Autumn Budget 2026: A little breathing space – but don't get too comfortable!
A new Chancellor, a new Budget and, apparently, some much-needed "breathing space". After the tax increases of recent years, Chancellor John Healey has opted for a somewhat gentler approach. But before we all get too excited, there's still plenty lurking in the small print.
The good news is that there are some welcome concessions for households and small businesses. The less good news is that tax thresholds remain frozen, some tax rates are heading upwards, and the tax system has become even more complicated. We weren't entirely sure that was possible.
As ever, the Chancellor's speech was only part of the story. Some of the more interesting announcements emerged afterwards, once everyone had started wading through the accompanying documents.
We've produced our comprehensive Budget 2026 Summary [download here], but for those who would prefer not to spend their time reading about tax legislation, here are some of the highlights.
The headlines
Income tax: Personal allowances and tax thresholds remain frozen until April 2031.
Landlords and savers: From April 2027, tax rates on rental income and savings income will rise by FOUR percentage points, to 24%, 44% and 49%. That's twice the increase announced in last year's Budget.
ISAs: Some welcome news! The proposed restriction on cash ISAs has been abandoned. The full £20,000 annual allowance remains available.
Business owners: Business Asset Disposal Relief will be restricted to a lifetime limit of £500,000 from April 2027, down from £1 million. However, a new Founders' Relief could offer a 10% CGT rate on qualifying gains of up to £10 million.
Small businesses: The trading allowance will increase from £1,000 to £3,000 from April 2027, while qualifying high street businesses will benefit from increased business rates relief.
Capital allowances: The new 40% first-year allowance will increase to 50% from January 2027, although the main writing-down allowance will fall from 14% to 12% from April 2027.
Pensioners: A new allowance will prevent those whose only income is their State Pension from facing an income tax bill when the State Pension exceeds the personal allowance.
Energy bills: Households in Council Tax bands A to D in England will receive a one-off £100 energy payment in January 2027.
So, what do we make of it all?
The tax rises that don't look like tax rises
Freezing income tax thresholds has become something of a Treasury favourite. Rather than announce an unpopular increase in tax rates, simply leave the thresholds unchanged and allow inflation and wage increases to do the work.
It's known as fiscal drag, although those finding themselves dragged into the higher-rate tax band might have a less polite description.
Landlords and savers take another hit
Last year's Budget announced a two-percentage-point increase in tax on property and savings income. This year's Chancellor has decided to double it. For a higher-rate taxpayer, that means a 44% tax rate on rental profits or taxable savings income from April 2027.
It's difficult to see this as particularly encouraging for private landlords, many of whom have already faced substantial tax and regulatory changes in recent years.
Good news for founders. Possibly.
The reduction in Business Asset Disposal Relief from £1 million to £500,000 is disappointing for business owners contemplating a future sale.
On the other hand, the proposed new Founders' Relief could be extremely valuable, offering a 10% capital gains tax rate on up to £10 million of qualifying gains.
There's a catch, of course. The relief is intended for founders and early investors in high-growth, innovative companies, and the detailed qualifying conditions have yet to be confirmed. So it's potentially excellent news for some entrepreneurs, but we wouldn't recommend planning your retirement around it just yet.
Small businesses get a little help
The increase in the trading allowance to £3,000 is welcome, particularly for those earning modest amounts from a side business.
There is also additional business rates relief for qualifying retail, hospitality and leisure businesses, including an increase in the threshold for 100% Small Business Rate Relief from £12,000 to £18,000.
And, inevitably, more complexity
One thing this Budget certainly hasn't delivered is a simpler tax system.
From April 2027, we will have different income tax rates for employment income, property income, savings income and dividends, alongside a collection of allowances, thresholds and reliefs that interact in increasingly complicated ways.
Add in the continuing rollout of Making Tax Digital, changes to capital allowances and forthcoming reforms to the taxation of company transactions, and there will be plenty to keep accountants occupied.
Not that we were particularly short of things to do.
Our verdict
This wasn't a Budget of dramatic surprises or sweeping reforms. Instead, it offered a few welcome concessions, some rather less welcome tax increases, and a great deal of tinkering around the edges.
For individuals and businesses, the important point is that some of the most significant changes don't take effect immediately. That creates opportunities to review arrangements and, where appropriate, plan ahead.
And, as always, if you'd like to discuss how any of the changes might affect you or your business, please get in touch.
After all, understanding the tax rules is our job. Making sense of why they need to be quite so complicated is another matter entirely.