29 Oct 2026
As always there are a number of highlights from this year’s budget and a lot of detail in the supplementary information that follows. If anything caught your attention or affects you or your business, then get in touch with your tax adviser.
For individuals, there are a collection of small impact measures which the Government hopes will make a difference to people dealing with the cost-of-living crisis and the owners of small businesses.
In particular there are a five “every day quick fixes”:
- Making higher tax-free mileage rates permanent and increasing support for nurses, care workers, self-employed trades and others who drive for work. The Chancellor is locking in the 55p per mile rate for the first 10,000 business miles and increasing the rate above 10,000 miles from 25p to 35p per mile, supporting around three million employees and self-employed people who use their own vehicle for work.
- Extending parental pay to more than 150,000 additional parents per year, including self-employed dads and partners who have previously missed out. This will give eligible parents two weeks of support currently worth up to £194 a week so they can spend more time with their child. We are awaiting confirmation on the implementation timing.
- Ending the Carer’s Allowance cliff edge, so unpaid carers no longer lose their entire allowance simply for earning a penny over the Weekly Earnings Limit, equivalent to 16 hours of the National Living Wage. Instead, only £1 of support will taper away for every additional £1 earned. We are awaiting confirmation on the implementation timing.
- Removing import tariffs on more than 100 products, helping lower costs on many family favourites including baked beans, chocolate and gherkins, while also supporting farmers facing higher fertiliser bills and households relying on kerosene heating oil. Together with tariff suspensions already introduced, households could save up to £21 on their food shop each year.
- Rolling out hundreds more Post Office drop boxes, bringing the total to 1,000, making it easier and more convenient for people to send and return parcels without having to queue at a Post Office counter, helping take some of the hassle out of everyday errands in the run-up to Christmas. This comes alongside upgrades to 600 Post Office branches by the end of the financial year, improving services for customers across the country.
An additional cost of living measure is to abolish the standing charges on gas bills which will be most noticeable on those receiving lower bills. This will be effective from the end of 2027, and it is likely that the cost will be transferred to the unit price of the fuel instead of the fixed standing charge in the hope that this is fairer.
The minimum wage for people over 21 will increase to £13.21 per hour. This means for someone working 40 hours a week, their wages increase to around £2,100 per month before tax and national insurance. For those aged 18-20, the hourly rate will rise to £11.27 per hour. This brings a 40 hour a week income to around £ 1,800 per month before tax.
The personal allowance – the amount we can earn tax free has stayed the same at £12,570 per year. This means based on the minimum wage figures those aged over 21 earning £25K per year, they should expect to pay around £210 in tax and national insurance a month so take home pay will be around £1,800. The equivalent figure for the younger person will be around £1,600 a month.
For pensioners however the position is a bit different. There has been a lot of talk about the increase in the state pension being more than the increase in the personal allowance and how this will work. The answer is that where someone’s only source of income is the basic state pension, HMRC will apply a special personal allowance so that no tax bill arises.
However, where pensioners have other income such as a private pension, bank interest or investment income they will have a tax bill. There are a range of particular allowances for savings, but people in this position should check their notices of coding and how much tax is being deducted. They may choose to prepare a tax return to keep matters on track.
Other key changes for individuals:
Income tax – for individuals (take note if you own a rental property) who receive rental income or more than £1,000 in savings income, there has been an increase in the tax rates on these sources of income.
Last year an increase was announced and now the increase has also been increased. This means from April 6 2027, rental and savings income will be taxable at 24/44% per cent or 49 per cent depending on your level of total income. The 44 per cent rate comes in when your total income is more than £37,000 pa and the higher rate when your total income is over £125K.
Capital Gains tax – despite all the speculation in the build-up to the budget, there has been no significant change to CGT rates. But for entrepreneurs there is a new 10 per cent Capital Gains Tax rate for lifetime gains with a lifetime limit of £10m which is a positive step to encourage business innovation and entrepreneurship proposed from April 6 2027.
Female founders were singled out with the commitment to support women-led businesses up to £200m, alongside a new scale-up programme for female founders.
Inheritance Tax – Again no changes here but it is important to remember that pensions left over on death are taxable for IHT from April 6 2027. Don’t forget to check your nominations are in order and that your heirs know what pensions schemes you are a member of and have the details kept safely.
ISAs – There are a few changes here mostly positive, especially for younger people. It was previously announced that the amount you could hold in cash in an ISA would be restricted if you were under 65. This restriction will now not go ahead so every adult has an allowance of £20,000pa to invest in an ISA which can be held in a combination of cash or shares.
The Lifetime Individual Savings Account or LISA is set to be abolished. It will be replaced with a new First Time Buyer ISA, which will be a bit less onerous on penalties if the holder buys a property which is over the maximum threshold. This is important here in and around St Albans where an average property costs £656,000. There will also be a new equity loan scheme for first time buyers.
Pensions – No changes were announced to how much you can add in or take out as a tax-free lump sum, so pensions remain a useful tool for saving for the future. There are however changes which have been announced to the age that you can access the 25 per cent tax free lump sum, which is rising from 55 to 57.
For Businesses:
There were a number of announcements aimed at supporting the smaller high street businesses which is good news here in St Albans. The main announcement was extending the exemption from business rates to properties with a rateable value of £18,000 (previously £12K) so hopefully this will help many smaller businesses and there are changes to the amounts you can claim on capital allowances : the tax relief you claim on plant and machinery etc in your business.
There will be changes to the way in which family businesses can take profits out of the business and also pass on the business to their families. Again, further details will follow on this.
Finally, many people are used to paying tax twice a year on their unearned income and from 2029 that tax may have to be paid more regularly. Again, we will have to look at the fine detail as it comes out but for now people will need to start to think about budgeting for that so they are not caught out.
As always, a lot of detail comes out in the days and weeks after the budget so keep informed about how the changes could affect you or your business.
Lisa Spearman is a partner at Mercer & Hole www.mercerhole.co.uk
