Autumn Budget 2026: The good, the bad and the uncertain - what it means for entrepreneurs and business owners

Income tax rates applying to savings and property income will increase from April 2027, while most income tax thresholds and national insurance limits remain frozen.

The government has confirmed that income tax rates on savings and property income will increase by four percentage points from 6 April 2027, double the increase originally announced at Budget 2025.

The measure leaves tax rates on other sources of income unchanged, while most income tax thresholds and national insurance limits will remain frozen until 2030/31, as previously announced.

Summary

The government previously announced that separate rates of income tax will apply to savings income and property income from 6 April 2027, while income from employment, self-employment and pensions would continue to be taxed at existing rates.

That measure has been amended, so that income tax rates for savings income and property income will now increase to 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers.

The new savings income tax rates will apply across the UK. The new property income tax rates will apply in England, Wales and Northern Ireland.

Other income tax rates and allowances

Income tax rates applying to employment income, pensions and trading profits (20%, 40% or 45%) and dividend income (10.75%, 35.75% or 39.35%) remain unchanged.

The existing dividend allowance and personal savings allowance will also remain in place. These currently shelter the first £500 of dividend income and up to £1,000 of savings income for basic rate taxpayers (£500 for higher rate taxpayers).

National insurance contributions

Most national insurance contributions limits, thresholds and rates have been frozen, except for the Class 1 lower earnings limit (increased to £6,916) and Class 2 small profits threshold (increased to £7,355). There is also an increase to the weekly rates of Class 2 (£3.80) and Class 3 (£19.05) national insurance contributions.

Our comment

The increase to the tax rate on savings and property income was first announced at the 2025 Autumn Budget. The Chancellor has now opted for a larger increase, doubling the previously proposed rise from 2% to 4%.

These measures seek to increase tax revenues while maintaining the government’s commitment not to increase the headline income tax rates for “working people”. Instead, the measures fall on savers and landlords.

We assume the changes will see the deduction available to landlords of residential properties increase from 20% to 24%, and that trustees will also be subject to the increased rates on their savings or property income. We expect to see an accompanying change to the allocation of allowances and reliefs such that these deductions must first be taken against income subject to 20%, 40% and 45% tax rates before property or savings income.

Savers should ensure they are taking full advantage of available tax-advantaged investments, particularly ISAs, within which interest and dividend returns are not subject to tax.

The government has announced that the trading allowance will treble to £3,000 from 6 April 2027.

Summary

The trading allowance is a flat rate deduction against trading and some miscellaneous income, and is an alternative to claiming actual expenses. The allowance was introduced on 6 April 2017 and has been £1,000 per tax year since that date.

Budget 2026 announced an increase to the allowance to £3,000 per tax year from 6 April 2027, alongside an increase to the self-assessment reporting threshold to £3,000.

Our comment

The increase to the allowance will be a welcome change for individuals taking their first steps in starting a business, and those with small amounts of income from hobbies or side businesses.

For some individuals, this will mean no longer having to file self-assessment tax returns. The reduced administrative burden may be the most valuable implication of the change for some, especially those who incur professional fees in dealing with their tax affairs.

Under the proposed changes, individuals with trading and miscellaneous income above £3,000 will still be required to file a tax return, even where no tax liability is due because of other allowances, for example, the personal allowance.

The government has published a consultation to finalise the details of a new founders’ relief. It will provide a 10% CGT rate on up to £10 million of lifetime gains from 6 April 2027.

The relief is intended to reward founders of innovative UK businesses, but the qualifying conditions as drafted are significantly more restrictive than those applying to business asset disposal relief (BADR) and may limit its practical availability.

Summary

The relief is intended to encourage entrepreneurs to establish, grow and retain innovative businesses in the UK by providing a reduced 10% CGT rate on qualifying share disposals. It will be available for disposals made on or after 6 April 2027 and will be subject to a £10 million lifetime limit per individual. The limit will be reduced by amounts claimed under BADR and investors' relief from that date.

To qualify, an individual must have:

• Held at least 25% of the company's ordinary share capital when the trade commenced

• Owned shares or securities in the company for at least five years before disposal, and

• Been UK tax resident for at least five continuous tax years prior to the disposal

Importantly, the relief will apply to all shares disposed of by a qualifying individual and is not restricted to shares acquired when the company was founded.

The company must:

• Be within the scope of UK corporation tax and maintain a substantial UK presence

• Carry on a qualifying trading activity, and

• Have achieved a minimum level of scale, including turnover of at least £10 million and at least 15 qualifying full-time employees before disposal

The company must also meet at least two of three additional tests designed to demonstrate sustained growth and innovation. These focus on turnover growth, employee growth and qualifying R&D expenditure.

Claims will be made through the self-assessment tax return for the year of disposal, and supporting information will be needed to demonstrate the qualifying conditions have been met.

The consultation closes on 30 November 2026 to allow sufficient time for legislation to be finalised before the relief takes effect from 6 April 2027.

Our comment

The government's objective is clear. While the UK has a strong record of creating innovative start-ups, it has historically struggled to scale those businesses into large, internationally competitive companies. By linking this tax relief to growth, employment and innovation, the government seeks to incentivise entrepreneurs whose businesses deliver broader economic benefits to the UK.

