Budget 2026: What it means for your business

1.  Corporate tax changes

Capital allowances: bigger first-year allowance, slower writing down

The main rate first-year allowance rises from 40% to 50% for spending on or after 1 January 2027. In exchange, the main rate writing-down allowance falls by two points to 12%. Full expensing stays, and the headline corporation tax rate remains capped at 25%. In short, new investment gets a stronger upfront boost, while relief on existing pools slows down. Businesses planning big purchases may want to think carefully about timing.

When: 50% FYA from 1 January 2027; 12% WDA from 1 April 2027 (corporation tax) and 6 April 2027 (income tax)

Bank surcharge temporarily doubled

To help pay for household energy support, the Bank Corporation Tax Surcharge rises from 3% to 6% for 15 months. The government says this time-limited period will not be extended, and the rate returns to 3% from 1 April 2028. This only affects banks within the surcharge.

When: 1 January 2027 to 31 March 2028

Foreign branch (permanent establishment) exemption becomes compulsory

At the moment, UK companies can choose whether to exempt the profits of their overseas branches. That choice is going. The exemption becomes mandatory, so foreign branch losses can no longer reduce UK corporation tax. Draft legislation includes transitional rules restricting certain carried-forward losses, and anti-avoidance rules apply from 13 July 2026. Groups with overseas branches should review their position now.

When: Accounting periods beginning on or after 1 January 2027

Advance Corporation Tax finally abolished

Advance Corporation Tax (ACT) legislation will be repealed on 1 April 2031. This will extinguish any surplus ACT balances still held. The repeal will be legislated in a future Finance Bill, so companies holding surplus ACT have time to consider whether it can be used beforehand.

When: 1 April 2031

Modernising how company distributions are taxed

The government will reform the rules on how distributions to individual shareholders are taxed, so similar transactions are treated consistently whatever their legal form. The aim is to stop well-advised taxpayers structuring profit extraction for a better rate. Reassuringly, capital treatment is protected for genuine ownership changes, including families passing down a business, and relief may be more generous for demergers. Draft legislation follows in 2027.

When: From April 2028 (draft legislation for consultation in 2027)

Simpler R&D claims

The R&D Claim Notification Form, which requires companies to notify HMRC in advance, is removed. The Additional Information Form will also be simplified from autumn 2027. The government is also gathering views on simplifying R&D legislation, including the ERIS intensity ratio and the PAYE/NIC cap.

When: Claim Notification Form removed from 1 April 2027; form simplification from autumn 2027

Advance Tax Certainty Service opened to more projects

The minimum spend for HMRC’s Advance Tax Certainty Service falls from £1 billion to £300 million. This means more major investment projects can seek upfront certainty on their tax treatment.

When: From 4 November 2026

Corporate Interest Restriction and creative credits

From 1 January 2027, Audio-Visual Expenditure Credits and Video Games Expenditure Credits will be excluded when calculating tax-EBITDA for the Corporate Interest Restriction. This is a technical change, but a welcome one for creative-sector groups.

When: From 1 January 2027

A wider programme of corporate tax simplification

The government has launched a consultation on targeted simplifications, covering areas such as withholding tax on interest, CFC and anti-hybrid rules, capital allowances, the Patent Box and the intangibles regime. A separate Call for Evidence looks at modernising corporation tax administration. Nothing changes yet, but this is a real opportunity to have a say. Expressions of interest are due by 21 November 2026.

When: Policy development through 2027

Stamp duty on shares replaced

The Securities Transfer Tax will replace Stamp Duty and Stamp Duty Reserve Tax on shares, with legislation in Finance Bill 2026-27.

When: From late 2027

SDLT group relief tightened

SDLT group relief rules are amended so relief is withdrawn as intended where a purchaser leaves a corporate group and the vendor company has been wound up. This applies to property in England and Northern Ireland.

When: Transactions from 29 October 2026

2. Personal tax changes

Higher tax on savings and property income

Budget 2025 had already raised the rates on savings and property income by two points. This Budget adds a further two points. From 6 April 2027 the rates will be 24% (basic), 44% (higher) and 49% (additional). The property rates apply in England, Wales and Northern Ireland; the savings rates apply UK-wide. The government says 84% of income taxpayers will be unaffected. Landlords and those with large savings outside ISAs should review their plans.

When: From 6 April 2027

Cash ISA limit stays at £20,000

Good news for savers: the planned cut to the cash ISA allowance is reversed, and the annual limit stays at £20,000. The government will also explore a new incentive for first-time stocks and shares ISA investors, with design to follow.

When: From 6 April 2027 (limit maintained)

New Founders’ Relief: 10% CGT on up to £10 million

A new Capital Gains Tax relief gives qualifying founders and early investors of high-growth, innovative companies a 10% rate on up to £10 million of lifetime gains. Proposed conditions include holding at least 25% of the shares for five years, and the company meeting turnover, headcount and innovation tests. The detailed design is under technical consultation, closing 30 November 2026, so the rules may still change.

When: Disposals on or after 6 April 2027

Business Asset Disposal Relief limit halved

The lifetime limit for Business Asset Disposal Relief, which gives an 18% CGT rate, falls from £1 million to £500,000. The government says three-quarters of claimants will still get relief on their whole gain. Owners considering a sale should take advice about timing.

When: Disposals from 6 April 2027

Trading allowance tripled

The tax-free trading allowance rises from £1,000 to £3,000. This lets individuals earn up to £3,000 of trading and miscellaneous income each year tax-free, a real help for side businesses and new entrepreneurs.

