Autumn Budget 2026

E-invoicing for VAT Reg Business

From April 2029, all “business to business” invoices (but not to consumers) will need to be issued in a machine readable e-invoice.

This is a long term ambition from HMRC, and I would not be surprised to see this pushed back further. It will mean using at least some billing software and may mean some clients using spreadsheets swap over to a full bookkeeping suite.

Curiously there seems no requirement to accept and pay in this method, i.e. you can presumably still send paper invoices too. How this will be enforced is also another question.

Business Asset Disposal Relief

The £1million limit is reduced to £500,000 from 6th April 2027.

This further erodes the ‘exit bonus’ on selling a small limited company, or taking out accumulated reserves.

If you are exiting your business with more than £500,000 then you probably want to have a chat….

New “founders” Tax Relief

10% tax rate for founders of a company on sale.

This seems to be BADR reintroduced with a much higher limit of £10 million by the backdoor.

There are extremely strict conditions including, 5 years of ownership (rather than 2) and 25% ownership (rather than 5%), plus (two of the following) £10 million turnover, 15 full time employees, or £1.5 million of R&D.

I cant see many businesses qualifying.

Mandatory Direct Debits for VAT and PAYE

From April 2029 it will be mandatory to set up a direct debit for all VAT and PAYE payments.

This is probably a good idea for most clients in any case, as the DD payments do work well.

You will need a Digital Tax Account for your company to set those up, we can’t do them for clients.

Capital Allowances

Writing down allowance falls to 12% from 14% April 2027

This further erodes capital allowances, albeit or most clients your will be claiming the 100% “Annual Investment Allowance” but this will hit your tax relief on your EV if second hand.

We seem depressingly back to “play with Capital Allowances to make the figures add up”. An old game I was hoping they had forgotten about as it makes the maths horrendous.

 

Already Announced

Companies House Changes

There are a number of changes at Companies House which are ongoing, which I cover again here as some clients still need to do this.

Hopefully all directors have now verified their identify

The next step is to add this to your Confirmation Statement on your normal due date. This completes the link from your ID to your company.

Major shareholders (>25%) who are not a directors are PSC’s, “Persons of Significant Control” who also need to undertake checks. There is a different deadline based on your month of birth. So if you are born in December, your date to do this is in a narrow window of 1st to 14th December.

For those who have not supplied us with your ID codes, please email over to Kelvin or I for our records. We will need these eventually to file your accounts. For PSC’s you can’t do this early, but if you miss the very peculiar deadline, please do it when you can.

Tax Planning for Directors PAYE

Employer’s NI now starts at £5,000 for single director companies.

Most clients have now appointed a second director / Company Secretary to mitigate this change and claim the Employment Allowance which can save you up to £1,135 in Employer’s NI payments. There is still time to put this into place before the end of the personal tax year, but the clock is ticking.

Ever Higher Income Taxes for Landlords

4% rise in income tax for landlords from April 2027.

ie 24% / 45% / 49% for basic rate/higher rate/additional rate tax payers.

This was previously announced as a 2% rise by Reeves, but doubled by Healey. He really must hate landlords.

The only good news is the “tax reducer” for interest goes up to 24% to match this.

Landlord’s Quarterly Reporting (MTD)

Penalties suspended for one year for the 2027/28 Cohort (turnover over £30,000 within 2025/26 personal tax return).

I have added some notes in Appendix 3 about this topic.

This mirrors the penalty suspension for the 2026/27 cohort, but does not extend it i.e. those who should have been filing this year, will need to do this from April 2027.

As Announced Previously:

60 Day Report and Pay

If you sell your let property any Capital Gains Tax needs to be reported and paid within 60 days of the sale, unless you sell during February or March and we can file your 2026/27 tax return before the 60 day clock runs out.

I keep putting this in, as we still get the odd surprised client who has overlooked this.

Sole Trader Allowance

Increased from £1,000 to £3,000 from April 2027.

