All change, no difference: The 2026 Budget

Banks and betting shops were the big losers in the Autumn Budget, paying for gains for pensioners and help for households, according to the early headlines following last week’s announcements.

A week later, though, that looks less convincing. Look at the Budget’s forecasts, and the figures tell a different story. It’s not the banks doing the heavy lifting on revenue raising. Rather, the pain may be more widespread.

While the temporary increase in the bank surcharge is expected to raise significant revenue this year and next, it’s time-limited, and revenues quickly tail off in 2028/29, with nothing raised from 2030 onwards. Over the full forecast period to 2031/32, the measure (if not repeated) is expected to raise £1.48 billion; the machine games duty increase from 20% to 25% for higher stakes machines, less than half that – £720 million.

By contrast, HMRC measures to close the tax gap, while expected to start slowly, are forecast to raise £7.85bn over the period.

That revenue, of course, is highly uncertain and it’s an ambitious target. But it’s not implausible given government commitments to recruit thousands of additional compliance officers and fast-developing technology. Regardless, it does mean businesses and high net worth individuals are likely to bear the burden of the 2026 Budget, if nothing else through increased scrutiny, enforcement and challenge from HMRC.

It’s not the only aspect of the Budget where the narrative unravels on further inspection. Other key announcements were neither as bad as they looked, nor as good as promised.

Changes to capital gains tax (CGT) relief for business owners and entrepreneurs were a case in point. Despite significant speculation in the run-up to the Budget, the main CGT rates remained unchanged. The Chancellor resisted calls from some, including those on Labour’s front bench, to narrow or equalise CGT rates with those for income, amid warnings of emigrating entrepreneurs and significant doubt that rises would actually raise revenue.

Instead, we got two measures that gave with one hand while taking away with the other. On the one hand, there was the new founders’ relief for those behind high-growth businesses and their early investors: a reduced 10% CGT rate on up to £10m of lifetime gains from April 2027. On the other hand, the government continued to reduce the broad-based business asset disposal relief (BADR), halving the lifetime limit from £1m to £500,000 from April 2027.

According to the government, these two will largely balance each other out, with the £1.29bn cost of the founders’ relief over the years to 2031/32 mostly paid for by the £1.06bn the cut to BADR is expected to save.

In truth, neither is likely to turn the dial for UK entrepreneurs. The further reduction in BADR is unwelcome but not unexpected, as it has been gradually whittled away over years, so that potential CGT savings for BADR claimants have fallen from £1.8 million to just £30,000.

Moreover, the government estimates that three-quarters of BADR claimants still receive the relief on their entire gain, and many family business owners will continue to pass over their shareholdings over time and take advantage of gift hold-over relief to avoid CGT.

The founders’ relief, meanwhile, as currently drafted, has so many conditions and restrictions that you could probably count the number who will be able to claim it on your hands. Hopefully the consultation on how the relief will work in practice, which was launched alongside the Budget, will address this.

The likely limited impact of the changes reflects a wider problem with the Budget. With changes to the taxes that generate close to three quarters of tax revenue (if we include employers’ NI) ruled out, the Chancellor is left tinkering around the edges.

Aside from HMRC enforcement activity, the next big revenue raiser announced at the Budget was a reduction in writing-down allowances (WDA), cutting the main rate from 14% to 12% from next April, partially offset by increasing the main rate first-year allowance (FYA) to 50% from 1 January 2027. Over the period to 2031/32, the Budget forecasts that will save the government £5.23bn.

Unlike the cuts to the BADR lifetime limit, which impact only around 13,000 of the 51,000 individuals who claim the relief annually, the changes to writing-down address a larger audience, with 600,000 businesses claiming main rate WDA and FYA (although many will not lose out).

Nevertheless, the Chancellor has proved reluctant to broaden the tax base. Indeed, when it comes to individuals, the distributional analysis within the Budget shows it continues the long-running trend of piling the tax burden on the shoulders of relatively few wealthy taxpayers: On average, households in the lowest income deciles in 2027-28 will benefit most from the Budget, while tax hikes are “concentrated among the highest income households”.

The problems with that, and questions over its sustainability, are by now well recognised. Moreover, unless the Chancellor is willing to make bolder choices, the myriad of tweaks and changes that endlessly complicate the tax system will continue as the government looks high and low for revenue in all the places it is hard to find.

Chelsea FC fans will remember former head coach Claudio Ranieri from early last decade. Criticised for endlessly rotating his squad, the British media dubbed him “The Tinkerman”. If John Healey produces many more Budgets like this, he may deserve the same fate.