 2027 to 5 April 2030
Small Business Rate Relief Retail, hospitality and leisure threshold for 100% relief raised from £12,000 to £18,000 rateable value 1 April 2027
Bank surcharge Up from 3% to 6% for 15 months 1 January 2027 to 31 March 2028
Self Assessment Payments on account to become smaller and more regular April 2029
Minimum wage National Living Wage up 3.9% to £13.21 per hour 1 April 2027
Mileage rates 55p for the first 10,000 business miles made permanent; higher rate rises from 25p to 35p 6 April 2027 (higher rate)

The backdrop

The Office for Budget Responsibility's new forecast was a mixed picture. It expects the economy to grow by 1.2% this year, better than it predicted in March, but just 1% next year, down from its earlier forecast of 1.6%. Inflation is now expected to reach 3.1% this year and 3.4% in 2027, only returning to the Bank of England's 2% target in 2030.

The Chancellor told the Commons that the OBR puts headroom against the government's stability rule at £15 billion in 2029/30, rising to £22 billion in 2030/31.

With the main rates of income tax, employee National Insurance and VAT still protected by the manifesto pledge, the revenue-raisers were targeted: a temporary increase in the bank surcharge, higher duty on high-stakes gambling machines, making online marketplaces collect VAT on behalf of UK sellers, reformed capital allowances, a cut to the Business Asset Disposal Relief limit, and a further push on tax compliance.

For founders and business owners

Business Asset Disposal Relief: lifetime limit halved

The most significant change for many of our clients is to Business Asset Disposal Relief (BADR). The lifetime limit on gains that qualify for the reduced 18% rate falls from £1 million to £500,000 for disposals made from 6 April 2027. The government says three-quarters of claimants will still receive relief on their entire gain, but it will matter a great deal to business owners planning a sale with gains above £500,000.

Gains above the new limit will be taxed at the main Capital Gains Tax rates instead. For anyone planning an exit, the timing of a sale relative to 6 April 2027 is now an important question, and one to model carefully rather than rush.

A new Founders' Relief

Alongside that cut, the Chancellor announced a new Founders' Relief: a 10% Capital Gains Tax rate on up to £10 million of lifetime gains. It's aimed at founders of, and significant early investors in, high-growth, innovative UK companies, and will apply to qualifying disposals of shares from 6 April 2027.

This could be very valuable for the right business, but the detail will be everything. The government has launched a technical consultation, closing on 30 November 2026, on the individual, company and "growth and innovation" conditions that will decide who qualifies. Many owner-managed businesses that currently rely on BADR may not meet those tests, so it shouldn't be treated as a like-for-like replacement. We'll be reviewing the conditions closely.

Bigger employee share options

There was good news for growing companies that use share options to attract and keep staff. The Company Share Option Plan (CSOP) is being renamed EMI2, and from 6 April 2027:

  • the value of tax-advantaged options an employee can hold under EMI2 doubles from £60,000 to £120,000;
  • the exercise period extends from 10 to 15 years;
  • EMI2 will no longer interact with the EMI option limit, so eligible employees can receive the full amount under both schemes.

The existing EMI scheme also gets more flexibility, including a longer window to exercise options after a disqualifying event (180 days rather than 90), and companies moving to an Employee Ownership Trust will keep access to EMI. The separate notification for EMI option grants is being removed, with grants reported through the end-of-year return instead.

Help for new ventures

  • Trading Allowance tripled: From 6 April 2027, individuals will be able to receive up to £3,000 a year of trading and miscellaneous income tax-free, up from £1,000.
  • Young Entrepreneurs Allowance: A pilot in England will support successful applicants with living costs during the first year of their business.
  • Female founders: A new scale-up programme, with the British Business Bank doubling its commitments to women-led businesses and funds to £200 million.

 

Capital allowances

Full expensing remains in place for eligible assets. For other main rate expenditure, the first-year allowance increases to 50% for spending on or after 1 January 2027, while the main rate writing down allowance falls to 12% from 1 April 2027 for Corporation Tax (6 April 2027 for Income Tax). The overall effect is a stronger upfront incentive to invest, but slower relief on the remaining balance.