This is an odd tax break as it effectively gives you £3,000 of business expenses no matter what you actually spend. This is worth up to £800 for higher rate sole traders with minimal costs.

Mileage Rates

Up to 55p from 45p, for the first 10,000 miles.

Up to 35p to 25p for over 10,000 miles.

This is BACKDATED to 6th April 2026, and builds on a random and rather overlooked policy from Rachel Reeves announced on 21st May putting the rate up to 55p for the first 10,000 miles in response to higher oil prices. The first time these rates have moved for 15 years.

From a practical point of view backdating things like this is a real pain, not least for employers who now need a policy on whether to pay this or not. For employers paying less than this rate, you can claim tax relief via your tax return. 10p ‘short’ will be worth 4p in the pocket. This is a classic ‘how to make tax complex’.

Reversal of ISA Changes (April 2027)

The cash element of ISA’s was to be capped at £12,000 for under 65’s from April 2027, but now isn’t.

The ISA rate remains £20,000, and you can choose how much or little to put into cash.

This seems a very sensible reversal to a rather odd policy to force stock market investment on those wanting to use their ISA allowances. I saw some cross industry heads who have just put a huge amount of money into systems to cope with this change, only to see it pulled again. But for everyone else, its a bonus.

Sole Traders Quarterly Reporting (MTD)

Penalties suspended for the 2027/28 Cohort (turnover over £30,000 within 2025/26 personal tax return).

I have added some notes in Appendix 3 about this topic.

This mirrors the penalty suspension for the 2026/27 cohort, but does not extend it i.e. those who should have been filing this year, will need to do this from April 2027.

Ever Higher Income Taxes for Savers

4% rise in income tax for savings interest from April 2027.

i.e. 24% / 45% / 49%  for basic rate/higher rate/additional rate tax payers.

This was previously announced as a 2% rise by Reeves, but doubled by Healey. He really must hate savers as much as he does landlords.

The only good news is the tax free interest bands of £1,000 (basic rate) and £500 (higher rate) remain.

Accelerated Tax Payments

Quarterly Tax payments from April 2029.

Details TBC.

This is another long term HMRC ambition.

There is scant detail provided. It is unclear if this is based on the prior year’s tax position, or a forecast based on the dubious Quarterly Reporting data. These will be “automated” payments, i.e. HMRC seem to want to switch payments to DD.

The starting point of 2029/30 sounds like a “we really haven’t worked this out yet”.

Unsurprising this pulls in big money, £1.3billion per year, albeit right out of banking liquidity for clients putting this cash aside in a savings account.

Already Announced

Pension Changes (salary sacrifice for employees)

Pension contributions via your employer are changed from April 2029.

1. Salary sacrifice capped to £2,000 per person.
2. Further pension would need to be deducted from net wages or paid by employee.

For those in employment trying to avoid the loss of personal allowance over £100,000, or retain child care hours, you will still be able to pay pensions out of your taxed pay.

For higher rate tax payers with most income via PAYE the tax cost of this is a rather modest 2% NIC. It hits harder for those who are basic rate tax payers as the rate of NIC’s otherwise avoided are 8%.

Some employers may seek to change the ratio of salary and employer’s pension which could sidestep this, albeit with implications on your headline rate of pay.

Mansion Tax (from April 2028)

For homes over £2 million, a council tax surcharge starting at £2,500.

This essentially adds a Council Tax surcharge. We understand valuation will be sent to homes from Autumn 2027 and you have 6 months to appeal a valuation. This will be fun given the Valuation Office seem to be using purchase price + indexation on what by definition will tend to be fairly unique properties. Expect quite a lot of haggling and a whole new industry in low ball valuations. There is a reason no-one has had the guts to re-draft council tax bands which remain untouched since 1991.

Company Car Benefit in Kind

The BIK band for electric vehicles, currently 4%, rises to 5% from April 2027 and 7% from April 2029.

