- Osome Blog UK
- UK Budget 2026
UK Budget 2026: Highlights for Businesses and Entrepreneurs
- Published: 1 November 2026
- 10 min read
- Taxes & Compliance
Ruth Dsouza
Author
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
Mosan Ali
Reviewer
Mosan Ali is our Accounting Manager based in the UK and has a wealth of knowledge of UK GAAP, VAT, and PAYE. With 12 years of experience crunching numbers and ensuring compliance, he keeps our financial reporting ship-shape. Think of Mosan as our blog's accounting guru. He carefully reviews our UK-focused content, ensuring it's accurate, up-to-date, and packed with helpful tips for UK businesses. Get your taxes right from day one with our informative blog posts.
The UK Budget 2026, delivered by Chancellor John Healey on 28 October 2026, changes wage costs, business rates, exit planning and Value Added Tax (VAT) rules for small businesses. Most measures start from April 2027, which gives owners a short window to adjust budgets and processes. This guide explains each change, who it affects and what to do before it takes effect.
Key Takeaways
- The National Living Wage rises 3.9% to £ 13.21 an hour from 1 April 2027, adding roughly £ 975 a year for each full-time minimum wage employee.
- Retail, hospitality and leisure properties in England with a rateable value up to £ 18,000 qualify for 100% Small Business Rates Relief from April 2027.
- The Business Asset Disposal Relief lifetime limit halves to £ 500,000 from April 2027, while a new Founders' Relief offers a 10% Capital Gains Tax rate on qualifying gains.
- All VAT invoices must be electronic from April 2029, and online marketplaces will collect VAT on qualifying sales by UK businesses from October 2027.
What Is the UK Budget 2026?
The UK Budget 2026 is the government's yearly statement of tax and spending plans, presented to Parliament by Chancellor John Healey on 28 October 2026. It is the first Budget under Prime Minister Andy Burnham, and the full measures are published in the Budget 2026 document on GOV.UK.
The main rates of Income Tax, National Insurance and VAT stay the same. The measures with the most impact on small businesses cover employment costs, business rates, tax relief on selling a company and the move to digital VAT invoicing. Many of them build on the direction set in the UK Budget 2025, with firm dates now attached.
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How Much Will the National Living Wage Increase Cost Employers?
The National Living Wage rises by 3.9%, from £ 12.71 to £ 13.21 an hour, on 1 April 2027. The National Minimum Wage for workers aged 18 to 20 rises to £ 11.27 an hour on the same date. The increase is positive for employees, and for employers it is another rise in payroll costs.
A full-time employee working 37.5 hours a week works about 1,950 hours a year, so the 50p increase adds around £ 975 to their annual pay before employer National Insurance and pension contributions. A café with ten staff on the minimum wage would pay close to £ 10,000 more each year. Employers with larger workforces should build the higher rate into their 2027/28 budgets now.
This Budget brings a mix of positives and some additional costs for businesses. The biggest thing I would say is do not just look at the headlines. Understand what these changes actually mean for your business, whether that is your payroll costs, cash flow or longer-term plans.
Accounting Manager
Osome's payroll processing is included in every UK accounting package, so the April 2027 wage increase can be applied from the correct pay period without manual recalculation or missed adjustments.
Which Businesses Qualify for the Higher Small Business Rates Relief?
From 1 April 2027, retail, hospitality and leisure properties in England with a rateable value up to £ 18,000 qualify for 100% Small Business Rates Relief, up from £ 12,000. Relief tapers to nil at £ 21,000, up from £ 15,000, and the higher thresholds apply until 31 March 2029.
This is good news for the high street. A café with a rateable value of £ 16,000 receives no Small Business Rates Relief today and could pay no business rates at all from April 2027. Pubs, social clubs and most live music venues also get an extra 20% relief in 2027/28 and 2028/29, taking their total to 35%.
Owners of shops, restaurants and cafés should check whether their property qualifies, as the saving can be significant.
How Does the Lower Business Asset Disposal Relief Limit Affect Selling a Business?
Owners planning to sell their company in the next few years will pay more tax on larger sales from April 2027. The Budget halves the lifetime limit for Business Asset Disposal Relief (BADR) and introduces a separate relief for founders of high-growth businesses, with its own rate and conditions.
What changes for BADR from April 2027
BADR lets owners pay a lower rate of Capital Gains Tax (CGT) when they sell all or part of a qualifying business. From April 2027, the lifetime limit falls from £ 1 million to £ 500,000. The relief can also be relevant when an owner exits by winding up the business, which our guide on how to close a limited company covers.
An owner who sells a company after April 2027 with a £ 1 million gain pays the BADR rate of 18% on the first £ 500,000. The remaining £ 500,000 is taxed at the higher CGT rate of 24%, which adds £ 30,000 to the bill compared with the current rules.
