A first look at today’s budget. As always E&OE and focused on the changes that matter to typical Whitefield / YogaTax clients.
A Quick Summary of Business Related Issues:
- 2% Increase in Dividend Tax Rates from April 2026, and on Income Tax for Rental Income and Savings from April 2027
- No changes to Income Tax rates and thresholds on employment income, trading income or pensions, thresholds frozen till 2031
- No NI rate changes, most NI thresholds unchanged, small CPI adjustments on Lower Earnings Limit etc
- No changes to Corporation Tax rates / thresholds
- No changes to VAT threshold or rates
- Reductions in business rate multipliers for RHL properties
- The £1m cap on APR and BPR for IHT from April 2026 to be made transferable between spouses
- 50p increase (4.1%) to main NMW rate
- No scrapping of MTD Phase 1 for next April (bit late for that now)
Setting The Scene
Its been perpetual gloom hasn’t it? Last year Rachel Reeves promised a one off set of tax rises to stabilise public finances. And yet, here we are again.
In fairness the economic position is dire, with global energy prices, the Ukrainian war and Trump’s tariffs to name but a few of the “headwinds” facing the Government, and, perhaps more controversially the drag on the economy from Brexit where, regardless of views on the wider issues, there does seem to be a consensus that economic growth is being held back
However it seems our current Government has a reverse Midas Touch with an uncanny knack of being able to take a bad position and turn it into an even worse one, and the constant vacillation on tax and economic policy is far from helpful. That today’s Budget was leaked in dribs and drabs over recent weeks, and then in full a couple of hours before the speech, doesn’t help, nor does the incessant kite flying by the Treasury around possible changes. A period of quiet reflection by all in Westminster would be welcome and would foster much needed stability.
Business Tax Measures
Publication of a new review into the Loan Charge, and Governments acceptance of the recommendations. This is intended to draw a line under a particularly complex set of failed tax planning arrangements, recognising that many people were mislead and HMRCs response was overly harsh. Alas no substantive sanction on the promoters. I’m pleased that Whitefield was never involved in recommending such schemes; many accountants felt they were unethical.
Some proposed changes to Landfill Tax to be rolled back.
VAT:
- A restriction on some VAT loopholes used by Taxi firms like Uber – they will not be able to use the Tour Operators Margin Scheme. There is no change to the underlying VAT principals for Agency and Disclosed Agency, which some of our clients in other sectors, notably Yoga Studios use.
- E-invoicing – mandatory that all VAT invoices to be issued electronically from April 2029. This is not simply a PDF – metadata will need to be integrated.
- No change to VAT Threshold or Rates.
Reform of the Low Value Import (LVI) regime for Customs Duties – impacting businesses who sell goods into the UK from warehouses outside of the UK. Customs Duty will be due on LVIs, which will mean higher costs to consumers – mainly for your haul from Shein / Amazon or Temu – planned for 2029.
Increases to tax relief’s under Venture Capital Schemes (EIS, VCT) with a reduction in the upfront tax relief on VCTs to match EIS. Expansion to EMI schemes. Its worth noting that none of these schemes really support small seed businesses.
Call for Evidence around Tax Support for Entrepreneurs: “This Call for Evidence will gather views and evidence on tax policy support for investment in high-growth UK companies. HM Treasury will consider your response to assess the impact, accessibility and generosity of existing schemes, and explore the potential policy options to go further.” The key here is “high growth” – it doesn’t feel like it is there to support the rump of UK small and medium businesses in non sexy sectors, struggling with increased NI and NMW costs, sluggish demand and rising cost pressures.
Business Rates:
- Consultation on Reforms to Business Rating, and making aspects of the system fairer. Of note here is moving away from a cliff edge if a business tips over the Small Business Business Rates Relief (SBBR) threshold. It feels however the the consultation perhaps attempts too much in looking at issues around how rating impacts multi billion pound infrastructure investments at one end, and SBBR at the other.
- A new grace period for businesses coming out of SBBR when they acquire a second property – it will become three years rather than one
Confirmation of changes to multipliers for Business Rates on RHL (Retail, Hospitality and Leisure) premises, and announcement of 2026-27 multipliers generally. The multipliers for April 2026 onward are:
- Small Business Multiplier (RV less than £50k) (non RHL) drops from 49.9p to 43.2p
- Small RHL Business Multiplier (RV less than £50k) drops from 49.9p to 38.2p
- Standard Multiplier (non RHL) drops from 55.5p to 48p
- Standard RHL Multiplier drops from 55.5p to 43p
- High value Multiplier (properties with RV over £500k) set at 50.8p
- It is with noting that RVs are being revalued from April 2026, so this accounts for the apparent drop in all multipliers as the tax base will be going up.
Capital Allowances:
- Main Rate Writing Down Allowance down from 18% to 14%
- First Year Allowance of 40% on Main Rate items being introduced
- Most small businesses will see no change due to £1m Annual Investment Allowance which is unchanged
- Doesn’t apply to cars – existing rules apply
- 100% FYA on zero emission cars extended until 31 March 2027
Changes to allow the cost of eye tests, flu vaccines, and home working equipment to be reimbursed free of Tax and NI to employees – currently exemption only applies if the employer pays for these directly.