Business rates

From 1 April 2027, the threshold for 100% Small Business Rate Relief for retail, hospitality and leisure properties in England rises from a rateable value of £12,000 to £18,000, and the upper threshold for tapered relief rises from £15,000 to £21,000. The government says this will take a further 70,000 businesses out of business rates altogether. Adult gaming centres and vape shops will be carved out of business rates reliefs.

Longer term, all business rates are set to be retained locally by the end of the decade, with mayors receiving 20% of business rates revenue from next year and a share of income tax receipts from 2028.

Corporation Tax and the bank surcharge

The 25% main rate of Corporation Tax is unchanged. Banks will pay a higher surcharge, rising from 3% to 6% from 1 January 2027 to 31 March 2028, to help fund support with energy bills.

There were some more technical corporate changes too. The foreign permanent establishment exemption becomes mandatory for accounting periods beginning on or after 1 January 2027, Advance Corporation Tax will be abolished from 1 April 2031, and the government is launching a programme to simplify specific areas of Corporation Tax, alongside a Call for Evidence on modernising how it's administered.

VAT and online marketplaces

From October 2027, online marketplaces will have to collect VAT on sales by UK VAT-registered businesses, and by other UK businesses selling more than £90,000 a year through the platform. Personal sales, second-hand goods and business-to-business sales are excluded. If you sell through a marketplace, it's worth checking how this will affect your pricing and VAT reporting.

For individuals and families

Cash ISAs: the cut is cancelled

In our preview, we listed the planned reduction in the cash ISA limit to £12,000 for under-65s, due from April 2027. That cut has now been scrapped. Savers of all ages will continue to be able to put the full £20,000 a year into a cash ISA. The government will also work with the investment industry on a new incentive for people opening a stocks and shares ISA for the first time.

First Time Buyer ISA and Your First Home

A new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029. It keeps the £4,000 annual limit and 25% government bonus, paid on withdrawal for a first home worth up to £450,000, with no upper age limit. Existing Lifetime ISA holders can carry on under the current rules, and from 29 October 2026 the withdrawal charge for buying a first home above the £450,000 cap falls from 25% to 20%.

Separately, the Your First Home scheme will help first-time buyers in England buy a new-build home with a 2.5% deposit, supported by an equity loan worth 20% of the property's value.

Pensioners

A new Pension Tax Allowance applies from 6 April 2027 to 5 April 2030. Pensioners whose total income is at or below the value of the full new State Pension won't have to pay income tax, with the allowance tapered away for incomes just above that level. The State Pension itself rises by 3.9% under the triple lock, taking the full new State Pension to £250.70 a week. From April 2030, the triple lock will be adjusted so that the State Pension tracks earnings over time, alongside plans for a new National Care Service.

Income tax thresholds

There was no change to the freeze on income tax thresholds. As pay rises, more income will continue to be taxed at higher rates.

Self Assessment

From April 2029, taxpayers who already make payments on account will move to smaller, more regular payments through the year, rather than two large instalments. The government will consult on how this works in practice, but it's worth factoring into longer-term cash flow planning for sole traders, landlords and company directors.

Two nearer-term changes are also worth knowing about. From 6 April 2028, the £2,500 threshold that forces some employees into Self Assessment to claim employment expenses is being removed. And taxpayers joining Making Tax Digital for Income Tax in April 2027 won't receive penalty points for late submission of their first four quarterly updates in 2027-28.

Capital Gains Tax and inheritance tax

There was no change to the main rates of Capital Gains Tax, and none of the more radical options that had been speculated about, such as ending the CGT uplift on death, were announced. The changes to CGT were the BADR limit, the new Founders' Relief and some technical measures.

