The Budget on 28 October 2026 left the headline rates of income tax on earnings, National Insurance and VAT unchanged, but raised tax on rental profits and savings interest to 24%, 44% and 49% from 6 April 2027. Business owners planning a sale face a lower Business Asset Disposal Relief limit of £500,000 from the same date, alongside a new Founders' Relief, and the trading allowance triples to £3,000. Most of these measures still need to pass into law, and some of the detail has not yet been published.
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At a glance
Most changes start on 6 April 2027. These are the points most likely to affect our clients:
- Headline rates: no rise in the rates of income tax on earnings, National Insurance or VAT. The rates on property and savings income do rise.
- Landlords: from 6 April 2027, income tax on rental profits is 24%, 44% and 49% in England, Wales and Northern Ireland.
- Savers: the same 24%, 44% and 49% rates apply to savings interest across the UK. The cash ISA limit stays at £20,000.
- Selling a business: the Business Asset Disposal Relief lifetime limit halves to £500,000, and a new Founders' Relief charges 10% on up to £10 million of gains for qualifying founders and early investors of high-growth, innovative companies. Both apply from 6 April 2027, and the Founders' Relief rules are still under consultation.
- Side income: the trading allowance rises from £1,000 to £3,000 from 6 April 2027, with some exclusions.
- Mileage (cars and vans): 55p a mile for the first 10,000 business miles is made permanent, and the rate above 10,000 miles rises from 25p to 35p from 6 April 2027.
- Unchanged for 2027/28: the personal allowance, tax bands, dividend rates and allowance, capital gains tax rates and annual exempt amount, pension and ISA allowances, and the inheritance tax nil rate bands. The full table is below.
If you are planning to sell a business, move property into a company or change how you take money from your company, speak to us before you commit. Some of the rules are not yet published.
Landlords and property
New rates. Rental profits will be taxed at 24% (basic rate), 44% (higher rate) and 49% (additional rate) from 6 April 2027. That is 4 percentage points above the 20%, 40% and 45% that apply in 2026/27. Budget 2025 had already set the 2027/28 rates at 22%, 42% and 47%, so this Budget adds a further 2 points. Our earlier guide to the April 2027 property income rates explains how the separate property rates work.
Where. The new rates apply in England, Wales and Northern Ireland. The Scottish and Welsh governments have been given the power to set their own property income rates.
Mortgage interest. Individual landlords of residential property get relief for finance costs at the property basic rate, so the credit rises from 20% to 24% once the new rates are law. This partly offsets the increase.
Allowances used against earnings first. From 2027/28 the personal allowance and other reliefs are set against earnings and pensions before rental, savings or dividend income (this is already law, in Finance Act 2026). People with a salary or pension therefore get less shelter for their rental income.
Company landlords. Companies pay corporation tax on rental profits instead, and the main rate stays at 25%. Moving property into a company can trigger capital gains tax and Stamp Duty Land Tax, and profits taken out of the company are taxed again, so take advice before making any transfer. You can estimate the effect of the new rates with our rental income tax calculator.
Other property changes announced or confirmed:
| Change | Where | From |
|---|---|---|
| Annual Tax on Enveloped Dwellings charges rise by 3.5% (already law) | UK | 2027/28 chargeable period |
| No Stamp Duty Land Tax on rent under assured tenancies | England | 1 May 2026 |
| Stamp Duty Land Tax group relief withdrawn when a buyer leaves a group after the seller is wound up | England and Northern Ireland | 29 October 2026 |
| High Value Council Tax Surcharge on homes worth £2 million or more, with deferral, discounts and exemptions; 100% premium on homes empty for 12 months or more (no date given) | England | April 2028 |
| HMRC consultation on letting agents and deposit schemes reporting landlords' income | UK | Closes 20 January 2027 |
Our property tax service covers ownership, rental profits and incorporation.
Business owners and founders
Business Asset Disposal Relief. The rate stays at 18%, but the lifetime limit falls from £1 million to £500,000 for disposals on or after 6 April 2027. Relief you have already used counts towards the new limit. For disposals in 2026/27, the £1 million limit still applies. Our guide to Business Asset Disposal Relief covers the conditions.
