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The Chancellor John Healy delivered his first Budget Statement on 28 October. The statement plus all the supporting documents are located here, but the key tax provisions are summarised below.
Income Tax on Savings
The rates of income tax applicable to savings income will increase from 6 April 2027. From 2027 to 2028, the savings basic rate will be 24%, the savings higher rate will be 44%, and the savings additional rate will be 49%.
Income Tax: Property rates for tax year 2027-28
The rates of income tax applicable to property income will increase. From 2027 to 2028, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%. 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.
Pensions Tax Allowance
The Pension Tax Allowance (PTA) will be introduced. This ensures that low-income pensioners whose total annual income is at or below the full new State Pension will not pay income tax. From 6 April 2027, the new state pension will be £13,036 and PTA will equal this amount, tapering away where income exceeds this threshold.
Annual ISA Allowance
The annual ISA allowance will remain at £20,000 for all savers, removing the previously planned cut to the Cash ISA limit for under 65s.
Trading Allowance Increase
The Trading Allowance will be increased from £1,000 to £3,000 from 6 April 2027. The trading income reporting threshold for Self Assessment will also be increased to £3,000.
Employee Share Schemes
The Company Share Option Plan (CSOP) individual option limit will be increased to £120,000.
The interaction between the CSOP and Enterprise Management Incentives (EMI) schemes individual options limits will be removed.
The CSOP exercise period will be extended to 15 years.
The period for certain tax-advantaged and non-tax advantaged shares and share options reserved by third parties to be excepted from the disguised remuneration rules will also be extended to 15 years.
The exception for Employee Ownership Trusts (EOTs) in the EMI rules will be extended to companies arranging to become controlled by an EOT.
The EMI exercise window following disqualifying events will be extended to 180 days.
The changes will take effect from 6 April 2027.
Inheritance Tax: Preventing Unintended Deductions for Liabilities in Trust Arrangements
The Government is amending the inheritance tax rules on liabilities and trust property. The legislation will provide a statutory rule for taking liabilities properly incurred by trustees into account when valuing settled property for inheritance tax purposes, align their treatment with personal liabilities and extend existing debt deduction restrictions and anti-avoidance rules to ensure that certain liabilities funded using value originating from a beneficiary’s own estate cannot reduce inheritance tax charges. The measure will have effect for deaths and other chargeable events occurring on or after 28 October 2026
Image Rights Payments
Image rights payments related to an employment are treated as taxable employment income. These payments will be subject to Income Tax and National Insurance Contributions (NICs). The changes will take effect from 6 April 2028
Founders’ Relief
A new Capital Gains Tax (CGT) Founders’ Relief is being introduced. This measure launches a technical consultation on the relief and is being published alongside the Summary of Responses to the Call for Evidence on tax support for entrepreneurs.
The relief will support founders and early investors who have made a significant long-term contribution to the creation and development of the UK’s most high-growth and innovative companies. The relief will provide a lower rate of CGT, for qualifying disposals of shares or securities, on or after 6 April 2027.
The consultation seeks views on the practical application of the relief and will close on 30 November 2026. The government will then introduce legislation through amendments to Finance Bill 2026-27 so that Founders’ Relief can take effect for qualifying disposals made on or after 6 April 2027.
Business Asset Disposal Relief
The lifetime limit of how much Business Asset Disposal Relief (BADR) an individual can claim will be reduced from £1,000,000 to £500,000 for BADR qualifying disposals made on or after 6 April 2027.
Gifts of Business Assets
The formula that restricts gift holdover relief on the disposal of qualifying shares or securities will be modernised to include assets within the intangible fixed assets regime or that qualify for the substantial shareholding exemption with effect from 6 April 2027.
Banking Surcharge
The Corporation Tax surcharge on banking companies to is increased to 6% for the period from 1 January 2027 to 31 March 2028.
Foreign Permanent Establishment (PE) Exemption
The Government is making the foreign permanent establishment (PE) exemption regime mandatory. The changes will take effect for Corporation Tax accounting periods beginning on or after 1 January 2027.
Capital Allowances: Reduce the main rate writing-down allowance and increase the main rate first-year allowance
The main rate first-year allowance will be increased to 50% for expenditure incurred on or after 1 January 2027 and the main rate writing-down allowance will be reduced to 12%, to take effect from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.
Corporate Interest Restriction: Interaction with Creative Reliefs
The Government is making technical amendments to Corporate Interest Restriction (CIR). From 1 January 2027, the calculation of taxable earnings for CIR will exclude Audio-Visual Expenditure Credits and Video Games Expenditure Credits.
Research and Development (R&D) Tax Reliefs
The Government is removing the requirement to submit a Claim Notification Form for R&D claims made on or after 1 April 2027, and will simplify and rationalise the information required in the Additional Information Form for companies that claim R&D tax relief from autumn 2027.
Making Tax Digital
Late-submission penalty points will not apply to quarterly updates for 2027-28 for taxpayers required to join MTD for Income Tax in April 2027. Certain groups, including taxpayers eligible for qualifying care relief, non-UK-resident foreign entertainers and sportspeople, and expected non-resident customers, will be exempt from MTD until further notice, with secondary legislation to be introduced before April 2027.
VAT - Domestic Electricity
The temporary removal of 5% VAT from domestic electricity bills in Great Britain has been extended to July 2027.
Direct Debits for VAT and PAYE
From April 2029, taxpayers must set up Direct Debit instructions for VAT and PAYE return liabilities.
Energy-Saving Materials VAT Relief
From April 2027, VAT relief will include heat batteries installed in UK residential accommodation or charity buildings.
VAT and Climate Change Levy on EV Charging
From 1 November 2026, electricity supplied through publicly accessible electric vehicle charging points will be standard-rated for VAT and will not qualify as domestic use for Climate Change Levy purposes.
VAT - Online Marketplaces
From October 2027, online platforms will collect and account for UK VAT on qualifying sales by UK businesses, helping to prevent evasion and create a more level playing field for high-street businesses.
VAT - Private Hire Operators
Larger minicab and taxi operators will be required to account consistently for VAT on full passenger fares, closing a tax loophole while protecting smaller local firms. No definition of “large” has yet been provided.
VAT - Social Housing Land
A new zero rate for social housing land sales should simplify transactions for housing associations. Currently, social housing providers can disapply a vendor’s option to tax, making the sale VAT-exempt and potentially causing the vendor to lose input VAT; the change removes this risk.
VAT - Healthcare & Medicine
Beginning June 2026, a new VAT zero-rating applies to donated medicines distributed free of charge for clinical trials and NHS treatments. Conversely, from May 2027, the VAT exemption for medical practitioner deputies is removed, subjecting standard deputising services to the standard 20% rate.
VAT - Reverse Charge
From April 2027, the VAT reverse charge on B2B services from overseas will only apply if the receiving UK business is VAT-registered. This change means that where a UK business is not VAT registered, the overseas supplier will be required to charge and account for UK VAT. This feels a significant change and will impact on a number of businesses in different ways and in some cases remove the need for VAT registration.
VAT - Deposit Return Scheme
From October 2027 the requirement for individual producers to account for VAT on unreturned deposits will be removed,
Tax Administration
HMRC will get £70m of additional funding to tackle tax evasion, including new powers to issue a Customer Correction Notice where it has reason to suspect an inaccuracy from 1 April 2028.