What the new Founders' Relief offers
Founders' Relief is a new relief for the founders of high-growth businesses. From 6 April 2027, it would apply a 10% CGT rate to up to £ 10 million of lifetime qualifying gains. The proposed conditions include:
- The founder held at least 25% of the ordinary shares when the company started trading;
- The founder has held the shares for at least five years before the sale;
- The founder has been UK tax resident for at least five continuous years before the sale;
- The company has turnover of at least £ 10 million and at least 15 full-time equivalent employees;
- The company meets two of three growth or innovation tests.
The rules are still under technical consultation, which closes on 30 November 2026, so eligibility could change before the relief starts. Anyone considering a sale should put proper tax planning in place before making any decisions.
City AM reports that Chancellor John Healey said the lower BADR limit will mean no changes for three in four claimants. The new Founders' Relief is aimed at the founders of the most successful firms.
When Do VAT Invoices Have to Be Electronic?
From 1 April 2029, every VAT invoice must be issued in a specified electronic format. The Budget 2026 set out the implementation roadmap for VAT e-invoicing, with full technical specifications due by April 2028. The government has said invoices will pass directly between businesses' own software instead of through a central government platform.
The change affects how every VAT-registered business raises and receives invoices. Businesses still creating invoices in spreadsheets or word processors will need software that can send them in the required format. Our comparison of the best accounting software for a small business is a practical place to start.
April 2029 might seem quite far away, but I think it is another reminder that HM Revenue & Customs (HMRC) is moving towards a much more digital tax system. If you are still relying on manual processes, now is a good time to start looking at your accounting software.
Accounting Manager
How Will Online Marketplaces Collect VAT From October 2027?
From October 2027, online marketplaces will become responsible for collecting VAT on qualifying sales made by UK businesses through their platforms. The rule covers sellers who are VAT registered or who make more than £ 90,000 of sales through a marketplace, with the threshold applied to each platform separately.
The change will not affect every seller or every transaction. These sales fall outside the rule:
- Sales by sellers who are not VAT registered and stay below £ 90,000 on a platform;
- Personal sales;
- Business-to-business (B2B) sales;
- Second-hand sales.
Sellers in scope need to record which sales the marketplace has already handled, so their VAT reporting and bookkeeping stay correct. Sellers close to the £ 90,000 threshold can check how the tax works in our guide to what is VAT.
Osome's ecommerce accountants handle bookkeeping and VAT returns for online sellers, so sales where a marketplace has already collected VAT are recorded correctly and your returns stay accurate from October 2027.
When Do the UK Budget 2026 Changes Take Effect?
The Budget 2026 measures start on different dates between January 2027 and April 2029. The table below sets out each change, its start date and who should act on it, so owners can plan in the right order.
Change | Start date | Who should act |
|---|---|---|
| Main rate First Year Allowance rises from 40% to 50% | 1 January 2027 | Businesses buying plant and machinery |
| National Living Wage rises to £ 13.21 an hour | 1 April 2027 | All employers |
| 100% Small Business Rates Relief threshold rises to £ 18,000 | 1 April 2027 | Retail, hospitality and leisure properties in England |
| Main rate of writing down allowances falls from 14% to 12% | April 2027 | Businesses claiming capital allowances |
| BADR lifetime limit falls to £ 500,000 | April 2027 | Owners planning to sell a business |
| Founders' Relief starts | 6 April 2027 | Founders of high-growth businesses |
| Making Tax Digital (MTD) for Income Tax extends to qualifying income over £ 30,000 | April 2027 | Sole traders and landlords |
| Online marketplaces collect VAT on qualifying sales | October 2027 | Online sellers |
| VAT e-invoicing becomes mandatory | April 2029 | All VAT-registered businesses |
Sole traders and landlords joining in April 2027 can prepare with our guide to Making Tax Digital for Income Tax.
Your Making Tax Digital checklist
If you are VAT registered, you must sign up for MTD. Here’s what you need to get started with Making Tax Digital.
How Osome Can Help
Keeping track of Budget changes takes time that most small business owners do not have, especially when payroll, VAT and tax planning all shift in the same year. Osome combines expert accountants with smart software to handle bookkeeping, payroll, VAT returns and annual filings for startups, freelancers and ecommerce businesses in the UK.
Our UK accounting team can update your payroll for the new wage rates, check how the marketplace VAT rules apply to your sales and help you get your records ready for e-invoicing, so each measure is in place before its start date.
Summary
The UK Budget 2026 brings a mix of positives and additional costs, and the main risk is reacting to the headlines alone. Work out what each measure means in pounds for your business, then build those figures into your 2027/28 cash flow forecast while there is still time to adjust pricing, hiring or the timing of a sale.
If you are unsure how any of the changes affect you, speak to your accountant sooner rather than later. Early advice matters most for owners planning a sale, where the April 2027 BADR change can alter the tax due by tens of thousands of pounds.
Ruth Dsouza Prabhu is a content developer who specialises in crafting clear, compelling narratives from complex ideas. With expertise in marketing communications and lifestyle writing, she simplifies business concepts for a wide audience. Her writing blends strategy, storytelling, and thought leadership, always with a focus on clarity, credibility, and meaningful impact.
