Despite speculation about measures to “tax wealth, not work”, John Healey’s first Budget as Chancellor was steady, with few rabbits pulled out of a hat, says Matthew Denney, Tax Partner at Bevan Buckland. The manifesto pledges were maintained. Businesses can breathe easier, as no further pain was inflicted on the scale of Rachel Reeves’s “jobs tax”.
While the main rates of Capital Gains Tax remained unchanged, landlords and savers will be bitterly disappointed by a further two-percentage-point increase in the tax on property and savings income, on top of the two percentage points announced at the last Budget. The reduction in the Business Asset Disposal Relief lifetime limit from £1m to £500,000 is disappointing, although the relief is of limited value given the 18% rate. The new Founders’ Relief is likely to attract attention, but the qualifying conditions look onerous and remain subject to consultation, so it remains to be seen what form it will take.
“My overall impression was that this Budget kicks the can further down the road. Despite fiscal headroom shrinking to £15bn, the Chancellor chose to defer the difficult decisions. Once the Milburn review into welfare has been completed, putting off those decisions will become harder. The Government must recognise that the overall tax burden on businesses and working people cannot keep increasing. The Government still has no appetite for bold changes such as a wealth tax or property tax reform, and so it is no surprise that landlords and savers are again the ones hit with further tax increases.”
Here are the main announcements and who they are likely to affect most.
Businesses and Employers
The most immediate cost is the wage bill. From 1 April 2027, the National Living Wage rises 3.9% to £13.21 an hour, adding around £910 a year to a full-time worker’s pay (based on a 35-hour week), and younger workers get the same percentage increase.
How tax is paid is changing too. Self Assessment is being reformed so that taxpayers make smaller, more regular payments rather than facing large bills, while HMRC gets stronger powers to pursue those who can pay but ignore repeated contact.
There is help for growing firms. From 6 April 2027, the trading allowance, the amount that can be earned tax-free from trading and miscellaneous income, triples from £1,000 to £3,000. The Company Share Option Plan is renamed EMI2 and its individual option limit doubles from £60,000 to £120,000, with the interaction with the £250,000 EMI limit removed. Tax-free mileage rates for people who use their own cars for work are also becoming more generous: the higher rate rises from 25p to 35p a mile, and the earlier increase to the standard rate is made permanent.
On the high street, 70,000 more retail, hospitality and leisure businesses in England will pay no business rates after the Small Business Rates Relief threshold rises from £12,000 to £18,000, and no other business will face an above-inflation rise in its bills for two years. Business rates are devolved, so this applies in England only.
Owner-Managers, Investors and Landlords
Owners planning an exit face a less generous regime. The lifetime limit for Business Asset Disposal Relief halves from £1m to £500,000 with effect from 6 April 2027, with the rate remaining at 18%. The Chancellor says three in four claimants are unaffected, but larger sales will cost more. At the top end, a new Founders’ Relief taxes up to £10m of lifetime gains at 10% for eligible founders of high-growth, innovative companies, with the qualifying conditions subject to consultation.
Profit extraction is also in the spotlight. Rules on company distributions will be modernised to stop complex arrangements being used to take profits out at lower tax rates, while protecting genuine commercial deals and family business succession.
Landlords and savers face a further rise. From April 2027, tax rates on savings and property income go up by another two percentage points across all bands, to 24%, 44% and 49%, with no change to tax on dividends or employment income. The Government says 88% of people will pay no more tax on their savings income, but those with rental income or significant savings outside an ISA will pay more. Cash savers do get some good news, with the planned cut to the cash ISA limit scrapped, keeping the full £20,000 for everyone.
Pensioners and Households
Frozen thresholds had created a problem for pensioners, with the full State Pension due to rise above the £12,570 Personal Allowance. From April 2027, a new Pension Tax Allowance means people over State Pension age with total income up to the value of the full new State Pension will pay no Income Tax in this Parliament. Around 500,000 pensioners are expected to benefit in 2027/28, of whom around 290,000 will no longer pay Income Tax.
For households, the surprise was a £100 energy payment this winter for homes in council tax bands A to D in England, a £2.6bn scheme funded by raising the bank surcharge from 3% to 6% for 15 months from January, alongside the higher tax on property and savings income. The Welsh Government receives funding for similar support and can choose whether to provide it. Everyone in Wales benefits from the VAT cut on electricity, which runs until 30 June 2027, the planned removal of gas standing charges (which Ofgem is being asked to abolish in 2027 or soon after) and a further six months of the 5p fuel duty cut.
What It Means for Wales
With business rates, council tax and housing devolved, several of today’s measures will only reach Wales if the Welsh Government chooses to follow. The Welsh Government will receive an additional £450 million for public services over three years. The Budget also names investment here, including £30m for Cardiff Parkway station, £11m for the Aberavon Bridge in Port Talbot and £2.5m for the M-SParc science park on Anglesey.
For a closer look at what the Budget means for Wales, watch the recording of our webinar, Autumn Budget 2026: Beyond the Headlines: https://youtu.be/_8ZdmxRA7XQ
What to Do Now
Many of these changes take effect from April 2027, which leaves time to plan. If you would like advice on how today’s changes affect you or your business, speak to your usual Bevan Buckland contact, call us on 01792 410100 or email mail@bevanbuckland.co.uk.
