Budget 2026 — What does it mean for small businesses?

Amid increasing global uncertainties, rising costs and slowing economic growth, this year’s Budget set out to give businesses the certainty they need to plan for the future.

On Wednesday 28th October, new Chancellor John Healey’s first Budget delivered short-term relief from macroeconomic pressures and long-term growth for the future of the UK economy. 

We know that certainty is important for small businesses. We welcome any measures that will give them the confidence to invest, hire, and grow. 

Here’s everything small business owners need to know about the 2026 Budget:

Business rates and operating costs

Business rates 

From April 2027, for qualifying retail, hospitality and leisure properties in England, the Small Business Rate Relief will be raised from £12,000 to £18,000 (and £21,000 for tapered relief). This means businesses occupying a single property with a rateable value of £18,000 or less will pay no business rates. 

For all other retail, hospitality and leisure properties in England, business rates will be frozen for two years. 

Energy costs 

Going live in April 2027, the British Industrial Competitiveness Scheme will give 10,000 energy intensive manufacturing firms a 20 to 25% discount on their electricity use. There will also be a backdated payment for 2026-2027.

Import tariffs

Tariff suspensions that were due to expire in December 2026 and June 2027 have been extended. These will apply to more than 269 goods across chemicals, plastics, hydrogen, automotive, and food and drinks industries.

From 11th November 2026 to 3rd February 2027, a new window opens for businesses to request removal of tariffs on other goods.

Fuel duty 

Frozen for the 16th consecutive year, the temporary 5p cut on fuel duty has been extended until 1st July 2027. 

Additionally, the temporary 3.7p cut on red diesel duty has been extended until 1st July 2027. After that date, red diesel duty will return to the rate before March 2022, and be uprated annually in line with the Retail Price Index (RPI).

Mileage

Tax-free mileage rates for those who use their own car for business are increasing. The Budget made the temporary 55p per mile rate, for the first 10,000 business miles, permanent. In addition from 6th April 2027, the higher rate, for anything above 10,000 miles, will rise from 25p to 35p. 

Alcohol duty 

From 1st February 2027, alcohol duty will be uprated by 4.55%, in line with RPI. At the same time, the relative value of Small Producer Relief will be increased through a more generous discount taper for products under 3.5% ABV. The marginal discount for products between 3.5% and 8.4% ABV will be uprated by RPI plus 10%. 

Taxation

Business Asset Disposal Relief 

The lifetime limit for Business Asset Disposal Relief is being halved from £1 million to £500,000 from 6th April 2027. This means you could pay more Capital Gains Tax when selling your business if your qualifying gains exceed the new limit.

Savings and property income tax

Last year’s Budget announced a 2% increase in the tax rate payable on income from savings and property. On 28th October, a further 2% increase was added across all bands.

This new announcement means the total increase in tax on savings and property income will be 4% from 6th April 2027:

• Savings basic rate will be 24%

• Higher rate will be 44%

• The additional rate will be 49%.  

VAT and online marketplaces

From October 2027, online marketplaces will be required to collect VAT on qualifying sales made through their platform by UK businesses.

Employment and staffing

Minimum wage

The National Living Wage and National Minimum Wage will both increase by 3.9% from 1st April 2027:

• National Living Wage for workers over the age of 21 will rise from £12.71 to £13.21 per hour 

• National Minimum Wage for 18-20 year olds will rise from £10.85 to £11.27 per hour

• For eligible apprentices and 16-17-year-olds, the rate will rise to £8 to £8.31 per hour

This will mean higher wage bills for employers. If you employ staff, it could be wise to update your forecasts and pricing.

Employee share schemes 

Designed to help businesses recruit and retain staff, the amount of shares employees can receive will be doubled.

From 6th April 2027, the Company Share Option Plan will be renamed Enterprise Management Incentives 2. The individual option limit will increase from £60,000 to £120,000 and the exercise period is extended to 15 years.

Non-compete clauses 

The Government will bring in legislation to limit non-compete clauses in employment contracts, something that has long been a barrier to start-ups and businesses looking to scale.

Capital allowances 

First-year allowance 

From 1st January 2027, the first-year allowance for main rate expenditure will increase from 40% to 50%. This is designed to encourage investment.

Writing down allowances 

The main writing down allowance will reduce from 14% to 12% in 2027: from 1st April for Corporation Tax; and 6th April for Income Tax.

This will affect how businesses recover the cost of their capital investments and could lead to higher Corporation Tax bills.

Business investment and support for entrepreneurs 

Access to finance

The British Business Bank will get an additional £5 billion of capacity so it can support more schemes to make finance accessible to small businesses. This extra funding will include £2 billion to back innovative and growing businesses, and new regional investment funds (subject to eligibility). 

Additionally, access to finance will be widened for businesses who want to export through the new UK Export Finance guarantee, delivered jointly with the British Business Bank and due to launch in 2027. 

Trading allowance

From 6th April 2027, the Trading Allowance will triple from £1,000 to £3,000. This means if your self-employed income is less than £3,000 you won’t have to tell HMRC or file a tax return. 

Founders’ Relief

From 6th April 2027, a new Founders’ Relief will be available to founders of high-growth, innovative companies. This will give qualifying founders a reduced 10% Capital Gains Tax rate on lifetime gains up to £10 million.

Young Entrepreneurs Allowance 

A new pilot, the Young Entrepreneurs Allowance, will give successful applicants help with living costs in the first year of their business.

Investment in female founders 

A new £200 billion scale-up programme for female founders will test how to overcome barriers to fundraising and investment for women founders.

In addition, the British Business Bank has earmarked £100 million to support women-led businesses and funds.

Administration

Cutting red tape

The Government has accepted the majority of recommendations from the Small Business Regulation Taskforce including:

• Making it simpler for SMEs to bid for government contracts

• Reducing the number of ONS business surveys and information requests

• Implementing its 'Tell Us Once' ambition, so businesses don't have to repeatedly provide the same information to different parts of government

• Reversing the planned requirement for the smallest companies to submit profit and loss information to Companies House

The Government has also announced up to £640 million in new gross regulatory administrative savings, contributing towards its target of cutting regulatory costs for businesses by 25%.

R&D tax relief

Measures to simplify the administration involved in claiming Research & Development (R&D) tax relief include:

• Removal of the R&D tax credit Claim Notification Form from April 2027

• Simplification of the Additional Information Form from autumn 2027

HMRC direct debit 

From April 2029, HMRC requires all employers to have a direct debit set up for VAT and PAYE return liabilities. Businesses can continue to use other payment methods before a specified cut-off date, but the direct debit will be used to collect any unpaid balances. 

Self-Assessment payment changes

From April 2029, Income Tax Self-Assessment taxpayers who make payments on account will have to make more regular in-year payments towards their final tax bill.

If your business is looking for finance to help you grow or adapt to these changes, you can apply for a loan or line of credit in minutes. Check if you’re eligible today on our website.

02/11/26: While we want to help as much as we can, the information found here is provided solely for informational purposes and should not be considered financial, legal, or tax advice. To the extent permitted by law, Funding Circle does not accept any liability for any loss or damage which may arise directly or indirectly from the use of, or reliance on, the information contained here. If you have any questions, please speak to your professional adviser or seek independent legal advice.