UK Budget 2026: What It Means for Small Businesses, Directors and the Self-Employed

At a Glance

Trading allowance: rises from £1,000 to £3,000 from 6 April 2027.
Property income: taxed at 24%, 44% and 49% from 6 April 2027 (England, Wales and Northern Ireland).
Business Asset Disposal Relief: lifetime limit falls from £1 million to £500,000 for disposals from 6 April 2027.
National Living Wage: rises 3.9% to £13.21 an hour from 1 April 2027.
Making Tax Digital for Income Tax: starts 6 April 2027 for sole traders and landlords with qualifying gross income over £30,000 in 2025-26, unless exempt.

What Has Not Changed in the 2026 Budget

Unchanged for 2027-28, according to HMRC's Annex A rates tables.

Dividends: 10.75%, 35.75% and 39.35%, with a £500 allowance.
Corporation Tax: 19% small profits rate and 25% main rate, with limits of £50,000 and £250,000.
VAT: registration threshold £90,000 and deregistration threshold £88,000.
Employer National Insurance: 15%, with a £10,500 Employment Allowance.

UK Budget 2026 for Company Directors

Founders' Relief: a proposed lower Capital Gains Tax rate for qualifying share disposals from 6 April 2027, subject to consultation. Business Asset Disposal Relief also falls to £500,000.
Equipment: the main-rate first-year allowance rises to 50% from 1 January 2027, while the writing-down allowance falls to 12% from 1 April 2027 for Corporation Tax.

UK Budget 2026 for Sole Traders and the Self-Employed

A woman researching the UK Budget 2026 on her laptop at a table inside a lively British cafe with a red double-decker bus visible outside. — Small business owners and freelancers staying updated on key tax allowances and rates while working remotely.

Making Tax Digital: the threshold is £30,000 from April 2027, falling to £20,000 from April 2028. It uses gross income, not profit.
Penalty easement: no late-submission penalty points for quarterly updates in 2027-28 for people joining in April 2027.
Mileage: the simplified rate above 10,000 business miles rises from 25p to 35p from 6 April 2027.

Check your 2025-26 income now. Our Self Assessment and Making Tax Digital support is built around exactly this change.

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UK Budget 2026 for Landlords

Property income tax rates: 24%, 44% and 49% from 6 April 2027 in England, Wales and Northern Ireland. Scotland has separate rates.
Making Tax Digital: rental income counts towards the £30,000 threshold.
High Value Council Tax Surcharge: from April 2028 on English homes worth £2 million or more.

UK Budget 2026 for Employers and VAT-Registered Businesses

A company director discussing financial documents and wage rates on a tablet with team members in a small business warehouse office. — Directors navigating National Living Wage increases, capital allowances, and operational adjustments for 2027.

Minimum wage from April 2027: £13.21 (21 and over), £11.27 (18 to 20) and £8.31 (16 to 17 and apprentices).
Payrolling benefits: company cars, vans, fuel and medical benefits go through payroll from 6 April 2027. Most other benefits follow from 6 April 2028.
Direct Debit: from April 2029, most businesses will need a Direct Debit instruction for VAT and PAYE payments. Other payment methods remain available.
Online marketplaces: will collect VAT on qualifying UK business sales from October 2027.
Business rates in England: from 1 April 2027, retail, hospitality and leisure properties get full Small Business Rate Relief up to £18,000 rateable value, tapering to zero at £21,000, until 31 March 2029.

FAQs

Do I need to use Making Tax Digital for Income Tax from April 2027?

You do if you are a sole trader or landlord with qualifying gross income over £30,000 in 2025-26, unless you are exempt. The test uses gross income, not profit, so check your 2025-26 figures now. HMRC has an eligibility checker.

What is the Making Tax Digital threshold for 2027 and 2028?

The threshold is £30,000 from April 2027, falling to £20,000 from April 2028. It is based on gross income, not profit.

Does rental income count towards the Making Tax Digital threshold?

Yes. Rental income counts towards the £30,000 threshold, so landlords should check their 2025-26 rental income as well as any self-employed income.

Are there penalties for late Making Tax Digital quarterly updates?

For people joining in April 2027, there are no late-submission penalty points for quarterly updates in 2027-28.

What is the trading allowance from April 2027?

The trading allowance rises from £1,000 to £3,000 from 6 April 2027.

Is Business Asset Disposal Relief being scrapped?

No. The lifetime limit falls from £1 million to £500,000 for disposals from 6 April 2027. Separately, a lower Capital Gains Tax rate called Founders' Relief is proposed for qualifying share disposals from the same date, subject to consultation.

How will rental income be taxed from April 2027?

Property income will be taxed at 24%, 44% and 49% from 6 April 2027 in England, Wales and Northern Ireland. Scotland has separate rates.

What is the National Living Wage from April 2027?

The National Living Wage rises 3.9% to £13.21 an hour from 1 April 2027 for workers aged 21 and over. Rates are £11.27 for ages 18 to 20 and £8.31 for ages 16 to 17 and apprentices.

Have Corporation Tax, dividend tax or VAT thresholds changed in Budget 2026?

No. According to HMRC's Annex A rates tables, these are unchanged for 2027-28: Corporation Tax at 19% (small profits) and 25% (main rate), dividend tax at 10.75%, 35.75% and 39.35% with a £500 allowance, and VAT registration at £90,000 and deregistration at £88,000.

Need help applying Budget 2026 to your business?

Some measures remain subject to legislation. Taxplus Accountants can help you understand the changes and prepare, with fees agreed upfront.

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