Chancellor John Healey delivered his first Budget against a backdrop of continued global economic uncertainty, promising some immediate “breathing space” alongside longer-term measures intended to support growth.
We summarise the key tax announcements for individuals and businesses.
Individuals
Income tax and National Insurance
- Tax rates on savings income will increase to 24%, 44% and 49% from 6 April 2027 across the UK.
- Tax rates on property income will increase to 24%, 44% and 49% from 6 April 2027 in England, Wales and Northern Ireland.
- A new pension tax allowance will ensure that pensioners whose total income does not exceed the full new State Pension from 6 April 2027 to 5 April 2030 will not have the administrative burden of paying small amounts of income tax. The allowance will be withdrawn at a rate of £1 for every £3 of income above the full new State Pension.
- The temporary increase in the tax-free approved mileage allowance for cars and vans of 55p for the first 10,000 business miles from 6 April 2026 will be made permanent, and the rate for mileage above 10,000 will increase from 25p to 35p per mile from 6 April 2027.
- The income tax trading allowance will increase from £1,000 to £3,000 from 6 April 2027.
- The changes announced at Budget 2025 treating image rights payments related to employment as taxable employment income will be delayed by one year to 6 April 2028.
- From April 2029, taxpayers within self-assessment who make payments on account will be required to make more regular in-year payments towards their final tax bill. Eligible taxpayers will be able to choose to pay through PAYE.
Capital gains tax (CGT)
- A new Founders’ Relief will apply a 10% capital gains tax rate to up to £10 million of lifetime gains for qualifying founders and significant early investors in high-growth innovative companies from 6 April 2027.
- The lifetime limit for Business Asset Disposal Relief (BADR) will reduce from £1 million to £500,000 for qualifying disposals from 6 April 2027.
- The capital gains rules attributing gains of non-resident close companies to UK residents will be amended to ensure they apply to protected cell companies, with effect from 28 October 2026.
Other changes
- The cash individual savings account (ISA) allowance will remain at £20,000 from 6 April 2027, reversing the previously announced reduction for people aged under 65.
- The two-year rule for pension death benefits will be removed, so tax-free benefits will no longer become taxable simply because they are paid more than two years after a member’s death. The change applies from 28 October 2026.
- A new First Time Buyer ISA will replace the Lifetime ISA for new savers from April 2029, allowing annual contributions of up to £4,000 and a 25% government bonus for qualifying first-home purchases.
- Eligible stablecoins will be treated more like money for tax purposes for individuals, trustees and companies and for the application of withholding tax from April 2027.
- The temporary reduction of VAT on domestic electricity from 5% to 0% from 1 October 2026 due to apply until 31 March 2027 will be extended to 30 June 2027.
- Double tax relief will be introduced for UK investors in US limited liability companies and similar entities from early 2028.
- The taxation of company distributions will be modernised from April 2028. While the government says it intends to protect genuine commercial transactions, the changes could restrict the use of capital reduction demergers and bring distributions and loans from non-UK companies within a broader income tax regime.
Businesses
- The capital allowance main rate first-year allowance will increase from 40% to 50% from 1 January 2027.
- The main rate capital allowance writing-down allowance for plant and machinery will reduce from 14% to 12% from 1 April 2027 for corporation tax and 6 April 2027 for income tax.
- The Company Share Option Plan (CSOP) will be renamed Enterprise Management Incentives 2 (EMI2), with the individual option limit doubled to £120,000 and the exercise period extended to 15 years from 6 April 2027.
- The requirement to submit a research and development (R&D) tax relief Claim Notification Form will be removed from 1 April 2027 and the information required in the Additional Information Form will be simplified from autumn 2027.
- Company car tax rates will increase by one percentage point in 2030-31, with the maximum rate for non-zero emission vehicles increasing to 40%.
- Online marketplaces will become liable for VAT on sales by UK businesses with annual sales of at least £90,000 on that platform from 1 October 2027.
- A zero rate of VAT will apply to land sold to registered social housing providers from 1 April 2027.