Contracts signed before 6 April 2027. Special rules will apply to sales agreed before that date that complete later, and to certain share reorganisations. The details are not yet published, so signing a contract early may not keep the £1 million limit. Do not change a deal timetable until the rules are out and you have taken advice.
Founders' Relief. From 6 April 2027, a new relief charges capital gains tax at 10% on up to £10 million of lifetime gains for qualifying founders and early investors of high-growth, innovative companies. Business Asset Disposal Relief or Investors' Relief used from that date reduces the limit. The rules are under consultation until 30 November 2026. Our business exit service looks at timing and the new limits for owners planning a sale.
Small traders and side income. From 6 April 2027, up to £3,000 a year of trading and miscellaneous income is covered by the allowance (up from £1,000) if you claim no actual expenses against it, and the Self Assessment reporting threshold for trading income also rises to £3,000. The allowance does not cover payments from your employer (or your spouse's or civil partner's employer), from a partnership you or a connected person are a partner in, or from a company you or your family own a stake in. For 2026/27 the allowance stays at £1,000, and the separate £1,000 property allowance is not changing.
Taking money out of your company. The government will make the tax treatment of company distributions consistent "regardless of legal form, company residence or transaction structure" from April 2028, with draft legislation in 2027. Capital treatment is protected for genuine changes of ownership, including family successions. Proposed new reporting of payments to shareholders and other participators will not go ahead for now. If you take profits out through capital routes, such as a share buyback or a members' voluntary liquidation, our profit extraction work will review the position once the draft rules appear.
Capital allowances. The main rate first-year allowance rises from 40% to 50% for spending on or after 1 January 2027. The main rate writing down allowance falls from 14% to 12% from 1 April 2027 for companies and 6 April 2027 for income tax. The £1 million Annual Investment Allowance, full expensing and the 6% special rate writing down allowance are unchanged.
Share schemes. From 6 April 2027 the Company Share Option Plan becomes EMI2 (Enterprise Management Incentives 2), with an option limit of £120,000 per employee (up from £60,000) and a 15-year exercise period. The interaction between the CSOP and EMI individual limits is removed. EMI limits are unchanged, but EMI options granted on or after 6 April 2027 will be reported on the annual return instead of being notified separately, employees will have 180 days (up from 90) to exercise after a disqualifying event, and companies arranging to become controlled by an Employee Ownership Trust keep access to the scheme. See our share schemes service.
VAT, payroll and other business changes
| Measure | What changes |
|---|---|
| Business rates (England) | Retail, hospitality and leisure from 1 April 2027: full Small Business Rates Relief up to £18,000 rateable value (from £12,000), tapered up to £21,000; bigger relief for pubs, social clubs and most live music venues; bill increases capped at inflation for two years. |
| Machine Games Duty | Rises from 20% to 25% on games with stakes over £1 or prizes over £100, from 1 April 2027. |
| Minimum wage | From 1 April 2027: National Living Wage £13.21 an hour; £11.27 (18 to 20); £8.31 (16 to 17 and eligible apprentices). |
| Payrolling benefits | Mandatory payrolling is delayed: company cars and vans, car and van fuel, and medical benefits from 6 April 2027; other benefits from 6 April 2028 (not employment-related loans or living accommodation). |
| Overseas workers | Employer-paid Immigration Skills Charge and Certificate of Sponsorship fees are not a taxable benefit from 28 October 2026. |
| VAT on overseas services | From April 2027 the reverse charge applies only to VAT-registered customers; overseas suppliers to unregistered UK businesses charge UK VAT. |
| Online marketplaces | From October 2027, marketplaces collect VAT for UK VAT-registered sellers and other UK sellers with sales of at least £90,000 a year on that platform. |
| VAT e-invoicing | VAT invoices in a set electronic format from 1 April 2029. |
| Direct Debit | Required for VAT (from 1 April 2029) and PAYE (from 6 April 2029) to collect anything unpaid by a cut-off date. |
| Other | R&D claim notification form removed from 1 April 2027; technical changes to EIS, SEIS and VCTs; a new Securities Transfer Tax replaces stamp duty on shares from late 2027. |
Employers providing company cars should note both the payrolling dates and the mileage changes below. Our company cars and leasing page explains how we help.
