Chancellor John Healey delivered his first Budget on 28 October 2026. When I was asked at the weekend what I expected, my answer was: not much. The government had already ruled out raising the big taxes, VAT, income tax and National Insurance, and last week it said the main rates of capital gains tax would not change either. That left the Chancellor very little room to manoeuvre.
That is broadly how it played out. For most small business owners it is a mixed picture with help on business rates and fuel, potentially higher wage bills, and no reduction on already high employment taxes.
As always, I have focused on news that impacts small and medium size business owners. I have tried to keep to our plain-English view on each. Full details are often published after the speech, so we will update clients as the fine print lands.
Business rates
The government had already announced a 20% cut in business rates for pubs, clubs and music venues from April 2027. It will now also raise the small business rate relief threshold for retail, hospitality and leisure businesses from a rateable value of £12,000 to £18,000. The Chancellor said this takes 70,000 more businesses out of paying business rates altogether. Other businesses in those sectors will have their rates frozen in real terms, so none face an above-inflation rise for the next two years.
YFT View: Good news, if you are in retail, hospitality or leisure.
This is great news if you run a shop, café, restaurant, pub or gym from premises with a rateable value of up to £18,000 as you may now pay no business rates at all. An awful lot of these type of businesses fall in to this category which could mean a saving of several thousand pounds a year. Larger premises in these sectors get some certainty that bills will not rise faster than inflation for two years, which helps with budgeting.
Unfortunately, everybody else that has an office-based businesses are not mentioned, so for them nothing changes
Fuel duty
The fuel duty freeze continues, and the 5p per litre discount stays in place until July 2027. It was introduced in 2022 as a 12-month measure but has been extended ever since. In May, the government had already pushed a planned 3p rise back from September to the end of this year.
YFT View: Good, but only a short-term reprieve.
If your business runs vans, delivers goods or covers a lot of miles, this keeps a lid on one of your bigger running costs. Keeping the 5p cut means fuel costs do not jump overnight, which is welcome when other costs are rising.
Bear in mind this is a delay, not a permanent cut. When the discount ends, fuel costs are likely to rise. If fuel is a major cost for you, it is worth building that possible increase into your forecasts from mid-2027.
Business asset disposal relief (this is the old entrepreneurs relief)
The lifetime limit for business asset disposal relief (BADR) in capital gains tax will be halved from £1m to £500,000. Separately, tax rates on income from property and savings will rise by a further two percentage points from April 2027. There is no change to tax on dividend income or employment income.
YFT View: Bad news if you plan to sell your business one day.
BADR lets you pay a lower rate of capital gains tax (currently 18% vs 24% for normal higher rate capital gains) when you sell or close your business. Halving the limit means only the first £500,000 of your lifetime gains now gets that lower rate. Gains above that are taxed at the normal rate, which is 24% for higher-rate taxpayers.
As an illustration, a higher-rate taxpayer selling with a £1m gain would pay around £30,000 more tax than before. If you are planning an exit, talk to us early: the timing of a sale now matters more.
We do not yet know the start date for the BADR change. We will confirm when the details are published.
National living and minimum wages
The national living wage, for workers aged 21 and over, will rise by 3.9% from £12.71 to £13.21 an hour. The national minimum wage for 18 to 20-year-olds will also rise by 3.9%, from £10.85 to £11.27 an hour. That is a slower rise for this younger group than in recent years. Note: Employers pay a 0% rate of Class 1 secondary National Insurance contributions (NICs) for employees who are under the age of 21
YFT View: Good for staff, but a higher cost for employers.
If you employ people on or near the minimum wage, your wage bill will go up. For a full-time employee on the living wage (37.5 hours a week), the 50p an hour rise adds roughly £975 a year in pay, before employer National Insurance and pension contributions.
The rise can also push up pay for staff earning just above the minimum, as people expect to keep their pay gap. The slower increase for 18 to 20-year-olds is mildly helpful if you employ younger staff.
Banks
Banks will pay an extra 3% on the bank surcharge, taking it to 6% on top of corporation tax. The increase is time-limited: it starts in January and ends 15 months later, and pays for immediate support on energy bills. The Chancellor praised banks for their contribution to tax, jobs and investment.
YFT View: Mostly neutral for small businesses, with a small risk.
This tax is paid by banks so it does not directly change your tax bill.
The risk is that banks pass some of the cost on through fees, loan pricing or savings rates. We cannot say yet whether that will happen. If you are about to borrow or refinance, it is worth comparing offers carefully over the next year.
Founders’ relief
A new capital gains tax relief, founders’ relief, will charge a 10% rate on lifetime gains of up to £10m. The Chancellor said it is aimed at the founders of “our most successful firms”, to make Britain the place where the companies of the future are built.
YFT View: This is new and could be very good, but we need the detail.
On paper, this is far more generous than BADR: a lower rate (10% rather than 18%) on a much larger amount (£10m rather than £500,000). For a founder who builds and sells a high-value business, the saving could be substantial.
The big unknown is who will qualify. The wording suggests it is aimed at high-growth businesses rather than every owner-managed company. Until the eligibility rules are published, most small business owners should plan on the basis of BADR, not founders’ relief.
Trading Allowance
The Budget also tripled the trading allowance for sole traders from £1,000 to £3,000, which helps people running a small side venture or side hustle.
Main Tax Rates
No change to income tax rates, corporation tax rates or dividend tax rates.
YFT View – given this impacts how much small business owners can take out of their companies it was good to see no rises here but equally there was no relief either!
Property and Interest Income
There will be an additional tax on income from property and savings interest which increases by 2 percentage points from April 2027, a measure that will impact landlords and savers holding cash outside of Isas and pensions. (Note: this is in addition to the 2% proposed increase already announced).
This further increase means the rates will now rise to 24, 44 and 49 per cent, respectively for basic rate, higher rate and additional rate tax payers.
Appendix 1: Reminder of Tax bands
Income Tax Rates for 2025/26
The annual tax-free allowance has been frozen at £12,570.
Basic rate of 20% applies between £12,570 and £50,270
The higher rate threshold is £50,270 and the higher rate of tax is 40%.
The income limit to retain your personal allowance is £100,000. For every £2 that you earn above £100,000, the Personal Allowance reduces by £1. This means that if you earn £125,140 or more, your personal tax allowance is zero.
Additional rate tax is £45% and applies to income over £125,140 (This has reduced from £150,000 in 2022/23).
If you have any concerns or questions about the budget please feel free to get in touch.