Autumn Budget 2026: key business tax announcements

The business tax announcements in today’s Budget centred on two themes: resisting broad-based tax rises and maintaining stability, while advancing the government’s ambition to make the UK the best place to start and scale a business. Our experts highlight the key business tax measures.

Introduction 

We knew from the Chancellor's clear signalling in the run-up to Budget Day that certain 'big ticket' tax reforms were not on the agenda. Despite media speculation, there was no increase to the main rate of capital gains tax, no large-scale real estate tax reform, no wealth tax and no major pension tax reform. With far fewer leaks and U-turns than Budget 2025, the emphasis was on calming the waters. The Government kept its manifesto pledges not to raise VAT or income tax on earnings, and restated its commitment to the 2024 Corporate Tax Roadmap. A healthy number of positive business tax measures also featured, as outlined below.

It is, perhaps, unsurprising that Andy Burnham's government chose to announce a new form of “fiscal devolution”, under which Mayors and local authorities will receive a share of income tax receipts and, by the end of the decade, 100% of business rates to deploy in their region. Many businesses will be interested in what this could mean for local growth and investment projects.

Tax measures for entrepreneurs and growth companies 

Founders’ Relief

Entrepreneurs have received some welcome Budget news, with the announcement of a targeted new capital gains tax (CGT) relief. Under the new ‘Founders’ Relief’, qualifying founders and significant early investors in high-growth, innovative UK companies will benefit from a 10% CGT rate on qualifying disposals, subject to a lifetime gains limit of £10 million. The relief will be available for disposals made on or after 6 April 2027. It will be interesting to see how this impacts on deal activity between now and then.

There are some stringent conditions to satisfy. The individual must have held at least 25% of the company’s ordinary shares and corresponding voting rights and rights to profit and assets on a winding-up when the relevant trade (or preparations for it) commenced. They must also have held shares or securities in the company, and been a UK resident for at least five years before the disposal. The company must broadly be within UK corporation tax, have had a substantial UK presence for the preceding five accounting periods and remain a qualifying trading company or group. It must also have turnover of at least £10 million and at least 15 qualifying full-time employees in the accounting period before disposal. The company must also demonstrate its growth and innovation credentials by satisfying at least two of three proposed conditions: a turnover test, headcount test and innovation test. Further technical consultation will take place until 30 November.

This relief is particularly important given the reduction in the lifetime limit on qualifying gains under Business Asset Disposal Relief (BADR) from £1 million to £500,000. Although BADR and Founders’ Relief may be available on the same disposal, amounts claimed against the lifetime BADR (and Investors' Relief) limits will reduce the Founders’ Relief limit.

Equity incentives

More good news for growing companies looking to attract and retain talent came with the announcement of further improvements to the UK’s tax-advantaged share option schemes, due to take effect from April 2027.

The Company Share Option Plan (CSOP) has been rebranded as ‘EMI2’, reflecting its role as the 'next step' for companies that have outgrown the Enterprise Management Incentive (EMI) regime (or did not qualify for it in the first place). The value of EMI2 options that an individual can hold will double from £60,000 to £120,000 and the maximum period for exercising an option whilst retaining the tax advantages will increase from 10 to 15 years. The existing aggregation of the EMI and CSOP limits will also be removed, allowing employees to hold up to £250,000 of EMI options alongside up to £120,000 of EMI2 options.

EMI itself has also received some helpful tweaks, including an extension to the period following a disqualifying event in which options must be exercised without losing tax-advantaged status from 90 to 180 days.

SEIS, EIS and VCT

Although not as far-reaching as many had hoped, the Government has also continued its efforts to make the UK’s venture capital schemes more accessible by introducing some technical changes to make the operation of the reliefs easier in practice – including allowing SEIS, EIS and VCT investment to take place on the same day and providing that tax relief is not all automatically lost where an EIS investment limit is exceeded.