This is the same policy as previously. Starting low and rising slowly. It impacts those driving an electric company car. The benefit in kind rate is applied to the list price of the vehicle and both you and your employer are taxed on the computed benefit. Electric cars are still however a brilliant tax break, as are some hybrids, and look to be for some years.

Personal Tax Bands

The current freeze continues, until April 2031.

Fiscal drag has been dragging on for so long everyone is bored of talking about it. Maybe that is the point!

Council Tax Discount

£100 off your council tax bill for bands A-D.

Bit random, but a cash boost for householders in the lower housing bands. It’s not much, but I imagine much of that will go straight back into the economy. It’s a small “feel good” boost, albeit at the cost of £2 billion plus no doubt a lot of admin.

Banking Levy and Surcharge

The banking surcharge has been increased, temporarily for a 15 month period, from 3% to 6%

The banking levy appears unchanged.

These are two different taxes. The Banking Surcharge is ‘extra corporation tax’. The Banking Levy is a tax on the balance sheet (ie largely deposits) held by UK banks.

The banks have naturally been suggesting they will move profits out of the UK due to the Banking Surcharge, but the reality is they already do that to the maximum extent that they can and this is largely a ‘free hit’ in the short term. Longer term it chips away at the competitiveness of London as a financial centre. The rate was reduced from 8% to 3% in 2023 so this is a mid range position, and also only for 15 months. In theory at least!

The Banking Levy is unavoidable, but my man in banking tells me “This tax burden won’t see banks move existing lending to other countries, but it would have made it less attractive for banks to lend in the UK and there are many other countries competing for finance for capital projects, particularly data centres. Ultimately tax is met by the customer, either through higher borrowing costs or lower rates on savings/deposits. “Windfall now” will likely increase “painful” tomorrow.”

Or in other words, Healey seems to have picked the right tax to put up that will not directly come out of consumer pockets in the future.

EV Mileage Tax

3p a mile to drive your EV from April 2028.

Right now it is pretty modest. If you drive an average 7,000 miles per annum, it’s just £210 per annum. This is to be collected via the DVLA VED charge, based on MOT records rather than fitting trackers or any other complex method, so ought not be a huge hassle. The main issue is the low starting rate is likely to go up sharply in time.

Below I list some major allowances, and in brackets [date of last change, what the rate would be if it kept pace with inflation to Oct-25, and % effective reduction].

• Personal allowance stays at £12,570 [Apr-21, £16,452, 31% reduction].
• Higher rate threshold stays at £50,270 [Apr-21, £65,794, 31% reduction].
• Corporation Tax main rate remains 25% for profits over £250,000 [Apr-23, £276,265, 11% reduction].
• Corporation Tax 19% for profits under £50,000 [Apr-17, £70,019, 40% reduction].
• VAT threshold stays at £90,000 [Apr-24, £97,146, 8% reduction].
• Mileage increased from 45p to 55p for business use of private car under 10,000 miles, and from 25p to 35p for additional miles, backdated to 6th April 2026.
• IHT threshold remains at £325,000 [Apr-09, £544,564, 68% reduction].
• IHT threshold for a married couple with a home announced 2017 remains at £1,000,000 [Apr-17, £1,400,389, 40% reduction].
• £100,000 threshold for loss of Personal Allowance remains (frozen since 2010) [Apr-10, £161,547, 62% reduction].
• £100,000 threshold for loss of Tax Free Childcare for Working Parents (frozen since introduced in 2017) [Apr-17, £140,039, 40% reduction].

I have put in my notes about this again, as its still very relevant. Written November 2025

One key background story which links into my notes about frozen allowances remains “fiscal drag”, that is to say not putting up key rates and allowance in line with inflation. What started as a way to flatter forecasts and defer political decisions, now seems to have been entrenched with most allowances frozen since 2019/20, which will be 7 years by the end of 2026/2027, in a period of around 35% inflation, and is now set to run to April 2031.

