With nearly 100 tax-related announcements, there was a lot to unpick in Healey’s first Autumn Budget.

The banks held the headlines in the run-up but the changes to capital allowances will swell the Treasury’s coffers more than the increase to the bank surcharge. Savers and investors are also contributing significantly to balancing the UK’s books.

Entrepreneurs were name-checked throughout the Chancellor’s speech. There was good news for some with the new founders’ relief, but it may be harder than hoped to qualify. On top of this, the proposal to limit capital gains tax treatment on certain transactions means that, rather than qualifying for relief, some entrepreneurs may find themselves paying income tax instead.

Entrepreneurial reliefs - business asset disposal relief and founders' relief

Business asset disposal relief (BADR) is cut to a £500k lifetime allowance with effect from 6 April 2027. From that point the relief will produce a maximum £30k tax saving against normal capital gains tax (CGT) rates. This delay gives ongoing sales a brief window to secure at current rates.

A new founders’ relief, offering better terms for some trade business owners, will apply to qualifying disposals from 6 April 2027. Full criteria are subject to consultation, but the bar looks considerably higher than for BADR, so fewer businesses are likely to qualify.

Qualifying requirements include owning 25% of company shares, and turnover of at least £10m, growing by a compound average 25% over the following three periods.

Founders’ relief applies a 10% rate to an individual’s qualifying lifetime gains of up to £10m, reduced by any BADR and investors relief claims made.

Modernising the taxation of distributions and repayments of capital from HMRC

Following a 2026 consultation on how shareholders extract value from companies (taxed as CGT or income depending on method), the changes could affect owner-managed and family businesses undertaking reorganisations, demergers, share buybacks or succession planning, as well as UK individuals receiving payments from overseas companies.

The government has confirmed it will proceed with the reforms, with some changes to the original proposals to protect genuine commercial transactions and family business succession. Further detail will follow in a technical consultation in 2027, with the new rules expected to apply from April 2028.

Anyone planning to reorganise company ownership will need to weight both the timing and detail as some previously popular planning strategies may need to be re-thought.

Inheritance tax and pensions

There were no significant announcements on inheritance tax (IHT)in this year’s Budget, but the point at which most pensions will be brought into the scope of IHT from 6 April 2027 draws closer.

As a minor, but helpful, concession, executors will get to decide how to treat notional pension property for the purposes of calculating the reduced 36% rate of IHT that applies when part of the estate is left to charity, potentially resulting in a lower overall rate of tax being payable by some estates.

Timely payments of income tax

Following consultation, the government will introduce in-year payments for self-assessment taxpayers to replace the current payments on account regime. Automated payments, such as by direct debit, will become the default with an option for those with income from PAYE sources to have more tax collected through PAYE.

The arrangements will extend to the wider self-assessment population liable to make payments on account. The changes are due to take effect from April 2029 and may present challenges to cashflow, particularly where tax reserves are used as working capital for the self-employed. HMRC intends to introduce new digital tools from 2028 to help taxpayers better understand and manage their liabilities.

US LLCs and double taxation: government announces plans for relief

UK-resident individuals with interests in US LLCs and certain other overseas entities could benefit from a proposed new foreign tax credit mechanism to address double taxation caused by differences in how countries tax these entities.

Claims are expected to be available from early 2028, but further consultation will determine the scope of the relief. The proposals do not change current law, so individuals should not assume the future credit will eliminate double taxation when making decisions now.

CGT exit charges - new relief for temporarily UK-resident trusts

Where trustees of an offshore trust move to the UK, the trust can become UK tax resident, potentially resulting in unexpected UK tax consequences.

From 28 October 2026, a new relief may apply where this UK residence is temporary, helping to reduce a potential tax barrier for internationally mobile trustees.

However, wider UK tax and reporting implications may still arise, so trustees should consider the position before relocating.

Other measures

From April 2027, income tax rates on property and savings income will rise to 24%, 44% and 49% in England, Wales and Northern Ireland.

A new allowance will protect lower-income pensioners from tax arising solely from the state pension rising above the personal allowance

The trading allowance will increase from £1k to £3k to support small start-up businesses.

Meanwhile, the proposed reduction in the cash ISA limit has been reversed, with the £20k annual limit retained. A new First Time Buyer ISA will replace the Lifetime ISA from April 2029, alongside plans to explore a new ISA for first-time investors in stocks and shares.

