Budget 2026: What It Means for UK Small Businesses and New Founders

The 28 October 2026 Budget left most headline tax rates alone, but it announced several changes that start in 2027 and 2029. The ones that matter most to small businesses are a higher trading allowance, a new Founders' Relief, a National Living Wage rise, more generous capital allowances and mandatory e-invoicing. Corporation Tax, dividend tax and National Insurance rates are unchanged.

Most of these changes aren't live yet, and some are still being consulted on. Here's what's been announced, and when it would start.

What's Changing for Sole Traders and Side Hustlers?

The trading allowance is going up from £1,000 to £3,000 from 6 April 2027, for the 2027 to 2028 tax year onwards. The Self Assessment reporting threshold for trading income also rises to £3,000.

The allowance applies to individuals with small amounts of trading or miscellaneous income, such as from providing goods or services. Whether it helps you depends on your own circumstances, so check GOV.UK's guidance on the trading allowance or speak to an accountant.

Some other changes affect the self-employed:

• Making Tax Digital. For 2027 to 2028, no late submission penalty points will apply to quarterly updates for people joining Making Tax Digital for Income Tax in April 2027. Quarterly updates are still required before you can submit a tax return. Our guides explain Making Tax Digital for sole traders and the questions people ask most.
• More regular Self Assessment payments. From April 2029, people who make payments on account will need to pay more regularly during the year. The detail is still being worked out and it's subject to consultation.
• Mileage. The business mileage rate above 10,000 miles rises from 25p to 35p per mile from 6 April 2027.
• Class 4 National Insurance. The profit limits (£12,570 and £50,270) and the rates (6% and 2%) are unchanged.

Is Anything Changing for Limited Companies and Directors?

Not much on rates. The Corporation Tax main rate stays at 25% and the small profits rate at 19%. The £50,000 and £250,000 profit limits are also frozen.

Here's what's staying the same:

If you're working out how to pay yourself, our guide on director salary and dividends is still a good starting point, though everyone's position is different.

There's also one new rule for directors. Disqualification of up to five years will apply for certain tax security offences committed on or after 1 April 2027.

What's New for Founders Thinking About Selling Their Company?

Founders' Relief is a new proposed Capital Gains Tax (CGT) rate of 10% on up to £10 million of lifetime gains, from 6 April 2027. At the same time, the lifetime limit for Business Asset Disposal Relief (BADR) halves from £1 million to £500,000 for disposals on or after that date. The BADR rate stays at 18%.

Founders' Relief is aimed at scaled-up companies, so most early-stage founders won't qualify. It's also still being consulted on until 30 November 2026. Our full guide to Founders' Relief covers the conditions in detail.

Capital Gains Tax rates themselves are unchanged at 18% and 24%, and the annual exempt amount stays at £3,000.

What About Employee Share Schemes?

The limit for company share option plans (CSOP) rises to £120,000 from 6 April 2027, and the CSOP exercise period extends to 15 years. For Enterprise Management Incentive (EMI) options, the exercise window after a disqualifying event extends to 180 days. EMI grants will also be reported in the annual return rather than through a separate notification, for options granted on or after 6 April 2027.

These could help startups that offer equity to attract staff. If you're planning a share scheme, take advice before you grant options.

What Does the Budget Mean for Employers?

The National Living Wage rises by 3.9% to £13.21 an hour from April 2027. Younger workers and apprentices get the same percentage rise:

You can check the full list on GOV.UK.

Employer National Insurance (15%) and the £10,500 Employment Allowance don't change. There are two payroll changes to plan for:

• Payrolling benefits. Company cars and vans, fuel and medical benefits can be payrolled from 6 April 2027. Most other benefits follow from 6 April 2028.
• Direct Debit for VAT and PAYE. From April 2029, VAT and PAYE liabilities will need to be paid by Direct Debit, with some exceptions. Legislation will come in a future Finance Bill.

Will the Budget Change How I Claim for Equipment?

Yes. The first-year allowance for main-rate assets rises from 40% to 50% for spending on or after 1 January 2027. The main-rate writing-down allowance falls from 14% to 12%, from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.

Full expensing and the £1 million Annual Investment Allowance are unchanged. The details are on GOV.UK. Whether any of this affects you depends on what you buy and how your business is set up, so check with an accountant.

What's Changing for VAT-Registered Businesses?

E-invoicing becomes mandatory for VAT-registered businesses from 1 April 2029. It applies to businesses, sole traders, partnerships and charities that are VAT registered, unless an exemption applies.

The government says the e-invoicing requirements will be confirmed between October 2027 and April 2028, so there's time. You can follow the milestones in the e-invoicing roadmap. Our guide on what VAT is covers the basics.

The VAT registration threshold stays at £90,000, and the standard rate stays at 20%.

Are There Changes to Business Rates?

Yes, but mainly for specific sectors in England. Pubs, social clubs and most live music venues get an extra 20% relief on top of the existing 15%, taking the total to 35%, in 2027/28 and 2028/29.

Small Business Rates Relief thresholds also rise for qualifying retail, hospitality and leisure properties, from £12,000 to £18,000 and from £15,000 to £21,000 until 31 March 2029. Your local council can confirm how this applies to your property.

Key Dates to Know

What Happens Next?

Most of these changes need legislation first. Finance Bill 2026 to 2027 is expected to set out many of the details, and some measures are still out for consultation. Dates and figures could change as the details are finalised.

For now, the useful thing is to know what's coming and when. Check the Budget 2026 tax overview on GOV.UK for the official detail, and speak to an accountant about how any of it affects your own business.

FAQs

What are the main Budget 2026 changes for small businesses?

The trading allowance rises to £3,000 from April 2027, the National Living Wage rises to £13.21, capital allowances change, and VAT e-invoicing becomes mandatory from April 2029. Corporation Tax, dividend and National Insurance rates stay the same.

Has Corporation Tax changed in Budget 2026?

No. The main rate stays at 25% and the small profits rate at 19%, with the same £50,000 and £250,000 limits.

Is the VAT threshold changing?

No. The VAT registration threshold stays at £90,000. The deregistration threshold stays at £88,000.

What is the new trading allowance?

It's £3,000 from 6 April 2027, up from £1,000. It applies to individuals with small amounts of trading or miscellaneous income.

What is Founders' Relief?

It's a proposed 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders, from 6 April 2027. The rules are still being consulted on, and the relief is aimed at scaled-up companies.

This article is for general information only and does not constitute legal, tax or financial advice. Budget measures are subject to legislation and consultation, so dates, rates and details may change. Please check GOV.UK or speak to a qualified accountant before making decisions.