Individuals, trusts, international and HMRC
Savings. Savings interest will be taxed at 24%, 44% and 49% across the UK from 6 April 2027. The personal savings allowance (£1,000 for basic rate and £500 for higher rate taxpayers) and the £5,000 starting rate for savings are unchanged, and interest inside an ISA is still not taxed. The ISA limit stays at £20,000, including for cash ISAs.
Lifetime ISA. The withdrawal charge for first-time buyers above the £450,000 property price cap falls from 25% to 20% from 29 October 2026. A new First Time Buyer ISA replaces the Lifetime ISA for new savers from April 2029.
Pension Tax Allowance. From 6 April 2027 to 5 April 2030, people over State Pension age whose total income is at or below the full new State Pension will pay no income tax, with a taper just above that level.
Mileage. The approved rate for cars and vans stays at 55p a mile for the first 10,000 business miles, now permanently, and rises from 25p to 35p above 10,000 miles from 6 April 2027 (the same figures apply for the National Insurance disregard). Employers can pay up to the approved rates without tax; if they pay less, you may be able to claim relief on the difference. Self-employed people can usually use the rates instead of actual costs, unless capital allowances have been claimed on the vehicle.
Other changes for individuals. From 6 April 2028, the £2,500 limit above which employment expense claims must be made through Self Assessment is removed. Eligible self-employed fathers, partners and adopters in Great Britain will be able to claim parental pay from April 2029.
Inheritance tax and trusts. Tighter rules on deducting trust-related debts apply for deaths and other charges from 28 October 2026. Most unused pension funds and death benefits come into the estate for inheritance tax from 6 April 2027 (already law). Trustees will pay 24% (basic rate) and 49% (trust rate) on property and savings income from 2027/28; the dividend trust rate of 39.35% and the 45% rate on other income are unchanged. A limited easement to the trust exit charge applies from 28 October 2026.
International. Double tax relief is to be given for income from certain foreign entities, including some US LLCs (in Finance Bill 2027-28). The foreign branch exemption becomes compulsory for periods from 1 January 2027, and a consultation on offshore penalties is due later in 2026. The Temporary Repatriation Facility rate rises from 12% in 2026/27 to 15% in 2027/28, as already legislated.
HMRC and tax administration. More regular in-year payments on account are planned from April 2029, and a duty to correct errors in returns from 1 April 2028. People joining Making Tax Digital for Income Tax in April 2027 will not receive late submission penalty points for their 2027/28 quarterly updates, although the updates are still required. HMRC will also get more compliance staff and debt powers.
Main rates and allowances for 2026/27 and 2027/28
The figures for 2027/28 are taken from HMRC's published rates and allowances for Budget 2026 (OOTLAR Annex A). The changes for 2027/28 still need to pass into law, except where marked as already law. Scottish income tax rates and bands are set by the Scottish Parliament and are not shown.
| Rate or allowance | 2026/27 | 2027/28 |
|---|---|---|
| Income tax | ||
| Personal allowance (reduced above £100,000 of income) | £12,570 | £12,570 |
| Basic rate band / higher rate limit (taxable income) | £37,700 / £125,140 | £37,700 / £125,140 |
| Main rates (earnings, pensions, trading profits) | 20%, 40%, 45% | 20%, 40%, 45% |
| Savings rates | 20%, 40%, 45% | 24%, 44%, 49% |
| Property rates (England, Wales and Northern Ireland) | Main rates apply | 24%, 44%, 49% |
| Savings starting rate limit / personal savings allowance | £5,000 / £1,000 / £500 | £5,000 / £1,000 / £500 |
| Dividend rates | 10.75%, 35.75%, 39.35% | 10.75%, 35.75%, 39.35% |
| Dividend allowance | £500 | £500 |
| Trading allowance | £1,000 | £3,000 |
| Mileage: first 10,000 business miles (cars and vans) | 55p | 55p (made permanent) |
| Mileage: above 10,000 business miles | 25p | 35p |
| Trusts: savings and property income (basic / trust rate) | 20% / 45% | 24% / 49% |
| Capital gains tax | ||
| Rates (basic / higher) / annual exempt amount | 18% / 24% / £3,000 | 18% / 24% / £3,000 |
