Autumn Budget 2026: What business owners and SMEs need to know
Discover how the Autumn Budget 2026 affects SMEs, from Corporation Tax and capital allowances to business rates, employee share schemes and exit planning.
Chancellor John Healey’s first Autumn Budget promised to give businesses greater breathing space while supporting investment, innovation and growth. For small and medium-sized enterprises (SMEs), the announcements included changes to capital allowances, business rates, tax reliefs and the rules affecting owners planning to sell their businesses.
However, not every measure represents a saving, and the timing of several changes will be important. Here are the key announcements and what they could mean for business owners.
- Corporation Tax remains stable, but investment incentives change
The government confirmed that the main rate of Corporation Tax will remain at 25%, with the small profits rate staying at 19%. This provides some continuity for businesses planning their finances over the coming years.
However, the Budget also introduced changes to capital allowances, which determine how much businesses can deduct from taxable profits when investing in qualifying assets.
From April 2027, the main rate of writing-down allowances will fall from 14% to 12%. At the same time, the First Year Allowance will increase from 40% to 50%, allowing eligible businesses to claim a larger deduction upfront on qualifying expenditure.
Full expensing will also remain in place for qualifying investment.
For businesses planning to purchase equipment, machinery or other qualifying assets, these changes could influence the timing and structure of investment decisions. It is worth reviewing planned expenditure with a tax adviser to understand which reliefs apply and when.
- Business rates: welcome relief for the high street
Retail, hospitality and leisure businesses received some targeted support.
From April 2027, the threshold for 100% Small Business Rates Relief will increase from £12,000 to £18,000 in rateable value for qualifying properties in England. The threshold for tapered relief will rise from £15,000 to £21,000.
The government expects around 70,000 additional businesses to benefit, while qualifying retail, hospitality and leisure properties will also receive a real-terms freeze in business rates bills for 2027/28 and 2028/29.
For smaller businesses operating on tight margins, these changes could help ease overheads and improve financial predictability.
However, the relief is targeted rather than universal. Businesses should check their eligibility and factor their actual rates liability into their budgets rather than assuming every small business will benefit.
- Selling a business: a mixed picture for owners
For entrepreneurs approaching retirement or considering an exit, the Budget contains an important change to Business Asset Disposal Relief (BADR).
From 6 April 2027, the lifetime limit on qualifying gains will fall from £1 million to £500,000. The relief’s Capital Gains Tax rate remains at 18%, meaning eligible gains above the reduced limit may face the standard applicable rate instead.
For some owners, this could increase the tax payable when selling their business.
There is, however, a new opportunity for certain entrepreneurs. Founders’ Relief will offer a 10% Capital Gains Tax rate on qualifying disposals of shares in high-growth, innovative UK companies, subject to eligibility conditions and a £10 million lifetime limit. It is intended to reward founders and significant early investors who build successful businesses.
The practical message is clear: business exit planning should not be left until a sale is imminent. Owners considering a sale, succession or management buyout should review their options early, particularly where the timing of a disposal could affect the relief available.
- Helping businesses attract and retain talent
Recruiting and retaining skilled employees remains a challenge for many SMEs. The Budget includes a potentially useful development in this area.
From 6 April 2027, the expanded EMI2 employee share scheme will increase the value of tax-advantaged share options employees can hold from £60,000 to £120,000.
For eligible growing businesses, employee share schemes can provide a way to reward key people, align employees’ interests with the company’s success and offer a stake in future growth without relying entirely on higher salaries.
The value of such arrangements depends on eligibility, scheme design and the company’s circumstances. Employers interested in using share incentives should seek advice on the rules and practical implications before introducing a scheme.
- Changes for sole traders and the self-employed
The Trading Allowance will increase from £1,000 to £3,000 from 6 April 2027. This will allow individuals to receive more qualifying trading and miscellaneous income tax-free, potentially making it easier to test a business idea or earn additional income.
From April 2029, taxpayers who already make Self-Assessment payments on account will move to smaller, more regular payments towards their tax bills. This should help some self-employed people manage their cash flow, although it does not remove the underlying tax liability.
The government has also announced a roadmap towards mandatory VAT e-invoicing from April 2029. The detailed design is still to be developed with industry, but businesses should keep an eye on the proposals and consider how their accounting systems may need to adapt.
- What about employment costs and tax administration?
The Budget did not announce a general reduction in employer National Insurance, so businesses should continue to plan around their existing employment costs.
The National Living Wage will rise by 3.9% from April 2027, which may increase payroll costs for employers with lower-paid staff.
The government is also modernising the taxation of company distributions to tackle arrangements used to extract profits at more favourable tax rates. Genuine commercial transactions and family business successions are intended to be protected, but further detail will matter to affected owners.
These developments reinforce the importance of keeping payroll, tax and financial records up to date and reviewing how profits are extracted from a company.
Turning the Budget into an opportunity
The Autumn Budget offers some useful opportunities for SMEs, particularly those investing in assets, operating eligible high-street premises or looking to attract talent through share ownership. For owners approaching an eventual sale, however, changes to Business Asset Disposal Relief make forward planning especially important.
The best response is not necessarily to make immediate changes. It is to understand which announcements apply to the business, when they take effect and whether they alter existing plans.
At Kellands Corporate, the focus is on helping business owners make informed decisions about their finances, their employees and the future of their business. Contact the team to discuss how the Budget changes could affect your business and your longer-term plans.
Please note
This article is based on the Budget 2026 document and the overview of tax legislation and rates document.
This article is for general information only and does not constitute financial, tax or legal advice. Measures may be subject to further legislation and guidance. Businesses should seek professional advice before making decisions based on the announcements.