Budget 2026: what accountants need to know and what it means for clients
The Chancellor’s Budget combines support for household energy bills and business costs with tax changes affecting landlords, savers and business owners.
Ahead of the announcement, a survey of 500 UK business leaders found that 44% wanted a simpler tax system and lower compliance burdens, 39% wanted a more stable and predictable Corporation Tax regime, 38% wanted support with energy costs and 37% wanted better investment incentives.
Put simply, with 65% delaying investment decisions until after the Budget, businesses were looking for information to help them plan ahead.
Our pre-Budget guide separated scheduled changes from speculation, and the government went on to describe this as a Budget designed to create “breathing space for today, fresh hope for the future”. Here’s what it included.
Business costs and investment
Business rates and online marketplaces
From April 2027, the threshold for Small Business Rate Relief will rise, taking a further 70,000 retail, hospitality and leisure businesses in England out of business rates. Other qualifying businesses in these sectors will have their rates frozen in real terms for two years, while pubs, social clubs and many music venues will receive additional relief.
To help fund this, online marketplaces will have to collect VAT on qualifying sales by UK businesses using their platforms from October 2027. Small Producer Relief will also become more generous, providing £10m a year to support more than 2,000 small alcohol producers across the UK. Machine Games Duty on higher-risk gambling machines will rise from 20% to 25% from April 2027, too.
What this might mean for your clients
Some high-street businesses and small producers could see lower costs. Online sellers using marketplaces will need to understand the new VAT arrangements, while business rates relief will depend on the type and size of the business.
Business investment and tax reliefs
The main Corporation Tax rate remains at 25%, with no increases to the headline rates of Income Tax, National Insurance or VAT. The government has also ruled out a wider change to Capital Gains Tax rates, although some reliefs are changing.
From April 2027, the main rate of Writing Down Allowance will fall to 12%, while the First Year Allowance will increase to 50%. However, the lifetime limit for Business Asset Disposal Relief will fall from £1m to £500,000.
The Company Share Option Plan limit will rise from £60,000 to £120,000, and the exercise period will extend from 10 to 15 years. R&D tax relief administration will also be simplified, including the removal of the Claim Notification Form from April 2027.
What this might mean for your clients
Founders, growing businesses and clients making capital investments or planning business disposals will need support to consider which reliefs apply and when transactions take place. Employee share schemes could also be affected.
Employment and administration
From April 2027, the National Living Wage and National Minimum Wage rates for workers aged 21 and over will rise by 3.9%. The minimum wage for 18–20-year-olds will rise to £11.27, while the rate for 16–17-year-olds and eligible apprentices will reach £8.31.
Paid parental pay will extend to self-employed fathers and partners for the first time from April 2029. The government also plans to replace the cliff-edge withdrawal of Carer’s Allowance with a taper on earnings above the weekly limit, although this is not expected until 2030–31.
What this might mean for your clients
Employers with staff on or near the minimum wage could face higher payroll costs. Changes to parental pay and Carer’s Allowance may affect them, too.
Bank Corporation Tax Surcharge
The Bank Corporation Tax Surcharge will rise from 3% to 6% for 15 months, from January 2027 to the end of March 2028, in a move designed to fund household and business support.
What this might mean for your clients
The surcharge applies to banks, not businesses generally. Any wider impact on borrowing costs or access to finance will depend on how lenders respond.
Household costs and personal finances
Savings, property and pensions
From April 2027, Income Tax rates on property income will rise by two further percentage points, reaching 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers in England, Wales and Northern Ireland.
Rates on savings income will also rise by two percentage points from April 2027, reaching 24%, 44% and 49% respectively for basic-rate, higher-rate and additional-rate taxpayers across the UK.
The annual Cash ISA allowance, however, will remain at £20,000 – rather than drop to £12,000 for under 65s as previously proposed. The government will instead explore a new incentive for people investing in a stocks and shares ISA for the first time, and introduce a First-Time Buyer ISA from April 2029, replacing the Lifetime ISA.