Finally, the government has also announced some easements to Making Tax Digital, including a temporary relaxation of late submission penalties for quarterly updates for those joining from April 2027.

Tweaks now, reform later

For large businesses, Autumn Budget 2026 is likely to be remembered as much for what the Chancellor did not change as for what he did.

Despite fiscal pressures, the government has resisted broad-based tax rises and reaffirmed its commitments under the Corporate Tax Roadmap. Targeted revenue-raising measures were combined with changes intended to support investment, innovation and reduce the administrative burden on businesses. The paradox, however, is the Chancellor also prepared the ground for potentially significant reform.

Investment incentives continue to evolve

Capital allowances remain an important part of the government's investment strategy. Several changes were announced:

• The existing 100% full expensing relief for companies investing in new, qualifying main pool plant and machinery (P&M) will remain.
• In January 2027, the first-year allowance (FYA) for other qualifying P&M will increase from 40% to 50%. This has fewer restrictions than other FYAs and can apply to assets bought for leasing and investment by unincorporated businesses.
• The main rate of writing down allowances (WDAs) will reduce from 14% to 12% in April 2027. This follows the initial reduction from 18% to 14% from April 2026.

Some businesses investing in qualifying P&M may see faster upfront relief. But the government is presenting this as investment support when it is, in substance, a net revenue raiser. Capital allowance pools will earn relief more slowly, and the changes are expected to raise more than £5bn by April 2032. For many businesses, the overall effect is a tax rise, not a tax break.

For qualifying infrastructure projects, the budget included a significant reduction in the threshold for using the recently introduced advanced tax certainty service, from £1bn to £300m. This is intended to give greater certainty on the tax treatment of qualifying investments, improving the accuracy of projected returns on long term projects. This will be particularly welcome in light of the increasing powers and resources available to HMRC to challenge treatments with which they do not agree.

The foreign permanent establishment exemption

Prior to the Budget it was confirmed that the foreign permanent establishment exemption will become mandatory for accounting periods beginning on or after 1 January 2027. The measure is expected to raise almost £500m annually, as branch losses will no longer be able to offset profits subject to UK corporation tax.

Groups with overseas branch structures should consider the impact as part of forecasting and planning for 2027 and beyond.

Cross-border payments

As part of the income tax rate changes, the basic rate of income tax on property and savings is increasing from 20% to 24% from April 2027. A planned increase to 22% had already been announced.

The income tax base rate also sets the income tax withholding rate on applicable cross-border payments of interest. The rate may be reduced where relief is available under a double tax treaty.

Following consultation earlier in 2026 on simplifying cross-border financing arrangements, a limited self-assessment mechanism is still being explored. Consideration is also being given to how more complex financing arrangements should be accommodated. The challenge is to reduce administrative friction while balancing this against the certainty provided by the existing system and the need to ensure relief is claimed only where it is properly due.

Tax administration: simplification meets increased digitisation

Continuing on the commitments made in the Corporate Tax Roadmap in 2024, the government has published a consultation entitled Corporate Tax Simplification for Business Investment. It’s a wide-ranging document, covering everything from hybrid mismatches to the corporate interest restriction and unallowable purpose rules. From innovation reliefs to capital allowances on large scale infrastructure projects. And much more besides. The government promises to work with stakeholders on these proposals over the next year before finalising detailed measures.

Simplification and greater certainty are an attractive prize, but businesses will want to see whether the reforms genuinely remove existing requirements rather than adding digital obligations alongside them. Experience from previous simplification projects also shows that care is needed to ensure that simplification doesn’t create unintended changes to the rules.

Alongside this, the government will invest in more HMRC compliance staff and debt management. New powers were also announced for HMRC to recover lower value tax debts through regular instalments directly from the bank accounts of individuals and companies who can afford to pay but repeatedly fail to do so from July 2029.

The Budget was, thankfully, silent on HMRC’s controversial proposals to extend the regime requiring the notification of uncertain tax treatments – a measure that would have introduced significant additional compliance burden.

Innovation receives more attention

The government is seeking to make research and development (R&D) tax reliefs easier to access, including removing the claim notification form from 1 April 2027 and simplifying the additional information form from autumn 2027. This is in response to feedback from claimants and advisers, amongst whom the claim notification form, only introduced in 2023, has been particularly unpopular.

