Chancellor Healey had two main aims today: provide some support to households and businesses through the latest energy shock and to convince financial markets that he is fiscally responsible. It seems he managed to achieve both aims.

The yield on 10-year gilts dropped slightly, indicating financial markets were unfazed, despite the government pledging to spend around £4bn supporting the economy through the winter. However, he did 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 a much larger, and tougher affair than today's event. Brace yourselves for higher taxes coming down the line.

The saving grace for the Chancellor turned out to be a more benign economic forecast from the OBR than expected. He also allowed the headroom against the fiscal rule to drop from £23.6bn to £15bn, rather than raising taxes to keep headroom steady. The good news is that a slew of policies designed to ease energy costs should help to blunt what looks like a significant rise in utility bills coming over the winter. However, the limited scale means these will probably knock just 0.1 percentage points off inflation next year. Households and businesses will still have to brace for a significant increase in energy costs in the winter.

Overall, the Chancellor largely kept to the script today, sticking to the 'do-no-harm' mantra that had been circulated in the last few weeks. However, that means it will do little to support the economy over the next year and means the truly difficult fiscal choices, and their consequences for households and businesses, have merely been pushed into next year.

Autumn Budget 2026: everyday fixes but limited breathing space for business

Chancellor John Healey played his cards close to his chest and delivered a Budget with a few more surprises than the run up had suggested.

Banks and gambling companies will bear the costs, along with savers and property investors, who will see their income tax rising even further than expected from next April with another 2% added to the increase announced by Healey’s predecessor last autumn, taking the basic rate from 20% to 24%. This will also increase the income tax withholding to 24% on cross-border payments to 24% where the payment cannot benefit from relief under a double taxation treaty.

The central message is 'breathing space now, structural reform later', with expectations of more substantive reform coming next year, along with the spending review.

That key message may temper the desired impact on growth and innovation that the Chancellor is targeting.

The Chancellor was keen to show the government’s support for entrepreneurs, with support for early stage start-ups.

Business asset disposal relief has been cut in half and will only apply to £500k of gains going forwards. In reality, this reduces the value of the relief from £60k to £30k and will have limited impact for many owners looking to exit.

More interesting to many entrepreneurs will be the introduction of a new founders’ relief. This will apply a 10% tax rate to £10m of lifetime gains. Sounding remarkably like entrepreneurs’ relief of old, first appearances suggest that the benefit will be restricted to the original entrepreneurs who start a business. The real significance will lie in the detail behind these announcements.

Introducing ‘EMI 2’, a new version of the enterprise management incentive scheme, ostensibly doubling the option limit available may support incentivising the management needed to scale those businesses.

The Chancellor has confirmed changes to the taxation of company distributions, following a wide-ranging consultation that raised concerns for family business succession. Although the Chancellor has sought to reassure family businesses that genuine succession will be protected, much will depend on the detail of the new rules.

The most eye-catching tax increase is reserved for the banking sector, through an increase in the surcharge on banking profits, albeit a temporary one and a smaller increase than expected. This effectively raises the headline rate of corporation tax on affected bank profits from 28% to 31%, but only for a 15-month period from January 2027.

Bank profitability has remained strong and taxing excess profits in a particular sector avoids increasing taxes directly on household earnings or mainstream business profits. However, a temporary rate increase introduces further complexity into the system.

Banks supply much of the capital on which businesses, house buyers and investors rely. Increasing their effective tax rate may raise revenue, but some of the cost may ultimately emerge elsewhere, through the availability or cost of finance.

Reversing the planned cut to the cash-ISA limit announced by Rachel Reeves in 2025, however, will be welcomed by savers and banks alike.

National minimum wage will increase by nearly 4% from April 2027. A boost to those on low incomes struggling with the cost of living, but expensive for businesses who will also have to bear the employers’ national insurance contributions (NIC) costs on top.

The rate for 18–20-year-old workers will also rise by the same percentage. This slows down the progress in converging the two adult rates (a 2024 manifesto commitment), in a nod to concerns about youth unemployment. Further measures to address this issue are expected to be addressed further down the road, following publication of the Milburn report.

Higher employment costs affect all businesses, but the consequences are not necessarily evenly felt. Retail, hospitality and other labour-intensive sectors provide many of the jobs through which younger people first enter the workforce. Those businesses have been particularly vocal about the effect of employment taxes on recruitment.

The continuing freeze in personal tax allowances and thresholds was expected. Its effect, however, becomes more pronounced with every year of wage and price inflation.

As earnings rise while thresholds do not, more income is brought into tax and more taxpayers move into higher bands. There may be no increase in the headline rate of income tax, but that does not mean the income tax burden is standing still.

The Chancellor has, however, addressed one increasingly obvious consequence of that policy.

A new enhanced personal allowance for low-income pensioners will prevent increases under the triple lock from bringing these people into income tax. It is a targeted solution rather than an unfreezing of allowances generally and introduces yet more complexity.

There is a clear piece of tax policy behind the Chancellor's announcements on business rates and online trading.

Business rates have long created an uneven burden between businesses dependent on physical premises and competitors operating primarily online. Healey has reduced that burden for smaller high-street retailers, hospitality and leisure businesses.

Part of the cost will effectively be recovered elsewhere in the retail economy.

Online marketplaces will take greater responsibility for collecting VAT due from sellers using their platforms. That should both protect tax revenues and make it harder for businesses avoiding their UK tax obligations to undercut compliant traders.

There are complications, however. How platforms will identify businesses below the VAT threshold, particularly where such businesses trade through multiple platforms, will be a challenge.

The gambling sector also 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 details of how this is to be applied and which businesses will be impacted may hide a broader concern; what the knock-on impact of this will be for high streets and employment if betting shops and bingo halls become unviable.

The Chancellor announced several changes to capital allowances:

• An increase in the first-year allowance for qualifying plant and machinery, from 40% to 50%.
• A reduction in the main rate of writing down allowances from 14% to 12%.

Businesses investing in qualifying plants and machinery may benefit from faster upfront tax relief. However, the government expects the decrease in the main rate writing down allowances to be a big revenue raiser, at the cost of the investing businesses.

The least eye-catching announcements may ultimately prove among the most important.

For years, budgets have concentrated on closing the tax gap ( the difference between tax paid and how much businesses and individuals should pay). Increasingly, government has concentrated on what information is shared with HMRC and when HMRC can see that information. Helping HMRC to identify whether the right amount of tax has been paid.

Additional information increases the cost of administration for businesses and the practical risk of errors. Tax governance, data quality and the connection between finance systems and tax returns therefore matter more, even where the underlying tax rules haven't changed.

A Budget of choices

Healey has chosen to continue raising revenue through frozen thresholds. He has asked banks and gambling businesses to contribute more. He has shifted some of the burden from the high street towards the digital economy and continued building an increasingly data-rich compliance system.

At the same time, he has frozen fuel duty and protected some pensioners from tax on rising state pensions, but savers and landlords will pay more.

But there is more going on than the absence of increases in the big headline rates suggests. Whether that adds up to a genuinely more growth-friendly tax system is a tougher question to answer.

The test of this Budget shouldn’t simply be whether Healey has raised enough revenue without increasing the main taxes. It is whether the tax system that emerges is better for growth, investment and doing business in the UK.

Avoiding the big tax levers may be politically attractive. It does not necessarily make for better tax policy.

Has the Chancellor missed an opportunity to establish a simpler, more transparent tax system that could ultimately create a more supportive environment for employment, entrepreneurship, investment and long-term economic growth?