| Business Asset Disposal Relief lifetime limit | £1 million | £500,000 |
| Founders' Relief rate / lifetime limit (new) | Not available | 10% / £10 million |
| Temporary Repatriation Facility rate (already law) | 12% | 15% |
| Companies and business | ||
| Corporation tax main rate / small profits rate | 25% / 19% | 25% / 19% |
| Main rate first-year allowance (from 1 January 2027) | 40% | 50% |
| Main rate writing down allowance | 14% | 12% |
| Annual Investment Allowance / full expensing for companies | £1 million / 100% | £1 million / 100% |
| EMI2 (formerly CSOP) option limit per employee | £60,000 | £120,000 |
| VAT standard rate / registration threshold | 20% / £90,000 | 20% / £90,000 |
| National Insurance | ||
| Employee: main rate / above upper limit / weekly threshold | 8% / 2% / £242 | 8% / 2% / £242 |
| Employer: rate / weekly threshold / Employment Allowance | 15% / £96 / £10,500 | 15% / £96 / £10,500 |
| Self-employed Class 4: main rate / above upper limit | 6% / 2% | 6% / 2% |
| Pensions, ISAs and inheritance tax | ||
| Pension annual allowance / money purchase annual allowance | £60,000 / £10,000 | £60,000 / £10,000 |
| Adjusted income above which the annual allowance tapers | £260,000 | £260,000 |
| ISA / Junior ISA limits | £20,000 / £9,000 | £20,000 / £9,000 |
| Inheritance tax nil rate band / residence nil rate band | £325,000 / £175,000 | £325,000 / £175,000 |
| Inheritance tax 100% agricultural and business property relief allowance | £2.5 million | £2.5 million |
What to do now
- Landlords: estimate your 2027/28 bill at the new rates, and check how jointly owned property and its income are split before 6 April 2027.
- Business owners planning a sale: look at timing against the £500,000 limit, but wait for the rules on contracts signed before 6 April 2027 before changing a deal timetable. If your company may qualify for Founders' Relief, the consultation closes on 30 November 2026.
- Directors: note that the treatment of distributions is due to change from April 2028, and review any plans to take money out as capital once the draft legislation is published in 2027.
- Employers: plan for payrolling company cars, vans, fuel and medical benefits from 6 April 2027, and review EMI and EMI2 options for staff.
- Savers, pensioners and trustees: check how the 24%, 44% and 49% savings rates affect your interest, pension and trust income.
- Anyone with foreign income: check how the double tax relief and Temporary Repatriation Facility changes apply to you.
Our firm is led by a Chartered Tax Adviser (CTA) and specialises in UK and international tax. We can set out your options, whether you are a landlord deciding how property and rental income should be held, a director looking at the April 2028 changes, an owner preparing to sell, an employer setting up share options or payrolling benefits, or a business preparing for Direct Debit and e-invoicing. To talk through your position, book a consultation.
Frequently asked questions
What are the new property income tax rates from April 2027?
From 6 April 2027, rental profits are taxed at 24% (basic rate), 44% (higher rate) and 49% (additional rate) in England, Wales and Northern Ireland. Budget 2025 had set these at 22%, 42% and 47%; Budget 2026 adds a further 2 points. Relief for residential mortgage interest rises to 24% to match. In 2026/27, rental profits are still taxed at 20%, 40% and 45%.
Is the Business Asset Disposal Relief limit changing?
Yes. The rate stays at 18%, but the lifetime limit falls from £1 million to £500,000 for disposals on or after 6 April 2027, and relief already used counts towards the new limit. The £1 million limit still applies to disposals in 2026/27. Special rules will cover contracts agreed before 6 April 2027 that complete later, but the details are not yet published.
What is Founders' Relief?
A new capital gains tax relief from 6 April 2027 that charges 10% on up to £10 million of lifetime gains for qualifying founders and early investors of high-growth, innovative companies. Business Asset Disposal Relief or Investors' Relief used from 6 April 2027 reduces the limit. The qualifying rules are under consultation until 30 November 2026.
Did dividend tax change in Budget 2026?