I have been discussing this topic for some time, but it is really affecting the ‘money in the pocket’ of many. It is not universal however. For basic rate tax payers who are employees, they have benefited from falls in National Insurance over the same period, neutralising the effect. However for those on professional level earnings it is significant. Take a middle manager earning £48,000 in 2020, still plodding away in the same job but with an inflation linked salary, they now earn £65,000. They are  pushed into the higher rate tax band by some margin, and will pay on average £200 a month more in taxes (after allowing for lower NI) than they would have if allowances had tracked inflation. The same pain is shared by all higher rate tax employees. It is no wonder many people are feeling the squeeze.

The loss of personal allowance at £100,000, which used to be fairly uncommon amongst our client base, is now a regular feature. An inflation linked band would be approaching £160,000 now. It was only introduced as a temporary measure following the 2009 crash.

From an individual point of view, this actively stifles behaviour and spending. So clients facing a 60% marginal rate of tax will tend to push more cash into pension than they would like, and foregoing day to day spends. The same happens with the ceiling in Tax Free Childcare which was set at £100,000 in 2017 and would now be £136,000 if inflation linked.

To me, this is a major issue in terms of economic growth and GDP. If people have less in their pockets, they cant spend it.

Another budget, another new Chancellor.

Resplendent in a bright red paisley tie, flanked in close by Andy B and Emma Reynolds (first minister of the Treasury) Healey showed no real nerves or emotion pushing his “safe pair of hands” persona.

As I said 11 months ago about Reeves “if still here in a year Reeves will have surpassed Rishi’s 29 month stint which is the longest serving out of the previous 6 and heading towards Hammond and Darling, with 3 years a piece back in more stable times“. Some heavy work on the “if“. Reeves managed just over 2 years in the job and is now on the back benches. How did she do? Well “not the worst” would be a fair summation, but completely boxed in by her electoral promises to not increase main line taxes she added 2p on investment incomes (dividend taxes, rents and savings) whilst sparing pensioners from any hit. Healey thanked her warmly, and might even have meant it.

In the run up, gone was the constant “kite flying” of various policies which ended up with, as I noted last year, the mad U-turn on policies which have not in theory been announced. Instead we got a fairly tight-lipped chancellor who made a few feel good ‘warm up‘ announcements which did not amount to much, but to be fair help create a positive feeling. After all part of the role is to inspire confidence and get people spending, which of course stimulates growth. So far, so good.

So the new boy, is, well, an old boy really. He has been an MP since 1997 and already passed state retirement age at 66. Usual Public School, Oxbridge degree (Cambridge, Social and Political Science). No obvious talents for business or commerce. The closest I can find on that front is his Harry Potter lookalike. His entrance to the post was part political theatre, with his resignation as Defence Secretary  which helped end Starmer’s tenure. However the pretext for resignation was the Treasury would not commit to fully fund the military, which leaves him in a somewhat difficult position now he controls the Treasury and has to work out where to get the money from. Oops. This may well come back to bite later on.

So where is the economy? Oddly enough despite dark clouds this might not be the worst ever starting point for a Chancellor, the first time for a long while. Growth is sluggish, but above zero. Borrowing costs are stable and (very) slightly falling as a percentage of GDP. The main “gotcha” is the cost of borrowing, which is now over 5%. Why does this matter? Well with over £3 trillion in national debt, the annual cost of servicing this debt is £125 Billion per annum, or about 16p off income tax. It’s a vast sum and the rate of borrowing is largely outside of the control of No.11. Trump bombing Iran is not helping. Debt creates a real headache. Put taxes up and the economy is likely to tank, worsening the deficit in the medium term. Cutting taxes to stimulate the economy is risky too. This not only raises borrowing levels, but also the average cost of servicing existing debt too, and sharply if the bond markets think you can’t repay it. You may recall the disastrous Liz Truss “not budget”, who found this out the hard way (but it’s not her fault according to this book written by, er, Truss herself which Healey ripped into). Back in reality, it’s a very tricky tightrope no matter who is in charge. For now Healey seems to have both feet on the rope and no obvious wobbles. Yet.

