Autumn Budget 2026 – Summary and reaction

John Healey’s maiden budget dubbed the breathing space budget certainly left us out of breath with a welter of small measures, which will meet with only muted approval as £66bn of tax rises have already been baked in by his predecessor in her two previous Budgets.

Against a backdrop of the government still planning to borrow £67bn per annum in 2029/2030 (£8bn higher than forecast in March 2026) and stubbornly high inflation, Mr Healey had very little room for manoeuvre. He’s eaten into his fiscal headroom (his rainy day fund) reducing this from the £23.6bn he had in March 2026 to £14.5bn now, presumably keeping everything crossed for an imminent cessation in hostilities in both Ukraine and the Gulf, and praying for no further global hotspots to burst into flames.

He has focussed on areas of concern for voters with numerous small measures which might (and might is as far as I’m prepared to go) benefit businesses and individuals that range from energy to Business rates.

Energy and its cost are a focus in most households particularly with winter approaching.  We are all already benefitting from the removal of VAT on electricity bills and this was extended for another three months until July 2027 – the initial saving was on average less than £50 so don’t go spending it all at once.  

Gas standing charges will also be removed from the end of 2027 saving £108 per year on average, but unit rates based on consumption will rise, so this may well be a case of him giving with one hand and the energy companies taking away with the other, and we’ve got to get through the next 15 months first.

A further £100 payment will also be made to households in Council Tax bands A to D early next year to subsidise their energy costs, funded by an increase in the bank levy – note the bank levy increase was less than expected so bank shares rose 2% or so in the immediate aftermath of the Budget.  There is a freezing of the Climate Change Levy for businesses, which will cost the Government £235m, so this will barely scratch the sides of the sorts of energy costs high energy using businesses face, but it’s better than an increase!

The postponement of the 5p fuel duty rise was also extended until 1 July 2027 and the increased business mileage rate increase from 25p per mile to 35p and 45p per mile to 55p are also to be made permanent.  Something of a crusade for me – no mention of the fact that the total cost of fuel then has duty added to it and then this has 20% VAT added as well – so while fuel prices are at least 25% higher than they were, presumably the VAT revenue from fuel is also 25% higher than it was…… so how much is he actually giving away?

Tariffs on 100 or so food products will also be removed so we might see the cost of the weekly shop fall slightly – although with inflation running at in excess of 3% the savings will probably be negligible.

Turning to taxes, no changes in the main rates of Income Tax, National Insurance, or Corporation tax were announced, for working people.  However if you are a working person who has a buy to let property or two, or an investment portfolio, brace yourself, as from 6 April 2027 the main rate of income tax applying to rental income and interest income will now be 4% higher than on employment and self employment income with increased rates to stand at 24%, 44% and 49% – last year’s Budget increased the rate of tax by 2% from next April, this Budget has added another 2% – compare and contrast this to the saving realised on the removal of gas standing charges……..

However, the Government has admitted defeat (my words not the Chancellor’s) with regard to their plans to reduce the cash ISA allowance to £12,000 per annum as it will now remain at £20,000 per annum, which is good news for savers.

Further welcome news for the lowest paid workers with increases in the National Minimum Wage and National Living wage of 3.9% to £13.21 per hour and for those aged between 18 and 20 seeing an increase to £11.27 per hour.  And some relief for pensioners after the removal of the triple lock at the end of the Parliament to fund the National Care Service as the least well off  pensioners who receive the state pension only will not pay tax on that pension income.

Business Rates are the bain of many of our clients, so extending the exemption from paying business rates from £12,000 per annum to £18,000 per annum for retail, hospitality and leisure businesses will provide some welcome relief, and for larger businesses Business Rates will be frozen for 2 years.

Gambling machine duty will increase and vape shops and adult gaming centres will not benefit from the Business Rates exemptions, but 2,000 smaller breweries will see a lowering of beer duty, so we can all drink to that!

There was more sleight of hand in respect of Capital Gains Tax for entrepreneurs with the Business Asset Disposal Relief allowance halved to £500,000 from April 2027, costing an entrepreneur an additional £30,000 in tax on an exit from a business, but also the introduction of a £10m lifetime Capital Gains Tax Founders Allowance for the founders of businesses with a 10% rate of tax introduced from April 2027 – we are not yet certain of how this will work but given the Government’s overall lack of cash, we are expecting it to be limited to a small population of individuals.

There were the usual announcements with regard to the management of the tax system – an expansion of HMRC compliance staff (another 670) to encourage more compliance with the tax regime, and moves from 2029 for self-assessment taxpayers to pay tax more regularly (for “more regularly” I would read earlier than is currently required).

Many of these measures will be headline grabbers whilst costing the Chancellor very small sums when compared to the behemoth that is Government spending.  In light of the increase in the tax burden imposed by the freezing of tax thresholds, increases in tax rates on rental income, interest and dividends, changes to inheritance tax and a plethora of other previously announced tax rises, whilst welcome, I would suggest we will not be breathing much more easily any time soon.