There were no changes to the main inheritance tax reliefs. The one inheritance tax measure is an anti-avoidance change clarifying when liabilities relating to trust property can reduce the value of assets for inheritance tax. It applies to deaths and other chargeable events on or after 28 October 2026, so anyone with trust arrangements may want them reviewed.

Changes already in the pipeline still stand

Apart from the cash ISA reversal, the changes we highlighted in our preview remain on course. Those include higher tax rates on savings and property income from April 2027, unused pensions coming into inheritance tax from April 2027, the High Value Council Tax Surcharge from April 2028 and the salary sacrifice cap from April 2029.

More HMRC scrutiny

The Chancellor said he was starting by making sure people pay the tax they owe, when they owe it. HMRC will receive more funding for compliance and stronger powers to collect overdue tax from people who can clearly afford to pay but ignore repeated contact, plus a further £70 million over five years for its partnerships with private debt collection agencies. Expect more letters, more checks and less patience with late payment. Good records and up-to-date filings are the best protection.

For our maritime clients

No yacht-specific or seafarer-specific tax measures were announced. The relevant changes are the general ones: the lower BADR limit and the new Founders' Relief for anyone selling a maritime business, the capital allowances changes for vessel and equipment purchases, and the Self Assessment changes for crew who file returns. On the industrial side, the National Shipbuilding Office will have oversight of all future civil ship procurement, with further detail due in a Shipbuilding and Maritime Technology Action Plan.

What to do now

  1. Review any planned business sale: With the BADR limit halving for disposals from 6 April 2027, model your expected gain under both the current and new rules, and check whether Founders' Relief could apply.
  2. Don't rush, but don't drift: Bringing a sale forward purely for tax reasons can backfire, but if a disposal is already in train, the timing relative to 6 April 2027 deserves careful thought.
  3. Revisit your share incentive plans: The doubling of the EMI2 limit and the extra EMI flexibility could make equity a more powerful hiring tool from April 2027.
  4. Plan capital spending: The higher first-year allowance from January 2027 and the lower writing down allowance from April 2027 may affect the timing of planned purchases.
  5. Revisit your ISA plans: The full £20,000 cash ISA allowance is staying, so there's no longer a deadline to use it before April 2027. 
  6. Keep planning for April 2027: The higher savings and property income tax rates and the pension inheritance tax change are still coming.
  7. Get your records in order: HMRC's new funding and powers make tidy, timely compliance more important than ever.

Frequently asked questions

Did Capital Gains Tax go up?

The main rates didn't change. However, the BADR lifetime limit is being cut from £1 million to £500,000 for disposals from 6 April 2027, so business owners selling with larger gains may pay more. The new 10% Founders' Relief may help some founders and early investors.

What is the new Founders' Relief?

A 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders of, and significant early investors in, high-growth, innovative UK companies. It applies to disposals from 6 April 2027, and the qualifying conditions are being consulted on until 30 November 2026.

Can I still put £20,000 into a cash ISA?

Yes. The planned cut to £12,000 for under-65s has been scrapped.

Did income tax or National Insurance rates change?

No. The main rates of income tax, employee National Insurance and VAT were unchanged, in line with the manifesto pledge. Income tax thresholds remain frozen.

When do the changes take effect?

Most of the tax changes start on 6 April 2027, including the BADR limit, Founders' Relief, EMI2 and the Trading Allowance. The bank surcharge rises from 1 January 2027, the Self Assessment payment changes start in April 2029, and the First Time Buyer ISA arrives in April 2029.

How Higginson James can help

Budgets rarely land exactly as predicted, and this one brought a mix of good news and unwelcome surprises, particularly for business owners planning an exit.

If you'd like to understand how the Budget affects you, whether that's a planned business sale, your share incentive arrangements, your remuneration strategy or your wider tax position, get in touch to arrange a consultation. We'll take you through the detail and help you plan with confidence.

This article is based on the Budget 2026 documents and the Chancellor's speech published on GOV.UK, on 28 October 2026. Measures may change as the Finance Bill passes through Parliament. It isn't tax advice for your specific circumstances.