Budget 2026: What to Expect If You’re a Business Owner
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On Wednesday 28 October, John Healey stands up to deliver his first Budget as Chancellor, and the first under Prime Minister Andy Burnham.
If you run your own business, especially a limited company, this is one to watch closely. Not because anyone expects fireworks, but because the areas where the government still has room to raise money are the ones that hit business owners hardest.
Here’s what’s already changed, what the rumour mill is saying, and what you can sensibly do before Budget day.
The promise that doesn’t quite cover you
The government has promised not to raise income tax, National Insurance or VAT for “working people”. Sounds reassuring. But read the small print.
That pledge covers the headline rates on a payslip. It says nothing about tax on dividends, capital gains, pensions or ISAs. And that’s exactly where most Budget predictions are pointing.
So if you pay yourself mainly through dividends from your own company, the promise protects you a lot less than it does someone on PAYE. Think of it as an umbrella with a hole right above your head.
What’s already changed (no guesswork needed)
Before we get to the rumours, it’s worth remembering you’re already paying more this year. These changes were announced in the last two Budgets and are now in force.
| What | This year (2026/27) | Last year |
|---|---|---|
| Dividend tax, basic rate | 10.75% | 8.75% |
| Dividend tax, higher rate | 35.75% | 33.75% |
| Business Asset Disposal Relief (tax when you sell your business) |
18% | 14% |
| Tax-free personal allowance | £12,570, frozen until April 2031 | £12,570 |
Source: Alto Accounting, drawing on GOV.UK.
That frozen allowance is the sneaky one. As your profits grow, more of your income gets pulled into higher tax bands, even though no rate has officially gone up. It’s a tax rise in disguise, sometimes called fiscal drag.
There’s also a change for anyone thinking about passing the business on. Since April, full inheritance tax relief on business assets is capped, rather than unlimited. The good news is the cap was raised from £1 million to £2.5 million before it came in, and it can be passed between spouses, so couples can pass on up to £5 million of qualifying business property. Above that, relief drops to 50%.
That frozen allowance is the sneaky one. As your profits grow, more of your income gets pulled into higher tax bands, even though no rate has officially gone up. It’s a tax rise in disguise, sometimes called fiscal drag.
There’s also a change for anyone thinking about passing the business on. Since April, full inheritance tax relief on business assets is capped, rather than unlimited. The good news is the cap was raised from £1 million to £2.5 million before it came in, and it can be passed between spouses, so couples can pass on up to £5 million of qualifying business property. Above that, relief drops to 50%.
What could change on 28 October?
A big caveat first: none of this is confirmed. The government hasn’t announced a single tax change for this Budget yet. But here’s what accountants and commentators are watching.
Capital gains tax.
There’s talk of bringing capital gains tax rates in line with income tax rates. If that happened, selling shares, property or a business could get a lot more expensive.
Dividends, again. Because dividend tax isn’t covered by the manifesto promise, commentators see it as an easy target for another rise.
Pensions. Pensions come up in almost every round of Budget gossip, including the tax-free lump sum. Paying into a pension through your company is one of the most tax-efficient ways to take money out, so any change here matters.
Exit tax. Some advisers are watching for a possible tax on people who leave the UK, which could affect owners planning to retire abroad.
And what probably won’t change
Corporation tax. Commentators don’t expect the main rate to rise above 25%, because the government keeps stressing stability for business investment.
Instead, the common view is that the government is more likely to raise money through tougher checks and better tax collection than through big increases to headline rates. In plain English: HMRC is getting better with data, and it’ll be looking harder at things like R&D claims, expenses, and how you pay your staff.
What you can do now
The golden rule: don’t make big decisions based on rumours. But the run-up to a Budget is a great excuse to give your finances a health check. Here’s where to start.
1. Plan on the rates you know. No one has proposed changing dividend tax halfway through the tax year, so this year’s rates apply until next April, whatever happens on Budget day. Work out your salary and dividend split for the rest of the year based on those.
2. Look at your pension. Paying into a pension through your company is still one of the most tax-efficient ways to reward yourself. If you were already planning a contribution, check with your accountant or adviser whether timing matters for you.
3. Selling up? Don’t wait for a better deal. The tax on selling your business has gone up twice in two years, from 10% to 14% to 18%. Nobody is predicting a cut. If you’re planning an exit, get proper advice on timing rather than hoping things improve.
4. Get your paperwork in order. With HMRC focusing on checks, make sure you can back up your expenses, claims and how you pay yourself and your team.
5. Don’t forget your own savings. The cash ISA limit drops from £20,000 to £12,000 for under-65s from April 2027, so this tax year is your last full one at £20,000.
6. Think about the long game. Succession plans, who owns what, and how you’ll eventually step back are easy to put off. A Budget is a good nudge to dust them off.
The bottom line
This Budget is likely to be more about tightening the screws than tearing up the rulebook. But for business owners, small tweaks to dividends, capital gains or pensions can add up to thousands of pounds.
We’ll break down exactly what was announced straight after 28 October. In the meantime, if you’re weighing up a sale, how to pay yourself, or how your business fits into your retirement plans, it can really help to talk it through. Find an independent financial adviser who can look at your situation properly.
This article is for education only and isn’t financial or tax advice. Budget predictions are speculation until announced, and tax rules depend on your circumstances and can change. Speak to a qualified accountant or regulated financial adviser before making decisions.
Sources
- Chancellor letter to the Treasury Committee: Budget 2026 date, GOV.UK
- Autumn Budget 2026: What UK Agency Directors Should Expect, Alto Accounting
- Autumn Budget 2026 predictions: Our pre-Budget view, Bishop Fleming
- Autumn Budget 2026: what can small business owners expect?, SmallBusiness.co.uk
- Finance (No 2) Bill 2025-26: update to agricultural and business property relief, Tax Adviser magazine
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