When: From 6 April 2027

Employee share schemes: EMI2 and more flexibility

CSOP will be known as EMI2. Its individual option limit doubles from £60,000 to £120,000, it no longer counts towards the EMI limit, and the exercise period extends from 10 to 15 years. EMI notification of grants is also replaced by reporting in the annual return. The window to exercise EMI options after a disqualifying event also extends from 90 to 180 days.

When: From 6 April 2027

Mileage rates made permanent, and higher for big drivers

The 55p per mile tax-free rate for the first 10,000 business miles, already in place from 6 April 2026, is made permanent. The rate for miles above 10,000 rises from 25p to 35p from 6 April 2027. This applies to employees and the self-employed using their own car or van for work.

When: 55p already in force from 6 April 2026 (now permanent); 35p from 6 April 2027

Paying self assessment tax more regularly

From April 2029, people who make payments on account will make smaller, more regular in-year payments, bringing payment closer to when income is earned. The aim is to avoid large, unexpected bills. Separately, the £2,500 self assessment threshold for employment expense claims is removed from 6 April 2028, so more claims can go through PAYE.

When: From 6 April 2028 (expenses) and April 2029 (payments)

CGT on sums received for giving up contract rights

Following a tribunal decision, the law is clarified so that a capital sum received under a contract for the loss of rights under that contract falls within CGT.

When: Sums received on or after 28 October 2026

Easier moves to the UK for trustees

A trust that becomes UK resident because a trustee moves here, and then stops being UK resident later that year or the next, will no longer face the CGT exit charge. This helps globally mobile people relocate.

When: Exit charges on or after 28 October 2026

Image rights taxed as employment income – delayed

Image rights payments connected to an employment will be taxed as employment income, like wages. To give sectors time to adjust, this is now delayed to 6 April 2028.

When: From 6 April 2028

3. Inheritance tax changes

Trust liabilities: closing an unintended deduction

HMRC found that, in some trust arrangements, liabilities could reduce inheritance tax in ways Parliament never intended. The new rules put trustee liabilities on a clear statutory footing, replacing reliance on the trustee’s lien, and apply the same anti-avoidance restrictions that already apply to personal debts. Where someone has a qualifying interest in possession, trust debts linked to value from their own estate may be reduced. Only a small number of people are expected to be affected, but trustees should review existing borrowing.

When: Transfers and chargeable events on or after 28 October 2026

Pension death benefits and inheritance tax

Where excess pension lump sum death benefits are subject to both income tax and inheritance tax, consequential changes will preserve the existing relief and ensure any later inheritance tax refund is brought into charge correctly.

When: From 6 April 2027

Reminder: unused pensions come into inheritance tax

This is not a new Budget 2026 announcement, but it is too important to leave out. Under rules already legislated in Finance Act 2026, most unused pension funds and pension death benefits will count as part of a person’s estate for inheritance tax from 6 April 2027. Personal representatives will be responsible for reporting and paying any tax due. Anyone relying on their pension to pass wealth to the next generation should review their plans now.

When: From 6 April 2027 (previously legislated)

4. Pensions

The “two-year rule” on death benefits is scrapped

Until now, tax-free lump sum death benefits (where the member died under 75) could become taxable simply because the scheme paid them more than two years after learning of the death, even where delays were nobody’s fault. That rule is removed. It also goes for beneficiary annuities from drawdown and certain overseas scheme funds. This is a genuinely kind change for bereaved families, removing time pressure during probate.

When: Payments on or after 28 October 2026

New Pension Tax Allowance

Pensioners whose total income is at or below the full new State Pension will not have to pay small amounts of income tax. The allowance tapers away for those just above that level. It is worth 20% of the gap between the full new State Pension and the Personal Allowance.

When: 6 April 2027 to 5 April 2030

Simpler tax on excess lump sum death benefits

Where death benefits exceed the deceased’s lump sum and death benefit allowance, the excess will no longer be treated as the recipient’s pension income. Instead, HMRC will charge a standalone tax at the recipient’s marginal rate, without reopening their wider tax or benefits position years later. Beneficiaries will not need to include it in their tax return.

When: Retrospective for payments on or after 6 April 2024

Defined benefit surplus can be paid to members

Defined benefit schemes will be able to pay surplus to members (who meet age or ill-health conditions) or their dependants as an authorised payment, taxed as pension income at the member’s marginal rate. Today, such payments would face unauthorised payment charges of at least 40%. Trustees keep full discretion.

When: Payments on or after 6 April 2027

Easier pension access for the terminally ill

The definition of terminal illness for serious ill-health lump sums is changing to make access easier where someone is expected to live less than 12 months. Medical evidence can also come from a practitioner outside the UK in certain cases.

When: Finance Bill 2026-27

State Pension Triple Lock adjusted

The Triple Lock continues to April 2029. From April 2030, the State Pension will rise by the highest of 2.5%, inflation, or the amount needed to keep its value relative to earnings as reached in April 2029.

When: From April 2030

A final word

We hope this gives you a clear, friendly starting point. Budget announcements are not yet law; most measures will be enacted through Finance Bill 2026-27 and detail can change along the way. This note is general information drawn only from the Budget 2026 document and the accompanying HM Treasury and HMRC papers published on 28 October 2026, and is not advice on your own circumstances. If anything here touches you or your clients, please pick up the phone. Our Tax team would be delighted to talk it through.