No. For 2027/28 the dividend rates stay at 10.75%, 35.75% and 39.35%, and the dividend allowance stays at £500. The rates that rise in April 2027 are those on property and savings income.
Has the trading allowance changed?
Yes, from 6 April 2027. The trading allowance and the miscellaneous income allowance rise from £1,000 to £3,000 where you claim no actual expenses, and the Self Assessment reporting threshold for trading income also becomes £3,000. Income from your employer (or your spouse's or civil partner's), from a partnership you or a connected person are in, or from a company you or your family own a stake in is excluded. The £1,000 property allowance is unchanged, and the trading allowance stays at £1,000 for 2026/27.
Sources
- HMRC, Budget 2026: Overview of tax legislation and rates (OOTLAR) (GOV.UK, 28 October 2026).
- HMRC, OOTLAR Annex A: rates and allowances, including trustees' rates and the Temporary Repatriation Facility.
- HM Treasury, Budget 2026 (GOV.UK, 28 October 2026): "Keeping the government's tax commitments"; "Making fair choices on revenue raising".
- Property and savings: Budget 2026, "Changes to tax on property income"; "Changes to tax on savings income"; "Maintaining the cash ISA limit at £20,000"; OOTLAR 1.2, 1.3; Income Tax Act 2007, s.25(3A), inserted by Finance Act 2026; ITTOIA 2005, ss.272A and 274AA(5).
- Other property measures: Budget 2026, "Annual Tax on Enveloped Dwellings (ATED)"; "Removing Stamp Duty Land Tax on rent under assured tenancies"; "Stamp Duty Land Tax group relief"; "High Value Council Tax Surcharge (HVCTS)"; OOTLAR 1.22; HMRC, "Improving Property Income Data Reporting" (consultation, 28 October 2026).
- Business disposals: Budget 2026, "Business Assets Disposal Relief (BADR): lifetime limit"; "Capital Gains Tax (CGT) Founders' Relief"; OOTLAR 1.32, 1.33; TCGA 1992, s.169N(4).
- Trading allowance and mileage: Budget 2026, "Increase Trading Allowance"; Table 6.1 and "Mileage rates review"; OOTLAR 1.5, 2.7; ITTOIA 2005, ss.783AO to 783AQ, 94D and 94E(2).
- Companies: Budget 2026, "Modernising the distributions framework"; "Close company reporting"; "Writing down allowances"; "Improving R&D Tax Reliefs"; "Improving tax advantaged venture capital schemes"; "Enterprise Management Incentives 2"; "Enterprise Management Incentive (EMI): Removal of the grant of options notification"; "Employee Share Schemes: enhanced flexibility".
- Business rates, VAT and payroll: Budget 2026, business rates measures for retail, hospitality and leisure; "Machine Games Duty (MGD)"; "National Living Wage and National Minimum Wage"; "VAT treatment of cross-border services"; "VAT online marketplace liability (OMPL)"; "E-invoicing"; "Requiring direct debit arrangements for VAT and PAYE return liabilities"; OOTLAR 1.24.
- Individuals, trusts, international and HMRC: Budget 2026, "Reduce Lifetime ISA (LISA) withdrawal charge"; "First Time Buyer (FTB) ISA"; "Income Tax: Pension Tax Allowance"; "Reforming how taxpayers claim for employment expenses"; "Inheritance Tax: preventing unintended deductions for liabilities in trust arrangements"; "Investors in US Limited Liability Companies and other reverse hybrids"; "Offshore penalties reform consultation announcement"; "More timely payment for self-assessment"; "Modernising the correction of errors in tax returns"; "Making Tax Digital (MTD) for income tax"; OOTLAR 1.27, 1.28, 1.39; Finance Act 2025, Sch. 10, para. 1(8).
Most of the measures in this article were announced at Budget 2026 on 28 October 2026 and still need to pass into law (Finance Bill 2026-27), so the details may change before they take effect. This article is a general summary, correct as at 28 October 2026, and is not advice.
This article is general information about UK tax, based on the law and HMRC practice at the date shown above. It is not advice, and reading it does not make you our client. Tax rules change and their effect depends on your circumstances, so please speak to us before acting on it.