Onto the speech itself, we had a lengthy hour long yawn fest of data no-one really follows live (even Wes Streeting was yawning when Healey was talking about his Deference spending), some jeering, and all the normal nonsense I write about every year, or indeed twice a year. He promised a “budget for business”, but omitted to do the biggest thing for Red Tape  – canning Quarterly Reporting. Landlords got yet another kicking with another 2% on top of the 2% Reeves added to income tax. This further punishes small landlords who will pay a 4% premium on income tax, along with savers. No real cheer for our client base.

Structurally on the main changes was a real push for devolution, with more money controlled by the regions. This may represent a real long term change amongst all the usual fluff.

The other ‘big one’ for me was the move to E-invoicing for VAT registered businesses and acceleration of tax payments via a not quite yet defined method. This sounds like lots more work all round. The main positive was the not entirely unexpected deferral of MTD quarterly reporting for the second tranche.

In reply, the Shadow Chancellor was again stood down, and Kemi was dealing with the response. Her usual aggressive style was (slightly) less adversarial than before. I imagine few outside of Westminster understand the petty jokes and sniping that took up a large part of the 30 minutes drone-a-thon. Her best line was “is that it?” Agreed it was very light budget in the house, but boy there was a lot of detail tucked away in the Red Book. What we didn’t hear was any substantive policy suggestions on what her party would have done differently other than finding savings from welfare which seemed a lot harder when sat on the other side of the house. Kemi ended with some join in chants which sounds more at home on the football terraces than in Parliament. I had long lost interest by this point and I think only Westminster fanatics would have been tuning in.

James Smith

5pm 28th October 2026

The following gives some “ready reckoners” on what money to take from your small limited company, and how much your personal tax will be.

Broad Strategies

Your gross income from the company (dividend+salary+other income) should be:

£50,270 if you want to stay basic rate

£60,000 if you want to keep all your child benefit

£100,000 if you want to preserve all your personal allowance

£125,140 if you want to avoid the additional (45%) rate of tax

You can then use the following rules of thumb for how much tax to keep back:

I have historically published tables to give typical extraction strategies undertaken by small Limited Companies and how they change as the tax bands change, however this has got so complex with the various bands of Corporation Taxes, salary strategies and other ‘noise’ there are now very few “normal” cases.

More on Pensions

With the upcoming changes to pension from April 2029 it is worth thinking ahead to what this means.

In summary the position from April 2029 is:

1. Salary sacrifice capped to £2,000 annually.
2. Pension can be paid by employers.
3. Pension can be paid privately, but you need ‘relevant earnings’.

The implications of this are complex for the small business. At the moment most clients with a small limited company pay pension as a “gross company contribution”. This is normally a “salary sacrifice” meaning you declare a notional salary and immediately sacrifice that for pension.

Without this option, for a small limited company with contractual flexibility, your employer could simply elect to pay the pension. However there is a “gotcha”, as you must have “relevant earnings” which exclude rents or dividends. For a standard £12,570 director’s salary, this would mean employer’s pensions are capped at £12,570 plus a further £2,000 sacrificed, so £14,750 in total, well short of the £60,000 maximum. Payments of pension privately will not generally be possible without “relevant earnings”, i.e. other PAYE incomes outside of the company.

Your company could pay a higher salary, but you would incur Employee’s NI at 8% plus your employer may incur Employer’s NI at a hefty 15%. Pension contributions above £1,250 a month are very much going to move from a “no brainer” tax wise to a “need to do the maths”.

The interactions between company taxes, payroll taxes and personal taxes are so complex now we are having to plan each client on their own merits to optimise profit extraction and tax policy.

