This week, new Chancellor John Healey delivered his first Autumn Budget, outlining the government’s tax and spending plans with a focus on providing “breathing space for Britain”. The Chancellor’s statement focused heavily on supporting working families and businesses while stabilising the UK’s finances, bringing a number of changes that UK business owners and entrepreneurs should be aware of.
While the government has maintained its promise not to increase the headline rates of Income Tax, National Insurance or VAT, and the main rate of Corporation Tax remains capped at 25%, there are several other changes beneath the headlines that could affect how businesses operate and plan for the future.
We’ve broken down the key changes and what they could mean for you and your business.
Selling Your Business
If you’re considering selling your business, passing it on or retiring in the next few years, this is one of the most important announcements to be aware of. From 6 April 2027, the lifetime limit on gains qualifying for Business Asset Disposal Relief (BADR) at the 18% Capital Gains Tax rate will be reduced from £1 million to £500,000.
The timing of any disposal could make a considerable difference to your tax bill.
New Founders’ Relief
For founders of high-growth, innovative companies, the Budget also introduces a new Founders’ Relief from the same date. This will offer a 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders. However, the qualifying conditions are still being consulted on, so it isn’t yet clear how widely the relief will apply. Business owners who may benefit should keep an eye on further announcements as the details become clearer.
Taking Profits From Your Company
The government has also announced plans to reform the tax treatment of company distributions from April 2028, so that similar ways of drawing profits are taxed consistently.
The government has already confirmed that genuine changes of ownership, including families passing on a business, will continue to receive capital treatment.
Draft legislation is expected in 2027, so the full details of how these changes will work are not yet available. If you’re considering restructuring your business, changing ownership or planning how to take profits in the future, this is an area worth monitoring closely.
Investing in Your Business
Businesses planning to invest in equipment, machinery or other qualifying assets should take note of changes to capital allowances. From 1 January 2027, the main rate first-year allowance will increase from 40% to 50% for qualifying expenditure. At the same time, the main rate writing down allowance will decrease from 14% to 12% from April 2027.
Capital allowances allow businesses to claim tax relief on certain qualifying investments, helping to reduce taxable profits. The changes could affect how quickly businesses receive tax relief on their purchases, making the timing of significant investments an important consideration.
Business rates
There is welcome news for many businesses in England on business rates from 1 April 2027. For retail, hospitality and leisure properties, the threshold for 100% Small Business Rates Relief rises to a rateable value of £18,000, with tapered relief continuing up to £21,000. Bills for these properties will also be frozen in real terms for two years.
Pubs, social clubs and most live music venues will see their relief more than double, from 15% to 35%. The Supporting Small Business scheme is extended for a further year, and fees for appealing to the Valuation Tribunal are being abolished. Businesses installing electric vehicle charging points can also benefit from 100% business rates relief on eligible chargepoints for ten years.
Rewarding Your Team
The Budget includes several changes designed to make employee share schemes more attractive and flexible.
The Company Share Option Plan (CSOP) will become EMI2, with the individual option limit doubling to £120,000 and the exercise period extending to 15 years. Employees will also be able to hold options under both EMI and EMI2.
The existing Enterprise Management Incentive (EMI) scheme will become more flexible, including for companies moving to an Employee Ownership Trust. Employee share schemes can help businesses attract, reward and retain talented employees by giving them an opportunity to benefit from the company’s future success. For growing businesses, these changes could provide additional flexibility when considering long-term employee incentives.However, the rules surrounding share schemes can be complex, so it’s important to understand the eligibility requirements and tax implications before introducing or changing an arrangement.
National Living Wage and Employee Benefits
Employers will also need to prepare for changes to employment costs and payroll reporting. From April 2027, the National Living Wage will increase to £13.21 per hour. For businesses employing staff at or near the National Living Wage, this will mean higher payroll costs. It’s also worth considering the wider impact on pay structures, particularly where employers want to maintain differences in pay between employees with varying responsibilities.
Another important change is that payrolling of company cars and medical benefits will become mandatory from April 2027. This means employers providing these benefits will need to ensure their payroll systems and processes are ready to report them through payroll. Reviewing employment costs and payroll arrangements in advance can help businesses prepare for these changes and understand their potential impact on profitability.
Income Tax on Property and Savings Income
From 6 April 2027, Income Tax rates on these sources of income will increase by two percentage points. The new rates will be:
- Basic rate: 24%
- Higher rate: 44%
- Additional rate: 49%
Although these changes don’t directly affect a limited company’s Corporation Tax liability, they may affect business owners and directors who receive personal income from rental properties or savings. If you have multiple sources of income, it may be worth reviewing your wider personal tax position to understand how the changes could affect your overall liability.
Sole traders
From 6 April 2027, the Trading Allowance will triple from £1,000 to £3,000. This means individuals will be able to receive up to £3,000 of qualifying trading and miscellaneous income tax-free each year, subject to the relevant rules. The increase could be particularly beneficial for individuals earning smaller amounts of additional income.
Making Tax Digital Updates
For sole traders joining Making Tax Digital for Income Tax in April 2027, there is some welcome breathing space. No penalty points will be issued for late submission of the first four quarterly updates during the 2027/28 tax year. This gives those entering the system additional time to become familiar with the new reporting requirements. The government is also deferring the rollout of Making Tax Digital to several other groups of taxpayers until further notice.
While these announcements may ease the transition for some individuals, it’s still important for those affected to understand their obligations and ensure their bookkeeping systems are ready.
Changes to Business Mileage Rates
The Budget also confirms a permanent increase to tax-free mileage rates for employees and self-employed individuals using their own cars or vans for qualifying business journeys.
The new rates are:
- 55p per mile for the first 10,000 business miles
- 35p per mile for business milage above 10,000 miles
These rates apply to both employees and self-employed individuals using their own vehicles for work, and could help individuals recover more of the costs associated with using their personal vehicles for business travel.
Need Help Understanding How the Autumn Budget Could Affect Your Business?
Although many of these changes won’t take effect immediately, understanding them now gives you time to consider how they could affect your business. Tax changes can create both challenges and opportunities, particularly when you’re planning for growth, investing in your business or considering your longer-term financial goals.
At BW Business Accountants & Advisers, we help UK limited companies understand their financial position, plan for upcoming tax liabilities and make informed business decisions. Whether you’re considering future investments, reviewing how you take profits or planning for the next stage of your business, our team can help you understand how the changes may affect your circumstances.
Get in touch with us to arrange a conversation, or explore our services and packages to find out how we can support your business.
Disclaimer: The information mentioned in this blog was correct at the time of posting (October 2026) and has not been updated for any future changes in tax law or HMRC practice. The contents of this blog has been produced as a helpful reference point, and the information provided should be used as a guide only. You should discuss your specific circumstances directly with us before taking any action based on the information included in this blog.