The Your First Home scheme is expected to help around 70,000 first-time buyer households in England purchase homes with a 2.5% deposit and a government equity loan of up to 20% of the property’s value. Income caps will be £110,000 outside London and £140,000 in London, alongside property price limits.
A new Pension Tax Allowance will protect people above State Pension age whose total income is at or below the full new State Pension from being drawn into Income Tax as the State Pension rises.
What this might mean for your clients
First-time buyers, clients planning Lifetime ISA withdrawals and people relying mainly on the State Pension could all be affected. Landlords and clients with taxable savings income should review how the higher rates could affect their finances. Eligibility and detailed rules will determine the benefit in each case.
Energy, fuel and everyday spending
The 5p-per-litre fuel duty cut will be extended until 1 July 2027, delaying the planned return to the previous rate. Tax-free mileage rates will permanently increase to 55p per mile for the first 10,000 business miles and 35p thereafter.
VAT on electricity will be cut until July 2027, while gas standing charges are due to be abolished and moved into unit rates. The government expects the VAT cut to reduce the annual price cap by around £50 in April 2027. Around 10,000 energy-intensive manufacturers will also receive a 20–25% electricity discount from April 2027, through the British Industrial Competitiveness Scheme.
For homes, eligible households in England in council tax bands A–D will receive a £100 Household Energy Payment from January 2027.
What this might mean for your clients
The benefit will depend on eligibility, energy use, mileage and the goods a business imports. The fuel duty extension delays an increase; it doesn’t guarantee lower pump prices.
Housing, regional investment and other tax changes
Housing and local support
The government will provide an additional £1.5bn to deliver around 10,000 social and affordable homes in England, taking planned investment in the Social and Affordable Homes Programme to more than £40bn over 10 years. A further £432m will support people sleeping rough in finding a route off the streets over 2027–28 and 2028–29.
A High Value Council Tax Surcharge (dubbed the ‘mansion tax’) will be introduced for high-value residential properties in England, with provisions for discounts, exemptions, and a deferral scheme for eligible owners. A separate 100% council tax premium will apply to properties left empty and unoccupied for 12 months or more.
Regional investment and devolution
Plans for greater devolution include more control over local business rates and a share of Income Tax for mayors. An initial £285m will support regional leaders’ investment priorities, alongside new funding and financing arrangements to help local areas support growth.
The government will fully fund its Defence Investment Plan, expanding investment through the National Wealth Fund and British Business Bank.
Support for entrepreneurs and women in technology
Led by the Women in Tech Taskforce, voluntary industry standards will aim to improve employment practices in the tech sector and make access to investment fairer for female entrepreneurs. A new scale-up programme will support women founders across the UK, helping address barriers to fundraising and growth.
The trading allowance will also rise from £1,000 to £3,000 from April 2027, allowing more people with small amounts of trading income to receive it tax-free. A Young Entrepreneurs Allowance – offering help with living costs – will be piloted in England, while a Founders’ Relief will offer a 10% Capital Gains Tax rate on qualifying gains of up to £10m, over a lifetime.
The government says it will ultimately reduce regulatory administrative burdens by nearly £800m a year, and plans to make procurement more accessible to innovative businesses – giving firms more scope to test and scale new technologies.
Making Tax Digital for Income Tax
Making Tax Digital for Income Tax remains on course to expand from April 2027. However, taxpayers joining then will not receive penalty points for late submission of their first four quarterly updates for the 2027–28 tax year.
Keeping up with the changes
The Chancellor summarised his approach in his speech, saying the Budget focused on: “raising revenue from those who can afford to pay, no tax rises on wages or dividends, cutting taxes for millions of families and businesses […creating] breathing space now, while taking the long-term action to get costs down for good.”
The impact those measures have will depend on each client’s circumstances, so it makes sense to use the announcements as a starting point for reviewing forecasts, identifying who needs advice and planning next steps.
Having up-to-date client information makes those conversations easier. Capium brings accounting workflows together to help your practice respond to changing requirements and spend less time pulling information together. Book a demo to see how we could support your practice.
This article summarises selected measures announced in the Budget and is not a substitute for checking the detailed rules and implementation dates. Read the official Budget 2026 report for the full announcements.
