John Healey delivered his first Budget as Chancellor on Wednesday 28 October 2026. For most micro and small businesses, it's a Budget of small tweaks rather than big changes. There's no rise in the headline rates of income tax, National Insurance or VAT, and nothing dramatic that will change how you run your business overnight.
But there's plenty in the detail that will affect you, especially if you employ people, run a shop, café or pub, or you're a sole trader about to come into Making Tax Digital. In this guide we'll go through what was announced, what it means in practice, when it all starts, and what we'd do now to get ready.
What didn't change
It's worth starting here, because it's what most people were worried about.
The main rates of income tax, National Insurance and VAT stay the same.
Employer National Insurance stays at 15%, and the £5,000 threshold where employers start paying it stays frozen until 2031.
The Employment Allowance stays at £10,500.
Dividend tax rates stay where last year's Budget left them: 10.75% for basic rate taxpayers and 35.75% for higher rate, with the £500 dividend allowance unchanged.
Income tax thresholds remain frozen, as announced last year.
So if you're a limited company director paying yourself a salary and dividends, nothing in this Budget changes the basic way you're taxed.
The National Living Wage goes up again
From 1 April 2027, the minimum wage rates all rise by 3.9%:
National Living Wage (21 and over): £12.71 to £13.21 an hour
18 to 20-year-olds: £10.85 to £11.27 an hour
16 to 17-year-olds and apprentices: up to £8.31 an hour
For someone working full time on the National Living Wage, that's around £910 a year more in pay. Once you add employer National Insurance, it costs you roughly £1,050 a year per person, before pension contributions.
The bit that often gets missed is pay differentials. If your supervisor is on £13.50 an hour now, they're only going to be 29p above the minimum come April, and they'll rightly expect a rise too. So the real cost to your business is usually more than the headline figure.
A lot of small employers were hoping for some help with employer National Insurance. There wasn't any. Get the new rates into your forecast now, not in March, and if you need help modelling the cost across your team, that's exactly what we do with our payroll and bookkeeping clients.
This all lands alongside the changes coming in through the Employment Rights Act, so if you employ people it's worth reading our guide to the Employment Rights Act 2025 too.
Business rates: help for the high street, if you qualify
This was the headline announcement for small businesses. From 1 April 2027, in England:
The threshold for 100% Small Business Rate Relief on qualifying retail, hospitality and leisure properties rises from a rateable value of £12,000 to £18,000.
Tapered relief will now run up to £21,000 (up from £15,000).
The government says this takes around 70,000 more businesses out of business rates altogether.
Other qualifying retail, hospitality and leisure properties get a real-terms freeze on their bills for 2027–28 and 2028–29.
Pubs, social clubs and most live music venues get an extra 20% relief from April 2027, which was announced back in July.
This is great news if you run a café, shop, salon or pub. But be clear on who it's for. It only applies to retail, hospitality and leisure, and only in England. If you're office-based, run a workshop or you're a small manufacturer, there's nothing here for you.
If you think you might qualify, check your property's rateable value using the business rates service on gov.uk and see where you land against the new thresholds.
Sole traders, side income and Making Tax Digital
The trading allowance triples
From 6 April 2027, the trading allowance goes up from £1,000 to £3,000. If you earn less than £3,000 a year from self-employment, you won't need to register with HMRC or pay tax on it.
If you earn more than that, you can deduct either the £3,000 allowance or your actual business expenses, but not both. For most established sole traders, your real expenses will be higher, so it won't change much. Where it really helps is people testing an idea on the side, before they've committed to it full time.
Making Tax Digital goes ahead
Making Tax Digital for Income Tax is going ahead as planned. From 6 April 2027, sole traders and landlords with qualifying income over £30,000 (based on the 2025/26 tax year) come into it. That means keeping digital records and sending quarterly updates to HMRC using compatible software. The threshold then drops to £20,000 from April 2028.
There was one bit of good news. If you join in April 2027, you won't get late filing penalties for your first four quarterly updates. If you've been in since April 2026, penalty points start from April 2027.
The penalty break is a safety net, not a reason to leave it until the last minute. If you're over £30,000, you need your software and records in place before April, and you need to get into the habit of keeping your books up to date every quarter, not once a year.
Parental pay for the self-employed
From April 2029, self-employed dads, partners and adopters will be able to claim a new parental allowance for the first time. Until now, this support has only been available to employees.
Using your car for work
The tax-free mileage rate of 55p a mile for the first 10,000 business miles has been made permanent.
From 6 April 2027, the rate for every business mile over 10,000 goes up from 25p to 35p.
The fuel duty freeze and the 5p cut are extended to 1 July 2027.
If you or your staff use your own cars for work, make sure you're claiming the full rate and keeping a proper mileage log. It's money a lot of small business owners miss out on.
Owners, landlords and selling up
Savings and property income
Tax on savings and property income goes up by a further 2 percentage points from April 2027, on top of the 2-point rise announced last year. That means 24%, 44% and 49% for basic, higher and additional rate taxpayers.
If you own rental property in your own name, or you've got savings outside an ISA, this will cost you more from 2027.
Selling your business
The lifetime limit for Business Asset Disposal Relief halves from £1 million to £500,000 from 6 April 2027. This is the relief that reduces the Capital Gains Tax you pay when you sell all or part of your business.
