Budget 2026: the changes small company owners need to know

What happened

The government delivered Budget 2026 on 28 October 2026. HM Treasury and HMRC published more than 100 tax documents alongside it. Most of them are about large companies, pensions or specific industries. We read the official documents and picked out the measures that matter most to owners of small limited companies, founders and directors.

The short version: corporation tax rates stay the same. The government says it will keep the main rate at 25% and the small profits rate at 19%, including for the financial year starting 1 April 2028. The changes that matter are in capital gains, capital allowances, personal tax on savings and rent, and how you pay HMRC.

1. Selling your company: Business Asset Disposal Relief halved

Business Asset Disposal Relief (BADR) gives a lower rate of Capital Gains Tax when you sell all or part of a qualifying business, up to a lifetime limit. The Budget cuts that limit from £1,000,000 to £500,000 for qualifying disposals made on or after 6 April 2027. There are special rules for some contracts made before that date but completed after it.

Example: Anna owns all the shares in her design studio, Anna Kowalska Design Ltd. A buyer has offered a price that would give her a gain of about £800,000, and she has never claimed BADR before. If the sale completes before 6 April 2027, the whole £800,000 can qualify for BADR's lower rate (if she meets the other conditions). If it completes on or after 6 April 2027, only £500,000 can qualify and the other £300,000 would be taxed at the normal Capital Gains Tax rates. The timing of a sale now matters more than before, and the transitional rules are technical, so this is a conversation for a tax adviser.

2. A new Founders' Relief, but only for fast-growing companies

The Budget announced a new Founders' Relief: a 10% Capital Gains Tax rate on up to £10 million of lifetime gains, for qualifying share disposals on or after 6 April 2027. The conditions in HMRC's draft are strict. They include holding at least 25% of the shares when the trade started, keeping them for at least 5 tax years, and a company with turnover of at least £10 million and at least 15 full-time-equivalent employees, plus fast growth or significant research and development. A technical consultation is open until 30 November 2026, so the details may still change. Most small companies won't qualify yet, but it's worth knowing about if you're building to sell.

3. Buying equipment: capital allowances change

The main rate first-year allowance rises to 50% for qualifying spending incurred on or after 1 January 2027. At the same time, the main rate writing-down allowance falls to 12% from 1 April 2027 for corporation tax (6 April 2027 for income tax). In practice, the rules reward claiming relief up front and give less relief each year on the remaining pool. Ask your accountant which allowance suits a planned purchase.

4. Rent and savings in your own name: higher tax

From 6 April 2027, savings income will be taxed at 24%, 44% and 49% (basic, higher and additional rates). Property income in England, Wales and Northern Ireland will be taxed at the same rates, although Scotland and Wales can set their own property income rates.

Example: Anna also lets out a flat she owns personally, with a profit of £12,000 a year, all of it in the higher-rate band. In 2026/27 that profit is taxed at 40%, so £4,800. In 2027/28 the rate is 44%, so £5,280: £480 more a year.

5. Other changes worth knowing

• Distributions: the rules on company distributions will be modernised from April 2028, to stop "complex arrangements being used to extract profits at lower tax rates". Draft legislation is due in 2027.
• Payments to participators: the government will not bring in the proposed new reporting rules for payments from close companies to their shareholders "at this time".
• Trading allowance: it rises from £1,000 to £3,000 from 6 April 2027, and the Self Assessment reporting threshold for trading income rises with it. This helps people with small side income, not limited companies.
• National Living Wage: up 3.9% to £13.21 an hour from 1 April 2027.
• Direct Debit: from April 2029, businesses will have to set up a Direct Debit for VAT and PAYE return liabilities, with some exceptions.
• Online marketplaces: from October 2027, marketplaces will collect VAT on qualifying sales made by UK businesses on their platforms.

What to do now

1. Selling within the next few years? Speak to a tax adviser before 6 April 2027 about timing and the BADR transitional rules.
2. Planning to buy equipment? Ask your accountant whether to time the purchase around 1 January 2027.
3. Paying staff? Budget for the new £13.21 National Living Wage from April 2027.
4. Earning rent or interest personally? Check how the 2027/28 rates change your tax bill.
5. Don't act on headlines alone. Several measures are still at draft or consultation stage. Wait for the final rules and get advice for your situation.

This article explains the announcements. It is not tax advice.

How we can help

Our Annual Accounts service prepares your accounts and Company Tax Return and keeps track of the deadlines. If you have rental or dividend income, our Self Assessment service files your personal return. For payroll and VAT, including the move to Direct Debit, see Bookkeeping, VAT and Payroll.

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