Mr Healey’s quiet budget

Britain’s financial markets barely blinked following Wednesday’s Budget. The Chancellor, John Healey, began his first budget by targeting savers, property owners and banks.

Even these higher tax areas and increased spending were regarded as modest compared to his predecessor, Rachel Reeves’s two-budget, £66 billion tax grab. The Financial Times estimated Mr Healey gave away £7.6 billion in 2026-27, with his planned tax rises generating £6.5 billion by 2030-31.

The budget “for working people” acknowledged the global turmoil which has pushed up costs for businesses and families, and his primary concern was with energy costs. The headline grabbers were the £100 fuel payment to each household in council tax bands A to D costing £2.6 billion and the abolition of gas standing charges next year.

Some of the tax increases were the usual suspects; alcohol duty up, Air Passenger Duty (APD) rates up, car tax up, tobacco duties up and so on.

Despite the continued arguments over the burgeoning welfare bill, there were no changes, with plans for new legislation tackling the issue pushed to next year. The Office for Budget Responsibility forecast benefits spending would rise by an average of £16 billion every year until 2031-32.

On welfare and defence, it was a ‘wait and see’ budget.

Mr Healey followed his boss’s favourite mantra of regional devolution, offering business rates and tax revenues to mayors at some point in the future.

He announced his second budget priority as being, “Backing the enterprise of British business to unleash innovation and growth in every postcode”, but both the National Living Wage and National Minimum Wage increased by 3.9%.

One area he emphasised was supporting Britain’s innovative business base.

What changes will businesses see?

Corporation Tax rates remained unchanged at 25% and 19%.

There were several changes to Capital Gains Tax (CGT), including the introduction of Founders’ Relief, balanced by another decrease in the lifetime limit for Business Asset Disposal Relief. Tech bros in, businessmen out.

The relief will support founders and early investors who have made a significant long-term contribution to the creation and development of a UK company. It will provide a 10% rate of CGT for qualifying disposals of shares or securities on or after 6 April 2027. The relief will have a lifetime limit of £10 million. Any Business Asset Disposal Relief (BADR) or Investors’ Relief gains arising after 6 April 2027 will reduce the amount of the Founders’ Relief lifetime limit available.

While the new Founders’ Relief might sound generous, changes to BADR are less so, with the lifetime limit yet again reduced, from £1 million to £500,000.

For businesses not yet planning to sell up, there was other bad news. From April 2027, the Writing Down Allowance has been cut to 12%. It was 18% in early 2025. The First Year Allowance (FYA), on the other hand, is up from 40% to 50% and this is limited to spending on plant or machinery which is unused and not second-hand.

There will also be reforms to the ‘distributions’ framework. The distributions rules aim to distinguish between taking profits out of a company, which is generally taxed as income, and making a gain when shares are sold, which is generally subject to CGT. The changes would target arrangements that allow profits to be extracted as capital gains rather than Income Tax rates (e.g. via a new holding company and share buyback).

Capital treatment will be protected for genuine changes in ownership, including family business succession, while the purchase of own shares and demerger reliefs will be modernised.

There will be new conditions for a company purchase of own shares with full details to be determined following further technical consultation during 2027.

The Income Tax treatment of distributions from non-UK resident companies will be aligned with those of UK resident companies.

Employee share schemes

Company employee share schemes will get a shake-up, with changes to both the Company Share Option Plan (CSOP) and Enterprise Management Incentives (EMI). The CSOP is a tax-advantaged share option scheme suitable for company employees and directors. While complex, unlike an EMI share option scheme, CSOP does not impose a trading company requirement or staffing limit, nor is there any upper limit on the value of CSOP options granted.

The Budget saw the individual option limit increased to £120,000 and its exercise period increasing to 15 years.

The interaction between the CSOP and EMI individual options limits will be removed. The exception for Employee Ownership Trusts (EOTs) in the EMI rules will be extended to companies arranging to become controlled by an EOT. The changes will take effect from 6 April 2027.

For EMI, there are plans to remove the requirement for a company to submit a separate notification of a grant of EMI option to HMRC. Instead, a company will be required to notify such a grant through the end-of-year return.

Business rates

Smaller firms such as pubs and beauty salons will see business rates either frozen in real terms, reduced, or cut to zero. For those businesses that fail the relief tests, the bill for the tax will rise by 4.5% in 2026-2027 to £35 billion and is set to rise further to £43.1 billion by 2030-31.

Vape shops and adult gaming centres will no longer be able to qualify for rates relief.

Taxation of company cars

Company car tax rates for the tax year 2030 to 2031 will see a one percentage point increase for zero emission vehicles and for all other vehicles, bands will increase by one percentage point per year in the tax year 2030 to 2031, to a maximum appropriate percentage of 40%.

Meanwhile, the government will increase the Approved Mileage Allowance Payments (AMAPs) and Simplified Mileage Rates for business mileage above 10,000 miles from 25 pence to 35 pence per mile.

As announced in the budget, the government will introduce legislation to extend the temporary five pence per litre (ppl) cut in the main rates of fuel duty (originally introduced at Spring Statement 2022) from 1 January 2027 until 30 June 2027. In addition, the legislation will extend the further 3.7 ppl cut to the rebated rates for gas oil (red diesel), biodiesel, bioblend and kerosene for excepted machines other than for heating, until 30 June 2027. The government will also introduce legislation to increase fuel duty rates in line with Retail Prices Index (RPI) inflation from 1 July 2027. 

So, who is paying?

While praising banks for their importance to the UK economy, Mr Healey added an extra payment of 3% on the existing surcharge to apply temporarily starting in January and ending 15 months later.

The High Value Council Tax Surcharge (HVCTS) is a new charge on owners of residential property in England worth £2 million or more in 2026, taking effect in April 2028. The charge will be additional to existing Council Tax liability. This measure is estimated to raise around £400 million of revenue per year from 2028-29. 

Properties above the £2 million threshold will be placed into bands based on their property value. Charges will increase in line with CPI inflation each year from 2029-30 onwards. 

There was also an increase in Income Tax applicable to property income. From 2027-2028, the property basic rate will be 24%, the property higher rate will be 44% and the property additional rate will be 49%. 

These rates will apply across England, Wales and Northern Ireland. The government has provided the devolved governments of Scotland and Wales with the ability to set property income rates in line with their current Income Tax powers. The changes will take effect from 6 April 2027.

This is a summary of the headline points, but if you need advice on any of the tax changes, please contact us. We’re here to help.