There's also a new Founders' Relief, which will give a 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders of high-growth companies. The detail is still being consulted on, but it's aimed at high-growth, innovative businesses, so we doubt many micro businesses will qualify.
If you're thinking about selling in the next couple of years, speak to your accountant now. Timing could make a real difference to how much tax you pay.
Employing carers
This one isn't strictly a business measure, but it matters if you employ someone who gets Carer's Allowance.
At the moment, if a carer earns even a penny over the £204 a week earnings limit, they lose their whole £86.45 allowance for that week. It's known as the cliff edge. The Budget confirmed that it's going. Instead, their allowance will reduce by £1 for every £1 they earn over the limit.
But there are two catches. Firstly, it won't start until the 2030–31 tax year, once the DWP has built the IT system to run it. Secondly, because it's £1 for £1, anything a carer earns over the limit is cancelled out by the allowance they lose, until the allowance runs out (at around £290 a week at today's rates). So it takes away the penalty, but extra hours won't actually leave them better off within that band.
If you employ carers, you'll know the problem already: turning down overtime, capping hours, or worrying a pay rise will leave them worse off. Until 2030 the cliff edge still applies, so have a conversation now and make sure April's pay rise doesn't tip anyone over the limit.
Paying HMRC and cutting red tape
Direct Debits for VAT and PAYE: from April 2029, you'll have to set up a Direct Debit instruction for your VAT and PAYE. You can still pay another way, but HMRC will use it to collect anything left unpaid.
Payments on account: also from April 2029, Self Assessment payments on account will be replaced with smaller, more regular payments through the year, rather than two big payments in January and July.
Less paperwork: the government's promising clearer guidance, simpler bidding for public contracts and fewer survey requests, which it says could save businesses almost £800 million.
Chasing overdue tax: HMRC is getting more staff and stronger powers to chase people who can afford to pay but don't.
Young Entrepreneurs Allowance: a new pilot will help young founders with their living costs in their first year of business.
The Direct Debit change is really a cash flow point. If HMRC can take what's owed, you need to know exactly what's due and when, so there are no surprises. Smaller, regular tax payments should make budgeting easier for the self-employed, but only if your books are up to date.
Key dates at a glance
1 April 2027: National Living Wage rises to £13.21; new business rates relief thresholds and extra pub relief start (England)
6 April 2027: trading allowance rises to £3,000; Making Tax Digital for Income Tax starts for income over £30,000; new mileage rate over 10,000 miles; savings and property income tax rates rise; Business Asset Disposal Relief limit halves
1 July 2027: fuel duty freeze and 5p cut end, unless extended again
April 2028: Making Tax Digital extends to income over £20,000
April 2029: Direct Debit instructions required for VAT and PAYE; new payments on account system; parental allowance for the self-employed
2030–31: Carer's Allowance taper replaces the cliff edge
The bottom line
It's a quiet Budget for most small businesses. The changes that will actually hit your business are the wage rise and Making Tax Digital, both from April 2027, plus a welcome rates cut if you're on the high street.
If you do three things now, make them these:
Update your forecast for the new wage rates and what they do to your pay structure.
If you're a sole trader or landlord with income over £30,000, get your Making Tax Digital software and records sorted before April.
If you're in retail, hospitality or leisure, check your rateable value against the new thresholds.
Getting ready for April
None of this needs to be daunting. Most of it doesn't start until April 2027, which gives you time to plan properly rather than react at the last minute. A bit of work on your forecast now will save you a lot of stress in the spring.
At HiThrive, we're business consultants first and foremost. We help small business owners plan for changes like these, from working out what a wage rise really costs to getting your books ready for Making Tax Digital. And where you need specialist tax advice, we'll always point you in the right direction.
If you'd like to talk through what the Budget means for your business, get in touch and let's talk it through.
Based on what was announced on 28 October 2026. Some details may change as the legislation goes through Parliament.
Summary: Budget 2026 for small businesses
What does Budget 2026 mean for small businesses? It's a Budget of small changes rather than big ones. The main things to plan for are the National Living Wage rise and Making Tax Digital for Income Tax, both from April 2027, plus better business rates relief for retail, hospitality and leisure businesses in England.
When does the National Living Wage go up, and by how much? From 1 April 2027 it rises 3.9%, from £12.71 to £13.21 an hour for workers aged 21 and over.
Has employer National Insurance changed? No. It stays at 15%, the £5,000 threshold stays frozen until 2031, and the Employment Allowance stays at £10,500.
Who benefits from the new business rates relief? Qualifying retail, hospitality and leisure properties in England. From April 2027, those with a rateable value up to £18,000 pay no business rates, with tapered relief up to £21,000.
Do I need to use Making Tax Digital from April 2027? Yes, if you're a sole trader or landlord with qualifying income over £30,000, based on the 2025/26 tax year. You won't get late filing penalties for your first four quarterly updates.
What's happening to the trading allowance? It triples from £1,000 to £3,000 from 6 April 2027.
Did dividend tax go up? Not in this Budget. Rates stay at 10.75% and 35.75%, following last year's rise, and the dividend allowance stays at £500.
Has the Carer's Allowance cliff edge gone? Not yet. It will be replaced with a £1 for £1 taper during the 2030–31 tax year. Until then, carers who earn over the weekly limit still lose their whole allowance for that week.