This sits alongside substantial public investment in innovation. UK Research & Innovation will focus £1bn of investment over four years into priority innovation clusters aligned with the government’s industrial strategy, while the budget also announces specific investment in life sciences, AI and other strategic technologies.

Banks face a targeted increase

The principal exception to the Chancellor's relatively restrained approach to large-business taxation is banking. The bank corporation tax surcharge will temporarily double from 3% to 6% from 1 January 2027 until 31 March 2028, with the government explicitly using the additional contribution to help fund support for households.

Breathing space, but businesses will look to the future

Overall, businesses may be relieved that the Chancellor has avoided another broad increase in business taxation, providing a degree of near-term certainty following several years of significant tax and employment-cost changes. The question is whether the Chancellor has truly put the UK’s finances on a sustainable footing. The success or otherwise of this budget will ultimately be judged with the benefit of hindsight, if future economic shocks can be withstood without businesses being asked to foot the bill.

Perhaps the most intriguing announcement is the consultation on corporate tax simplification. It would be naïve to expect this to translate to tax giveaways, but it could make a real difference to businesses if the compliance burden is meaningfully reduced.

More scope for employee share ownership

Enterprise Management Incentives 2 (EMI2), an expanded and rebranded Company Share Option Plan (CSOP), will support businesses that cannot qualify for EMI. EMI2 gives these businesses more flexibility to incentivise key employee with a stake in the business’ growth.

From 6 April 2027, the individual option limit doubles from £60k to £120k, the maximum exercise period increases to 15 years and the interaction with the EMI option limit is removed.

This follows EMI’s expansion from 6 April 2026: the gross assets limit rose from £30m to £120m, the employee limit from 250 to 500 and the company option limit from £3m to £6m.

National Living Wage and National Minimum Wage

The National Living Wage and National Minimum Wage rates will increase by 3.9% from April 2027, increasing costs for affected employers.

The impact for employers will, of course, be higher as they pay employers’ national insurance contributions (NIC) on top.

Higher mileage allowances and simpler expense claims

For employees using their own cars or vans for business, the approved tax-free rate above 10k miles rises from 25p to 35p from 6 April 2027.

The first 10k-mile rate was increased from 45p to 55p from 6 April 2026 and this change has now become permanent. Employees paid below approved rates may claim mileage allowance relief on the difference through their self-assessment tax return.

Benchmark scale rates are optional flat rates set by HMRC that allow employers to reimburse employees for meals, incidental costs, and travel within the UK without requiring receipts, as long as the employee is on a qualifying business journey. From 6 April 2028, these rates increase to £20 for over five hours, £60 for over 10 hours and £75 for over 24 hours. A new tiered system linked to these rates will replace 200+ destination-specific overseas scale rates.

The £2.5k self-assessment expenses threshold will also be removed from April 2028, allowing more employees to claim evidenced tax relief through PAYE for unreimbursed employment expenses without the need to file a tax return. Currently if an individual is making a claim for unreimbursed employment expenses over £2.5k, they need to file a tax return for the whole amount .

Payment of PAYE and VAT

From April 2029, direct debit instructions will be required for VAT and PAYE return liabilities, (with some exceptions). Other payment methods remain available before the deadline, but unpaid amounts will be collected by direct debit after the due date.

Mandatory payrolling of benefits

Benefits in kind have historically been reported annually at the end of a tax year on form P11D with Class 1A NIC being paid to HMRC. The tax has then been collected from the employee via the PAYE and self-assessment systems. In a move to tax these benefits in real time, mandatory payrolling starts on 6 April 2027 for company cars, vans, fuel and medical benefits, with remaining benefits (excluding accommodation and beneficial loans) following on 6 April 2028. P11Ds will still be required for benefits in kind that are not payrolled.

Benefits in kind: company vehicles and immigration costs

• From April 2027, the 2027/28 van benefit charge will be £4,310, the van fuel benefit charge £825 and the car fuel benefit multiplier £30,200.

• Mileage-based electric vehicle excise duty for electric and plug-in hybrid cars is due from April 2028. Plans include a mileage estimation tool, optional connected-vehicle reporting and automated refunds by 2030.

• For 2030/31, company car benefit percentages rise by one percentage point for other bands, capped at 40%.

