Autumn Budget 2026 - Our Initial Thoughts

Chancellor John Healey delivered his first Budget on 28 October 2026. There is no increase to the headline rates of income tax, National Insurance or VAT. Instead, the main tax rises for individuals fall on savings and property income, with targeted increases for banks and some duties, together with changes to reliefs and allowances.

1. Income Tax thresholds

The Personal Allowance and income tax bands stay frozen. From 6 April 2027, two allowances change:

• A new Pension Tax Allowance means pensioners whose total income is at or below the full new State Pension pay no income tax.
• The Trading Allowance rises from £1,000 to £3,000.

The tax-free mileage rate of 55p per mile for the first 10,000 business miles is now permanent. Above 10,000 miles, the rate rises from 25p to 35p.

From April 2029, Self Assessment payments on account move to smaller, more regular instalments.

2. Dividend tax rate

Dividend tax rates will remain at:

• 10.75% (basic rate)
• 35.75% (higher rate)
• 39.35% (additional rate)

From April 2028, the rules on how company distributions are taxed will be reformed. This will include changes to mechanisms for demergers with capital treatment protected for genuine changes of ownership such as family successions. 

3. Savings and Property Income

From 6 April 2027, the rate of income tax on savings income and property income will increase by 2 percentage points to:
•    24% (basic rate)
•    44% (higher rate)
•    49% (additional rate)

The planned cut to the cash ISA limit is reversed, so it stays at £20,000.

4. Inheritance Tax

Rates and nil-rate bands are unchanged, and unused pensions still come into estates from 6 April 2027. From 28 October 2026, the rules on deducting liabilities from trust property are tightened. The two-year rule for pension lump sum death benefits is also removed from that date.

5. National Insurance Contributions (NICs)

NIC rates and thresholds are unchanged. Businesses must set up a direct debit for VAT and PAYE liabilities. 

6. National Living Wage & National Minimum Wage Increases

From 1 April 2027, all rates rise by 3.9%:

• £13.21 per hour for workers aged 21 and over.
• £11.27 for 18 to 20-year-olds.
• £8.31 for 16 to 17-year-olds and apprentices.

7. Capital Allowances

Full expensing continues. The main rate first-year allowance rises from 40% to 50% for spending from 1 January 2027. The main writing down allowance falls from 14% to 12% from April 2027.

8. Salary Sacrifice for Pension Contributions

No new change was announced. As set out at Budget 2025, from 6 April 2029 only the first £2,000 a year of salary-sacrificed pension contributions will be exempt from NICs.

9. High Value Council Tax Surcharge

The surcharge goes ahead in England with no change to the threshold. It will include a deferral scheme, discounts and exemptions, and a 100% premium on properties left empty for 12 months or more.

10. Electric Vehicle Excise Duty (eVED)

The mileage-based charge on electric and plug-in hybrid cars still starts in April 2028. Three features are planned:

• A mileage estimation tool.
• Opt-in reporting through a car’s built-in connectivity.
• Automated refunds by 2030.

11. Fuel Duty

The 5p-per-litre cut is extended to 1 July 2027, and the planned RPI rise is deferred to the same date. The red diesel duty cut and the 0% VAT rate on domestic electricity are also extended to 1 July 2027.

12. Universal Credit Child Element

No change to the child element was announced. The £2,500 surplus earnings threshold is kept until March 2028. From 2030-31, a taper will replace the cliff edge at which Carer’s Allowance is lost when earnings exceed the limit.

13. Household Energy Payments

From January 2027, a one-off £100 Household Energy Payment will go to up to 20 million households in England in council tax bands A to D.

14. Gambling Duties

From 1 April 2027, Machine Games Duty rises from 20% to 25% on machines with stakes over £1 or prizes over £100. From the same date, adult gaming centres in England lose access to the lower business rates multipliers.

16. Business Rates

Starting 1 April 2027, retail, hospitality and leisure properties in England get more relief:

• Small Business Rates Relief applies in full up to a rateable value of £18,000 (up from £12,000), and is tapered up to £21,000.
• Relief for pubs, social clubs and most live music venues rises from 15% to 35%.
• Other qualifying properties will have bill increases capped at CPI for 2027-28 and 2028-29.

17. VAT on Online Marketplace Sales

From October 2027, online marketplaces will collect VAT on sales by UK businesses that are VAT-registered or have at least £90,000 of annual sales on that platform. The rules don’t apply to personal sales, second-hand goods or business-to-business transactions.

18. VAT E-invoicing

VAT invoices must be issued in a specified electronic format from 1 April 2029. Full details of the technical requirements will be published by April 2028, so businesses should start checking whether their accounting software will be ready.

19. VAT on Cross-Border Services

From April 2027, the reverse charge on services bought from overseas suppliers will only apply to VAT-registered UK businesses. Overseas suppliers will have to charge UK VAT to businesses that are not VAT-registered, which may increase costs for smaller businesses.

20. R&D Tax Relief

From 1 April 2027, the R&D Claim Notification Form will be removed. The Additional Information Form will be simplified from autumn 2027.

21. HMRC Debt Management Powers

From July 2029, HMRC will be able to recover lower-value tax debts in regular instalments directly from the bank accounts of individuals and companies that can afford to pay but repeatedly fail to. Safeguards will be set out in a Code of Practice before the power is legislated.

More to Come from Shorts

The tax team at Shorts is carefully analysing the Autumn Budget, and we will soon be publishing our detailed reaction to the Chancellor’s speech. This will include all major tax announcements, as well as commentary and insights on what they might mean for our clients.