Company tax measures

Modernising the framework for company distributions

Alongside the Budget, the Government published a response to the consultation published earlier this year on modernising the rules governing how companies’ distributions to individual (non-corporate) shareholders are taxed, so that similar transactions are taxed alike regardless of legal form or where the company is based. The reforms will tackle arrangements, such as inserting a new holding company, that let business owners take profits out as capital gains rather than income. They will also bring the treatment of payments and loans from overseas companies closer to that of UK companies, modernise the purchase of own shares relief, expand demerger relief, and clarify the existing anti-avoidance rules. 

These changes will mainly impact shareholders who control how profits are paid out, typically on one-off events such as retirements or capital reorganisations, along with some individuals with interests in overseas companies. Genuine family succession is intended to be protected, and the revised purchase of own shares rules are meant to allow qualifying company-funded exits to happen in stages. Technical consultation will take place in 2027 before the changes take effect from April 2028.

Capital allowances

The Chancellor also announced the reduction of the main rate writing-down allowance for plant and machinery from 14% to 12% from April 2027. This is, however, accompanied by an increase in the main rate First Year Allowance from 40% to 50% for expenditure incurred on or after 1 January 2027.

Windfall tax on bank profits

Banks have been asked to bear the burden of helping to balance the Budget by shouldering an increase in the bank corporation tax surcharge from 3% to 6% for a period of 15 months, from 1 January 2027 to 31 March 2028. The change follows calls for banks to contribute more following a period of strong profitability supported by higher interest rates.

VAT

VAT liability for online marketplaces

In a significant extension of the rules introduced in 2021, the Chancellor has announced that online marketplaces (OMPs) will also be required to collect and account for VAT on sales of goods in the UK made through their platforms by UK businesses, with implementation targeted for October 2027. The rules currently only apply to certain sales by overseas businesses.

OMPs will now become liable for VAT on sales by UK businesses where sales through the relevant platform exceed £90,000, in line with the current VAT registration threshold. The Government has decided against introducing specific anti-disaggregation measures that would have prevented a business from selling via multiple different platforms and staying just beneath the £90,000 per-platform threshold. 

Personal tax 

Income tax

Budget 2025 increased the rates of tax on savings and property income by 2% across all tax bands from April 2027, and this Budget goes further by increasing these rates by an additional 2% from the same date. Reassuringly, rates of tax on dividend and other income remain unchanged.

ISAs

The Government has decided to retain the £20,000 cash ISA limit, reversing the reduction to £12,000 announced in last year's Budget. Further support comes in the form of plans to explore a new ISA incentive for individuals investing in stocks and shares for the first time.

Real estate tax

Foreign Sovereign Investments 

From 1 January 2029, the current sovereign immunity from direct tax regime will be replaced by a new sovereign tax status. Where sovereigns invest in the UK through UK companies, those companies’ income and gains are already subject to the corporation tax regime and will therefore be unaffected. The Government expects that the main effect of the new regime will be to bring sovereigns’ returns from UK real estate within the scope of taxation, while also taxing certain trading income in limited circumstances. The Government will hold a technical consultation before implementation.

Business rates

The 2026 Budget announced a package of business rates measures for high-street businesses in England, including a two-year real-terms freeze in bills lasting until March 2029. Small Business Rates Relief thresholds for these properties will increase to £18,000 for full relief and £21,000 for tapered relief, taking around 70,000 additional businesses out of business rates. From 2027-2029, the Government will introduce a 20% relief in business rates for pubs, clubs and music venues.

Other notable tax announcements

• The Government will continue to work towards a new Business Rates Retention Zone from 2028, supporting the Cambridge Biomedical Campus alongside wider investment in the Oxford-Cambridge Growth Corridor intended to make it easier to finance land, housing and infrastructure development.
• The Government has confirmed that it will address the potential double taxation suffered by UK residents investing through US LLCs and other similar entities, with reform expected from early 2028.
• The Trading Allowance will triple from £1,000 to £3,000 from 6 April 2027, allowing individuals to earn more from small-scale trading activities before needing to pay income tax on those amounts. 

If you would like further information in relation to any of these measures, please contact a member of our tax team.