It is disappointing, therefore, that the consultation proposes what would become one of the most heavily conditioned tax reliefs in the UK tax system. Qualification depends not only on the founder’s shareholding and residency position, but also on a range of company-level metrics that may span a ten-year period. In practice, founders are likely to require detailed professional advice both before and after a transaction to determine whether the conditions are satisfied.

Some aspects of the design appear particularly restrictive. The requirement that the company continues the same trade for which it was originally established may prevent relief being available where a business has successfully evolved or pivoted in response to market opportunities. While the provision is clearly aimed at preventing abuse, it may not reflect the commercial reality that many highly successful businesses develop significantly from their original business model.

The proposed innovation test may also create uncertainty. Eligibility can depend on whether historic R&D expenditure qualified for relief, an area that has become increasingly subject to HMRC scrutiny. The consultation acknowledges that a subsequent challenge to an R&D claim could lead to founders’ relief being withdrawn, potentially leaving individuals with additional tax liabilities and interest.

There are also practical concerns around compliance. Founders may need access to information that is held by the company, sometimes many years after the relevant period. The consultation therefore proposes granting individuals a statutory right to request information from companies. While this may assist claimants, it will create additional administrative obligations for growing businesses.

In its current form, the breadth and complexity of the proposed conditions impose an added burden on businesses, and the resulting uncertainty may limit the behavioural impact that the relief is intended to achieve.

Founders’ relief achieving its policy objectives will rely on striking the right balance between targeting support and maintaining simplicity. It has the potential to become a valuable addition to the UK's entrepreneurial tax landscape, but not as drafted.

The government has announced that the lifetime limit for capital gains qualifying for business asset disposal relief (BADR) will be halved to £500,000 for disposals made on or after 6 April 2027. The existing CGT rate for qualifying gains will remain unchanged at 18%.

This further erodes the relief, which has seen several restrictions over recent years.

Summary

BADR is intended to incentivise enterprise by providing a reduced CGT rate on qualifying disposals of trading businesses.

In the Autumn Budget 2026, the government announced that from 6 April 2027 the lifetime limit of capital gains on which an individual can qualify for BADR will be reduced from £1 million to £500,000.

Our comment

The decision to halve the lifetime limit was, perhaps, unsurprising given the modifications to BADR in recent years.

The announcement follows several previous restrictions to the relief, which, at its most generous, provided for a 10% CGT rate on capital gains up to £10 million in an individual’s lifetime.

Formerly entrepreneurs’ relief, the following changes have been made since 2020:

• 11 March 2020 – lifetime limit reduced from £10 million to £1 million

• 6 April 2025 – applicable CGT rate increased from 10% to 14%

• 6 April 2026 – applicable CGT rate increased from 14% to 18%

• 6 April 2027 – lifetime limit reduced from £1 million to £500,000

A claimant of the relief could have previously saved £1.8 million in CGT. That is now limited to £30,000.

The government’s data indicates that three-quarters of taxpayers claiming BADR will not be affected by the latest changes. Nevertheless, the announcement will be disappointing to entrepreneurs. The cumulative changes to BADR may motivate taxpayers to leave the UK, potentially allowing them to fall outside the scope of UK CGT entirely.

The introduction of founders’ relief may mitigate the impact of these changes to a limited extent. However, the conditions attaching to the relief in its current proposed form mean that it will be available to a far smaller audience.

For disposals made on or after 6 April 2027, the calculation restricting the capital gains tax relief for certain gifts of company shares will include a wider range of assets.

The change may increase or decrease the relief available, depending on whether those assets are used for trading or non-trading purposes, but should align the relief more closely with the underlying economic composition of the company or group.

Summary

Gift holdover relief is a capital gains tax relief for gifts of business assets, including certain qualifying shares. It can defer the capital gains tax that would otherwise arise when an individual gives away the assets. The relief can be restricted where the gift is of shares, and the relevant company or group holds assets that are not used for trading purposes.

The restriction is calculated as a proportion of the company’s non-trading chargeable assets, multiplied by the capital gain. Many assets are left out of the calculation. For disposals on or after 6 April 2027, the calculation will be expanded to include certain underlying shareholdings, as well as assets within the intangible fixed assets regime, such as goodwill and intellectual property.

By bringing a broader range of assets into the calculation, the change should align the relief more closely with the underlying economic composition of the company or group. However, it will not necessarily increase the relief available. The outcome will depend on whether the additional assets are used for trading or non-trading purposes.

Our comment

This is a sensible change that should align the calculation more closely with the underlying economic composition of the company or group. The calculation will account for a broader range of assets, rather than excluding them solely because of their tax treatment.

The measure may be particularly significant for succession planning for family businesses. The restriction to business relief, announced in the Autumn Budget 2024, made lifetime gifts of business assets to younger generations far more important. Following this announcement, there may be additional relevant factors to consider when deciding the timing of those lifetime gifts.

Individuals considering a gift in the near future may wish to compare the outcome under the existing and post-5 April 2027 rules before deciding when to make the gift where the shares are in:

• Companies holding valuable goodwill or intellectual property

• Companies holding non-subsidiary share interests

• Companies with a mixture of trading and investment activities