Personal Tax Measures
The manifesto commitment around not raising taxes on “working people” is subject to some clever interpretation
- Income Tax and NI Thresholds are being frozen until 2031 (was 2028). Taxes will go up through fiscal drag, including bringing a lot of state pensions into taxation.
- Income Tax rates on pensions and earned income – wages, salaries and Business Profits – remains unchanged.
- Dividend tax goes up by 2% from April 2026 at the ordinary and upper rate (Basic Rate and Higher Rate taxpayers), the Additional Rate for Additional Rate Taxpayers remains unchanged.
- Tax on both Rental Income and Savings (essentially Interest from Banks and Building Societies) goes up by 2% across the board from April 2027 from the current 20%/40%/45% to 22%/42%/47%.
- This exposes the continued muddle of having NI on earned income but not unearned income – maybe one day a Chancellor will endeavour to regularise this.
- A change to ordering rules so that the Personal Allowance is used against pensions and earned income first will apply from April 2027 – this removes a quirk whereby the Personal Allowance can be allocated against income sources taxed at greater tax rates, currently only dividends, and thus be worth more. Removing this quirk will make the tax calculation easier, probably as HMRC systems wouldn’t otherwise have coped.
Non-reimbursed employment expenses for home-working- employees can no longer claim these on a free-standing basis. Employers can still pay then under current tax free arrangements.
Capital Tax Measures
IHT Thresholds frozen until 2031. No changes to rates.
No changes to CGT rates or thresholds other than those pre announced from April 2026 in last years budget.
£1m cap on IHT relief under APR and BPR (Agricultural Property Relief and Business Property Relief) which comes in from April 2026 be made transferable between spouses, including from a spouse who died pre April 2026. no roll back on the scheme despite the protests from farmers.
Reduction in CGT relief for transfers to Employee Ownership Trusts, from 100% to 50% – effective immediately.
Personal Finance Measures
Removal of the two child child benefit cap from April 2026 (of course, a totemic issue for Labour backbenchers).
Introduction of Electric Vehicle Excise Duty (eVED) to Electric and Hybrid cars from April 2028, on a mileage basis as a proxy for the Fuel Duty paid by non electric/hybrid vehicles – the plan is It will be set at half of the equivalent rate of Fuel Duty for electric cars, and half again for plug-in hybrid cars (presumably as they are also paying Fuel Duty on fossil fuels at the pump), and paid at the time of the annual Road Fund Licence payment.
Extending the 5p Fuel Duty cut until the end of August 2026 with rates then gradually returning to March 2022 levels by March 2027
Salary Sacrifice Pension Contributions being capped at £2,000 from April 2029. Contrary to the noise being made about this, our experience is not many people use this relief. This doesn’t impact tax relief on pension contributions, so much as NI relief, both Employers and Employees, and it means that only the first £2k of a pension contribution by an Employee can get this relief.
Nothing else noted on pensions, speculation had existed around restricting Tax Free Lump Sums
High Value Council Tax Surcharge (“Mansion Tax”) on residential properties with a value over £2m (2026 levels), coming in from 2028. A deft bit of redistribution given many London Boroughs with expensive housing stock have quite low Council Tax rates. A property valued between £2m and £2.5m will have a charge of £2,500 / year, rising to £7,500 / year on properties valued over £5m. One would imagine Ministerial Grace and Favour Homes,and Royal Palaces, will be exempted. Arguably tapered CGT on main residences over £2m is a missed goal for a bold Chancellor.
Some VAT and IPT reliefs removed under Motability scheme.
Cash ISA limit for under 565s cut to £12k / year, but main ISA threshold unchanged at £20k
Other Points of Note
Increase to NMW rates for 2026/27
- Aged 21 and over – increase by 50p from £12.21 to £12.71 (4.1%)
- Aged 18 – 20 – increase by 85p from £10.00 to £10.85 (8.5%)
- Under 18 and Apprentices – increase of 45p from £7.55 to £8.00 (6%)
Consultation around restricting non-compete clauses in employment contracts, with the aim of improving innovation (so you can plagiarise your employers ideas and go and start up over the road).
Proposed National licensing Framework for Hospitality and Leisure Sectors.
Policy Statement on Mayoral Revolving Growth Funds promising “… devolves patient, recyclable capital to MSAs to invest in commercial projects that deliver long term growth. It is a strategic investment partnership between central government and mayors to support local economic development, utilising the public sector balance sheet to crowd in private finance and catalyse growth, in line with the Financial Transactions Control Framework” – what that means in plain English is debatable.
International Student Levy for the Higher Education Sector, with monies recycled into maintenance grants for disadvantaged students.
Reform of Gambling Duties from April 2026 – increased duties on remote gaming and Betting, abolition of Bingo Duty supporting bingo halls.