Budget Newsletter - Autumn Statement 2026
The Chancellor, John Healey, recently delivered his first budget which was focussed on measures to help those on lower incomes. These measures are largely paid for with additional taxation on the banks but also some key changes affecting clients which are summarised below.
Income tax
Headline income tax rates on earned income and the tax bandings were unchanged which continues fiscal drag pushing more taxpayers into the higher tax bandings. Rate increases for landlords and savers were announced which apply from 6 April 2027.
Landlords
From 6 April 2027, the rate of tax paid by individuals receiving property income will increase by 4% on all current rates. The increases will affect landlords in England, Wales and Northern Ireland at present. Whether the increases to landlord rates are adopted by the Scottish government in future budgets remains to be seen but seems likely.
The tax rates for landlords in England, Wales and NI will become:
Basic rate taxpayers - 24% property basic rate
Higher rate taxpayers - 44% property higher rate
Additional rate taxpayers - 49% property additional rate and property trust rate
Savings
As with the introduction of the property rates, new savings rates are being introduced from 6 April 2027 and these affect all United Kingdom nations.
The tax rates for savers in the UK will become:
Basic rate taxpayers - 24% savings basic rate
Higher rate taxpayers - 44% savings higher rate
Additional rate taxpayers - 49% savings additional rate and savings trust rate
The tax-free savings limit for basic rate and higher rate taxpayers of £1,000 and £500 respectively remain unchanged.
Given these higher rates and limited amount of tax-free allowances, you may want to consider tax efficient savings such as ISAs or premium bond, particularly for additional rate taxpayers.
ISAs
The previous chancellor has announced a proposal to reduce the amount that can be saved in a cash ISA to £12,000 from £20,000 applying from 6 April 2027. This autumn statement reversed this proposal and the original £20,000 has been reinstated which is the limit for both cash and stocks and shares ISAs.
A new first time buyer ISA is to be introduced replacing the Lifetime ISA and operating in a similar way.
Capital gains tax
After much speculation leading up to the budget, the headline rates of capital gains tax remained unchanged.
However, an important change was made to a capital gains tax relief known as Business Asset Disposal Relief (BADR) reducing the lifetime amount available from £1m to £500,000 for qualifying disposals taking place from 6 April 2027.
A new capital gains tax ‘Founders Relief’ will be introduced following consultation, early signs are that this relief will not be widely available to small owner managed businesses.
Trading allowance
For the self-employed with modest levels of income, there has been a trading allowance of £1,000 in recent years to allow a small amount of income to be earned without the need to report under self-assessment. This figure is also the amount that can be claimed as a flat rate for expenses where the income is above this amount and actual costs below £1,000. From 6 April 2027 this level will increase to £3,000 which will benefit those with small amounts of self-employed income.
Benefits in kind
From 6 April 2027 there will be a change to the way in which benefits in kind are reported to HMRC. The current system of preparing a form P11d will end for most benefit in kind reporting with clients most likely no longer needing to submit a form P11d after the 2026/27 tax year.
The change will affect cars, vans and medical insurance from 6 April 2027 and will require the monthly payroll to reflect a monthly benefit in kind. For those receiving a salary from your company, an adjustment will be made on your monthly salary but for those who do not currently receive a salary, it will be necessary to report the benefit in kind in the same way as a salary. The PAYE team will be in touch with clients in advance of the change for those clients affected.
National minimum wage
For those employing staff on the national minimum wage, please note that the rates will increase from 6 April 2027 to:
£13.20 for those employees who are 21 and over
£11.27 for 18 to 20 year olds
Self-assessment tax system for individuals
The self-assessment tax system for individuals has largely been unchanged for the last 30 years with payments being made in July and January each year and a tax return being due annually by 31 January following the end of the tax year.
One of the quieter announcements in the budget is likely to have a significant impact on clients in the future is a measure referred to as ‘timely payments in income tax self-assessment. It is in early stages but it would appear that HMRC are looking to move to a monthly payment system for self-assessment which will replace the current system of paying in arrears.
The proposal is for a new system to be in place from April 2029 which will require monthly payments to be made based on the prior year tax liability. These measures may be linked to the new ‘Making Tax Digital’ regime affecting the self-employed which requires quarterly reporting to HMRC of your income and expenses on a cash basis.
It remains to be seen how these measures will be transitioned into force as there are many problems with an assumption of a taxpayer’s tax liability remaining consistent and importantly, income is rarely earned consistently across the year with significant seasonality and irregular receipts e.g. dividends.
Whilst the detail may be scarce at this stage, it is likely to come into force and therefore for clients who tend to save for their next half yearly tax payment, it may be sensible to try and get ahead of the current payments in the next couple of years to reduce the impact of paying under the new system.
