On Wednesday 28 October, Chancellor John Healey delivered the Autumn Budget. Back in September we looked at how to prepare your business finances ahead of the announcement. Now the detail is out, here is a plain English round up of the changes most likely to affect small business owners, directors and the self employed.
The good news is that most of the measures below do not take effect until April 2027, so there is time to plan. Some of the detail is still to be confirmed in draft legislation, so a few points may change before then.
The trading allowance is tripling
If you earn a little extra income on the side, such as selling online, occasional freelance work or a small hobby business, this one is worth knowing about.
The trading allowance will rise from £1,000 to £3,000 from 6 April 2027. If your gross income from a small trade is within the allowance, you generally do not need to declare it or pay tax on it. If it is higher, you can choose to deduct the allowance instead of your actual expenses, which can be useful if your costs are low.
Changes to capital allowances
If you are planning to buy equipment, machinery or vans, the timing of your purchases matters.
The Annual Investment Allowance stays at £1 million, so most small businesses can still claim the full cost of qualifying equipment in the year they buy it.
The main rate first year allowance rises from 40% to 50% for qualifying spending on or after 1 January 2027. This mainly benefits sole traders, partnerships and leasing businesses.
The main rate writing down allowance falls from 14% to 12% from April 2027, which means slower tax relief on assets that are not covered by other allowances.
We covered capital allowances in more detail in our August blog, Buying Equipment for Your Business, if you would like a refresher.
Higher tax on property and savings income
From 6 April 2027, property income and savings income will be taxed at their own separate rates, four percentage points higher than the standard income tax rates:
Basic rate: 24%
Higher rate: 44%
Additional rate: 49%
This was originally announced as a two point rise in last year’s Budget, so the increase is larger than expected. If you own rental property personally or hold significant cash savings, it is worth reviewing how your income is structured before April 2027.
As a reminder, dividend tax rates already rose in April 2026, to 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers. If you are a director who pays yourself through a mix of salary and dividends, now is a good time to check that the balance still works for you.
Business Asset Disposal Relief is being cut
If you are thinking about selling your business or retiring in the next few years, this is one of the most important announcements.
The lifetime limit for Business Asset Disposal Relief will be halved from £1 million to £500,000 of gains from 6 April 2027. That could mean a significantly higher tax bill on the sale of a successful business.
A new Founders’ Relief has also been proposed from the same date, with a 10% Capital Gains Tax rate on up to £10 million of qualifying gains. However, it is aimed at founders of high growth companies, comes with strict conditions and is still subject to consultation.
If a sale or exit is on your horizon, speak to your accountant sooner rather than later, as the timing could make a real difference.
Employers: minimum wage increases
From 1 April 2027, the National Living Wage will rise from £12.71 to £13.21 per hour, an increase of 3.9%. The rate for 18 to 20 year olds will rise from £10.85 to £11.27 per hour.
If you employ staff, it is worth building these increases into your budgets and cash flow forecasts now, along with the knock on effect on employer National Insurance and pension contributions.
Mileage rates
The approved mileage rate for business journeys in your own car stays at 55p per mile for the first 10,000 miles. From 6 April 2027, the rate for miles above 10,000 will rise from 25p to 35p, which is welcome news for anyone who covers a lot of business miles.
Business rates relief
Small retail, hospitality and leisure businesses could see lower bills. The small business rates relief threshold for qualifying properties will rise from £12,000 to £18,000, with tapered relief extending up to £21,000. Pubs and live music venues will also see their rates reduction rise to 35% from April 2027.
Making Tax Digital
If you are a sole trader or landlord with qualifying income over £30,000, you will need to join Making Tax Digital for Income Tax from April 2027. The Budget confirmed that you will not receive late submission penalty points for quarterly updates during your first year in the scheme. This does not apply to your year end return, so the usual deadline still matters.
If you are already in Making Tax Digital, do not forget your next quarterly update is due on 7 November.
What has not changed
The VAT registration threshold stays at £90,000.
The personal allowance stays at £12,570.
The main rates of Capital Gains Tax are unchanged.
The fuel duty freeze has been extended to July 2027.
Looking further ahead
A few changes are further away but worth having on your radar. From April 2029, Self Assessment tax payments are expected to be brought forward, and HMRC will have wider powers to recover smaller tax debts directly from bank accounts. HMRC is also receiving extra funding for compliance work, so keeping accurate records has never been more important.
What should you do now?
Review your salary and dividend mix for the rest of this tax year and next.
Plan the timing of any large equipment purchases.
If you are considering selling your business, get advice before April 2027.
Update your payroll budgets for the April 2027 wage increases.
Check whether you will need to join Making Tax Digital next April.
How Solutions Accountancy can help
Budgets can feel overwhelming, with lots of headlines and very little explanation of what they actually mean for you. At Solutions Accountancy, we help business owners make sense of the changes and plan ahead so they can make the most of the opportunities and avoid any surprises.
If you would like to talk through how the Autumn Budget affects your business, get in touch with the team. We are always happy to help.