I enclose however some general pointers for those looking at their tax efficiency.

Things to Consider

The following costs are “no brainers” for most (but not all) clients, regardless of income.

• Having two directors and paying salaries to £12,570 for at least one of them.
• Gross Company Pension Contributions vs payments out of net pay.  Well not from April 2029.
• Company phones for each director (private use permitted).
• Take an “annual event” at £150/per employee (plus a guest).
• Electric vehicle as a company car [25 to 40% saving, reducing over time due to tax change and initial age of vehicle].
• Hybrid vehicle as a company car [5 to 20% saving again benefits reduce over time, and initial age of vehicle].
• For those working from home, a home office rental agreement.

In case you have missed it, this project requires quarterly reporting for sole traders and landlords. Moreover there is a new year end tax return and a whole new system to deal with filing and payments, largely operated using paid for third party software.

So how is it going? Well after 11 years of development, the first wave of victims tax payers have filed 436,000 Q1 updates out of an expected 864,000, or just over 50%. This is not quite as bad as it sounds, as penalties were suspended so it is effectively an “open pilot”.

Of more concern is the new tax return which seems to be poorly designed. For example, users of the new system have found any overpayments are sat in limbo on the old system. This is one of many, many issues.

For the second phase (turnover over £30,000 in the 25/26 tax return), quarterly reporting should start from April 2027, with the first filing to June 2027 filed by 7th August. However penalties have been suspended for this cohort and in practice you don’t need to do it until April 2028. Phew!

The only other good news is we have had a good rate of success with exemptions for older clients, which means they stay on the current system for now.

For everyone else the current strategy is:

• Don’t sign up for anything to do with MTD.
• Don’t buy any software unless you want it anyway.
• Wait for us to either instruct you to sign up or seek an exemption.
• Do create a a digital tax account  if you don’t have one.

For those with no penalties, “do nothing” seems to be a good plan. This has worked so far for the first cohort, one of our volunteer filers has been caught by the repayment issue. Those in the pilot for 24/25 returns have had issues with getting mortgages as the relevant SA302 and Tax Year Overviews don’t yet exist and might not until at least April 2027.

For those for whom non-filing will result in penalties (i.e. mandated for 26/27 but didn’t file due to penalty suspension), we will be issuing instructions in March. For most clients we expect you to be able to “self file” using bridging software. Crucially there is no quality threshold here, you just need to file *something” and once set up should find it fairly simple to file.

Pressing the button once a quarter, to send in a number no-one will be looking at, would appear to be the ultimate in “red tape”.

Overview

Criteria and start dates:

Total turnover (rental business PLUS sole trader incomes)

• More than £50,000, April 2026  [Based on your filed 24/25 tax return].
• More than £30,000, April 2027  [Based on your filed 25/26 tax return].
• More than £20,000, April 2028.

File What?

• Landlords               Rents and total expenses (rents only if joint).
• Sole Traders           Sales, and total expenses (two total figures a quarter).

File When?

• Quarter End                       Deadline
• Jun 2026                            7^th Aug 2026
• Sep 2026                           7^th Nov 2026
• Dec 2026                           7^th Feb 2027
• Mar 2027                           7^th May 2027
• Final Return                     31^st January 2028

File How?

• From bookkeeping software, or;
• From excel with a plug in (which you will need to pay for), or;
• Via a third party, or;
• Via your accountant.

File Why?

Because HMRC say so. To be clear this is not “five tax returns” as the quarterly data has no tax function at HMRC’s end. It’s proper old fashioned “busy work”.

When it comes to the year end, we will replace your figures with the real ones, so the quality threshold here is very low.

Do’s and Don’ts

These remain the same:

• Don’t buy software unless you actively want to use it for your record keeping.
• Do use a dedicated business account.
• Don’t sign up for the pilot, or the real thing. HMRC may sign you up themselves but this really just saves everyone a job.