Budget announcements can feel like a lot to take in on the day, particularly when some changes take effect straight away and others are still a few years off.
This year’s Budget has a bit of both. There are some changes that will mean higher tax for some, and others where the detail is still being worked through.
Rather than cover everything, we have focused on the key points that we feel will affect you the most.
Changes for employers
From 1st April 2027, the National Living Wage for those aged 21 and over will increase by 3.9% to £13.21 per hour.
The rate for 18 to 20 year olds will rise to £11.27, while the rate for 16 to 17 year olds and eligible apprentices will increase to £8.31.
For employers, particularly those with larger numbers of staff on or around the minimum wage, this will need to be factored into payroll and wider budgeting for 2027.
Changes for business owners considering a sale
There were two significant announcements affecting Capital Gains Tax and business disposals.
The lifetime limit on gains qualifying for Business Asset Disposal Relief will reduce from £1 million to £500,000 for disposals made from 6th April 2027.
For business owners considering a future sale or exit, this is an important change because it reduces the amount of qualifying gains that can benefit from the relief.
At the same time, the Government announced a new Founders’ Relief. From 6th April 2027, this will introduce a 10% Capital Gains Tax rate on up to £10 million of lifetime qualifying gains.
The relief is intended for founders and significant early investors in high-growth, innovative UK companies. However, the detailed eligibility criteria are still being worked on, so there is more to come before it is clear exactly which businesses and shareholders will qualify.
Property and savings income tax will increase
From 6th April 2027, the Income Tax rates applying to property and savings income will rise to 24% for basic rate taxpayers, 44% for higher rate taxpayers and 49% for additional rate taxpayers.
This is particularly relevant to landlords and individuals receiving taxable savings income outside ISAs and other tax-free allowances. For those affected, the change may be worth factoring into future tax planning rather than waiting until the new rates take effect.
Cash ISA allowance to remain at £20,000
One previously announced change will now not go ahead. The proposal to restrict the cash ISA allowance has been dropped, meaning the annual cash ISA limit will remain at £20,000.
New Pension Tax Allowance
From April 2027, a new Pension Tax Allowance will be introduced for pensioners whose total income is at or below the value of the full new State Pension.
The intention is to prevent those individuals from being brought into paying Income Tax simply because increases in the State Pension take it above the Personal Allowance. The allowance is currently expected to remain in place until April 2030.
Small Business Rates Relief changes
There was also an announcement for qualifying retail, hospitality and leisure businesses in England.
From April 2027, the rateable value threshold for 100% Small Business Rates Relief will increase from £12,000 to £18,000.
Tapered relief will also extend to qualifying properties with a rateable value of up to £21,000. For businesses operating from qualifying premises, this could make a meaningful difference to future property costs.
Trading Allowance increases to £3,000
The Income Tax Trading Allowance will increase from £1,000 to £3,000 from 6th April 2027. This will allow individuals to receive up to £3,000 of qualifying trading and miscellaneous income each year before Income Tax becomes due on that income.
The increase may be particularly relevant to those earning smaller amounts of additional income alongside employment or other sources of income.
A softer first year for Making Tax Digital
Those required to join Making Tax Digital for Income Tax from April 2027 will benefit from a 12 month penalty easement.
Late submission penalty points will not be applied to missed quarterly update deadlines during the 2027/28 tax year.
That does not remove the requirement to submit quarterly updates. They will still need to be completed before the annual tax return can be filed, but the easement gives those entering the system in 2027 more time to adjust to the new reporting requirements without immediately receiving late submission penalty points.
Self Assessment payments will become more frequent
The way some Self Assessment taxpayers pay their tax is also set to change from April 2029. Those who currently make Payments on Account will move towards smaller, more regular payments during the year rather than paying larger amounts at fewer points.
This will not change the overall amount of tax due, but it will change the timing of payments and could therefore affect how some taxpayers plan their cash flow.
HMRC to receive further debt recovery powers
From July 2029, HMRC is expected to receive additional powers to recover lower-value tax debts directly from bank accounts. The measure is aimed at taxpayers who can afford to pay but have repeatedly failed to engage with HMRC.
Further detail will be needed on how the process will operate in practice, but it is another sign of HMRC taking a firmer approach to the collection of overdue tax where there has been repeated non-engagement.
Getting Advice on the Budget