• Employer only payments of the immigration skills charge or certificate of sponsorship fee made on or after 28 October 2026 will no longer be taxable benefits. Evidence of the actual payment date will be required.

Miscellaneous

Employment-related image rights tax changes will take effect from 6 April 2028, rather than 6 April 2027. Payments for image rights (common for individuals in professional sports and broadcasting) will be treated as employment income for tax and national insurance.

Statutory payments for cancelled, moved or curtailed shifts are taxable employment income. Legislation will extend coverage to agency workers from April 2027.

Roadmap for e-invoicing

As promised, HMRC has published a roadmap for the journey to mandatory e-invoicing by April 2029. The technical specification will be finalised over the next year, leaving businesses approximately 18 months to ensure that their systems can issue and receive structured electronic VAT invoices.

Judging from experiences elsewhere, this is a relatively ambitious timetable. Businesses should therefore already be taking steps to assess affected entities and transactions, and review systems and providers. There was little new detail in the Chancellor’s announcement, although it is noteworthy that UK e-invoicing will apply to non-established businesses that are registered for UK VAT.

Gaming duty

The gambling sector faces another increase in taxation (following the rises in remote gaming duty and general betting duty in Autumn Budget 2025), with a rise in machine games duty to 25%.

The duty applies to the takings of gaming machines. With limited ability to pass the increased cost on to consumers due to regulation of stake and prize levels, it is the operators who will bear the increased duty. The detail of how this applies, and to which businesses, may obscure a broader concern: the knock-on impact for high streets and employment if betting shops and bingo halls become unviable.

Other measures affecting the sector include a consultation on making machine owners (rather than venues) account for machine games duty on machines subject to profit share agreements. The treatment of remote gaming duty on free spins is also to be clarified.

Online marketplaces

From October 2027, online marketplaces must collect VAT on relevant sales by UK-established businesses that are VAT-registered or exceed £90k annual sales on an individual platform, extending existing overseas-seller rules.

The threshold applies separately to each marketplace. Unregistered businesses turning over less than £90k on each platform may not be affected by this measure, but will still have to consider ordinary VAT registration obligations. Personal sales, second-hand goods and business-to-business goods sales are excluded.

The measure will be welcomed by many high street retailers, who have been competing with online retailers which have failed to account for UK VAT on their sales. However, there will be significant operational challenges for online businesses and marketplaces to address.

HMRC respond to recent court decisions

Historically, HMRC has waited for the final conclusion of court cases before changing rules. A number of announcements in the Budget suggest that this may no longer be the case, and that HMRC has an increasing appetite to address areas of uncertainty through legislation.

• Remote Gaming Duty: following HMRC’s recent defeat in the Upper Tribunal in Jumpman Gaming Ltd, legislation will be introduced to put the treatment of freeplays, prizes and tournaments beyond doubt, from 1 April 2027.

• EV charging: with effect from 1 November 2026, legislation will ensure that electric vehicle charging at public charge points is subject to VAT at 20%, regardless of the eventual outcome of the ongoing Chargemystreet litigation.

New VAT reliefs to be introduced

Two important new VAT reliefs have been announced:

• The early access to medicines scheme (EAMS) provides new medicines that do not yet have a marketing authorisation to people with life-threatening conditions. A new zero rate will be introduced to ensure that donations of such medicines do not give rise to a VAT charge on a deemed supply, which had caused some pharmaceutical companies to leave (or consider leaving) the scheme.

• From April 2027, a new zero rate will apply to land sold to registered providers of social housing. This is intended to enable housing associations to acquire land earlier, reducing reliance on the staged transactions and complex contractual chains typical of ’golden brick’ structures, currently used to avoid unnecessary VAT costs

Other reliefs extended

• In response to the sharp increase in global energy prices this year, the temporary zero rate on domestic electricity is being extended to July 2027.

• The 5p per litre reduction in fuel duty and the reduction in duty on red diesel will also be extended for the same period.

• The temporary VAT rate on energy saving materials will, however, revert to a 5% reduced rate from April 2027, although that relief has been extended to cover heat batteries.

Autumn Budget calms markets but stores up trouble for 2027

Chancellor Healey had two main aims: to support households and businesses through the latest energy shock and to convince financial markets that he is fiscally responsible. He appears to have achieved both. The yield on 10-year gilts fell slightly, indicating that financial markets were unfazed, despite the Government pledging to spend around £4bn to support the economy through the winter. However, he achieved this by postponing most of the major, and more difficult, decisions until next year. That sets up next year’s budget and spending review to be much bigger and tougher affairs than Autumn Budget 2026. Brace yourselves for higher taxes further down the line.

