UK Budget 2026:What It Means for Business Owners and HNW Individuals

Chancellor James Murray held the headline rates of income tax on earned income, corporation tax, National Insurance and VAT. The money is being raised instead through higher tax on income from assets, a halving of Business Asset Disposal Relief, rebalanced capital allowances and tighter compliance. If you own a company, let property or hold investments outside an ISA, the measures below affect you. Most take effect from April 2027. The list is ordered by who is most affected.

1. Company owners and founders

Selling or passing on a business

• Business Asset Disposal Relief cut in half. The lifetime limit on gains taxed at the reduced 18% rate falls from £1 million to £500,000 for disposals on or after 6 April 2027. On a £1 million qualifying gain, the extra tax is up to £30,000 for a higher- or additional-rate taxpayer with the full lifetime limit unused. If a sale is already in prospect, completing before 6 April 2027 is worth planning for.
• New Founders' Relief at 10%. From 6 April 2027, qualifying founders of high-growth, innovative companies pay 10% CGT on up to £10 million of lifetime gains. The definition of a qualifying founder and company is out for consultation now; our expectation is that it will be drawn more narrowly than BADR.
• How profits leave a company is being rewritten. From April 2028 the rules on company distributions will be reformed so that similar transactions are taxed the same way whatever the legal form, residence or structure. The stated aim is to stop profits being extracted as capital where income treatment would otherwise apply. Capital treatment is to be protected for genuine ownership changes, including family succession, and demerger relief may become more generous. Draft legislation comes in 2027. Anyone planning a liquidation, buy-back or reorganisation should take advice on timing.
• Not proceeding: the proposed new reporting of company payments to participators (loans to directors and shareholders) has been dropped.

Investment and capital spending

• Capital allowances rebalanced. The first-year allowance on qualifying main-rate plant and machinery rises from 40% to 50% for expenditure from 1 January 2027, but the main-rate writing-down allowance drops from 14% to 12% from April 2027. Full expensing for companies continues. New qualifying kit bought from January 2027 gets more relief up front; existing pools get relief more slowly.
• Corporation tax stays at 25% under the Corporate Tax Roadmap. The foreign permanent establishment exemption becomes mandatory for accounting periods from 1 January 2027, so overseas branch losses will no longer reduce UK profits.
• R&D claims get easier: the claim notification form goes from 1 April 2027 and the additional information form is simplified from autumn 2027.

Rewarding staff

• EMI2 (the reformed Company Share Option Plan, which the Budget says will be known as EMI2). Individual option limit doubles from £60,000 to £120,000, the exercise period extends from 10 to 15 years, and the limit no longer interacts with EMI, so a company can use both in full. From 6 April 2027.
• EMI itself: the exercise window after a disqualifying event goes from 90 to 180 days, companies moving to an employee ownership trust keep EMI, and grants are reported on the year-end return instead of separately. Shares set aside for employees can be held for 15 years without triggering disguised remuneration rules.
• Other employer points: National Living Wage rises 3.9% to £13.21 from 1 April 2027; tax-free mileage becomes 55p for the first 10,000 miles and 35p thereafter, permanently; paying an employee's Immigration Skills Charge or Certificate of Sponsorship fee is no longer a benefit in kind from 28 October 2026; legislation to restrict non-compete clauses is planned, with a consultation to follow and a detailed position promised in early 2027.

2. Property and investment income

Tax on rental and savings income rises again. Budget 2025 added two percentage points to the rates on property and savings income from April 2027. This Budget adds another two. From 6 April 2027 the rates are 24% (basic), 44% (higher) and 49% (additional). Property rates apply in England, Wales and Northern Ireland; savings rates apply UK-wide. Earned income and dividends are unchanged. For a landlord whose £30,000 of net rent all falls in the higher-rate band, that is £1,200 a year more than today.

• Incorporation looks different at these rates. With rental income at 44% or 49% against corporation tax at 25%, holding property through a company is worth modelling again, though SDLT and CGT on transfer, mortgage terms and the distribution reforms above all bear on the answer. See our Incorporating a Property Portfolio 2026 guide and Should I Incorporate? tool.
• HMRC is coming for property data. A consultation has been published on collecting property income data from third parties, initially letting agents and tenancy deposit schemes. Separately from the Budget, the UK has committed to join an international agreement to exchange information on real estate ownership, with a stated aim of doing so by 2029 or 2030 subject to domestic procedures. HMRC has also published a new multi-year plan for the compliance of wealthy taxpayers. Undeclared rental income, UK or overseas, is becoming harder to keep undeclared.
• Residential property measures: the High Value Council Tax Surcharge announced last year on homes valued over £2 million is confirmed, with a deferral scheme, discounts and exemptions, and a 100% premium on homes empty for 12 months; ATED charges rise 3.5% for 2027/28; SDLT on rent under assured tenancies is abolished from 1 May 2026.
• ISAs. The cash ISA limit stays at £20,000 (the planned cut is reversed). A new incentive for first-time stocks and shares ISA investors is being designed. A First Time Buyer ISA replaces the Lifetime ISA for new savers from April 2029, and from 29 October 2026 the LISA withdrawal charge on homes above £450,000 drops to 20%.

3. Pensions, trusts and estates

• Pension death benefits: the two-year rule is removed for payments from 28 October 2026, so beneficiaries are no longer taxed solely because a lump sum was paid late. Separately, under last year's changes, most unused pension funds and pension death benefits are expected to be included in the estate for IHT from 6 April 2027, subject to exclusions.
• Trusts: deductions for liabilities against trust property are tightened for IHT from 28 October 2026, and the CGT exit charge when a trust leaves the UK is eased from the same date, aimed at mobile families relocating here.
• US LLCs and other reverse hybrids: a mechanism for double tax relief on income from these entities is coming in Finance Bill 2027-28, following consultation.
• State Pension: the Triple Lock is to be adjusted from the next Parliament so the pension tracks earnings. A Pension Tax Allowance from April 2027 to April 2030 stops pensioners with income up to the full new State Pension paying small amounts of tax.

4. Compliance and administration — dates to diary

HMRC also gets 670 more compliance officers, consultations on the avoidance market and offshore penalties, and wider publication of deliberate defaulters. Stamp duty on shares becomes a Securities Transfer Tax from late 2027.

5. Households

VAT on domestic electricity stays at 0% until 1 July 2027. A £100 Household Energy Payment goes to council tax bands A to D in England from January 2027. The 5p fuel duty cut runs to 1 July 2027. Child Benefit overpayments will be offset against the High Income Child Benefit Charge. The trading allowance rises from £1,000 to £3,000 from April 2027. A new Parental Allowance for fathers, partners and adopters, including the self-employed, starts in April 2029.

What to do before April 2027

• Selling a business or shares: if a disposal is realistic in the next 18 months, completing before 6 April 2027 can save up to £30,000 of CGT per owner on a qualifying gain, depending on each owner's circumstances.
• Buying equipment: where full expensing doesn't apply, qualifying spending from 1 January 2027 attracts 50% first-year relief rather than 40%.
• Taking money out of a company: liquidations, buy-backs and reorganisations planned for 2028 or later will fall under the new distributions rules; review structure and timing once draft legislation appears in 2027.
• Letting property: model 2027/28 at the new rates and revisit whether a company, a spousal transfer or a different mortgage structure improves the position.
• Share schemes: companies that have outgrown EMI, or want to offer more than £60,000 per employee, can plan EMI2 grants for April 2027.

Budget 2026 — frequently asked questions