Markets give the Autumn Budget a sigh of relief

Despite the reduction in fiscal headroom from £23.6bn in March to £15bn now, the gilt market’s muted reaction suggests that John Healey’s first Budget has passed the financial markets’ ‘sniff test’.

However, this slim margin leaves the public finances vulnerable to further adverse moves in interest rates or inflation. The OBR estimates that headroom would need to be £50bn to give the government a 70% chance of meeting its fiscal rule.

The Budget’s major policy announcements were aimed at helping households manage the energy crisis this winter. The removal of standing charges from utility bills, the continued fuel duty freeze and the three-month delay to the reversal of VAT cuts on electricity were accompanied by a £100 energy bill rebate for households in lower-valued council tax bands. These measures will cost around £4bn and are expected to lower inflation by approximately 0.1 percentage points next year. They will be funded through a temporary increase in the bank surcharge rate to 6% for 15 months, higher gambling taxes and several smaller tax rises.

The OBR is underestimating the UK’s growth prospects

We believe the OBR has taken an unnecessarily gloomy view of the economy’s growth prospects. Its forecast for this year was raised only slightly to 1.2%, while its projection for GDP growth in 2027/28 was cut by 0.5 percentage points to 1.1% because of higher inflation and interest rates. The recent evidence points to a stronger outcome. The economy grew by 1.3% in the first eight months of the year, and business surveys suggest that momentum remained healthy in the third quarter. A significant deterioration in the final quarter would therefore be needed for growth to fall back to the OBR’s forecast. While higher inflation and interest rates will slow the economy next year, our expectation is that growth will remain comfortably above 1%.

Interest rate hikes still on track

Given the relatively minor changes to tax and spending policy, the Budget will make little difference to the MPC’s decision next week. Indeed, with growth stronger than expected, the labour market improving and inflation likely to rise above 4.5%, a rate rise next week looks almost guaranteed.

The Bank is likely to follow this with at least one further rate rise next year, probably in February. The announcements in this Budget will trim inflation slightly, but not by enough to change that outlook.

The much bigger issue for the MPC is what happens to energy prices over the winter. A further rise in natural gas prices would probably cement the case for a third increase, while a fall would point to a prolonged pause after February.

UK public finances remain on an unstable footing

Looking at the public finances in detail, we think the Autumn Budget is far less credible than the headlines suggest.

First, the largest tax-raising measure is the effort to close the tax gap. This is notoriously difficult to achieve in practice and creates a significant risk that receipts will undershoot in future. Moreover, the focus on a smorgasbord of smaller taxes (the Budget contained 98 individual measures, the most since 2010) is likely to create distortions, and some measures also have highly uncertain behavioural effects and revenue yields.

Second, there was little in the Budget to put the public finances on a more sustainable long-term footing. There are now even more ‘fiscal fictions’, such as the plan to raise fuel duty. Moreover, the current plans envisage real-terms spending cuts that this government will find almost impossible to deliver.

Add to this the pressure to increase defence spending, and the conclusion is inevitable: either taxes will have to rise further over the next few years—which will be difficult under the current manifesto commitments—or the government will have to bear down harder on welfare spending. This conundrum increases the chances of an early general election.

Disappointingly, despite the government’s rhetoric, the Budget contained no new measures aimed at boosting the UK’s long-term growth rate. Although an additional £20bn was allocated to public financial institutions, there was no indication of how this would lift growth.

Our conclusion? A steady Budget, but fragile foundations

Overall, this Budget cleared the relatively low bar of not upsetting bond markets, while offering households and businesses some support with energy bills. However, the slim margin of fiscal headroom leaves the UK vulnerable to any further deterioration in market conditions or the geopolitical backdrop.

Moreover, there seems little chance that the government will deliver its planned fiscal consolidation in full. That leaves the risks to borrowing, and to further tax rises, firmly tilted to the upside.

Autumn Budget 2026 was yet another budget of targeted tweaks and reliefs, adding more, not less complexity to the UK’s already challenging tax landscape. Some measures offer genuine opportunities, but tighter eligibility rules and staggered start dates make this Budget far from straightforward.