The Budget on 28 October 2026 left the headline rates of Income Tax, National Insurance and VAT unchanged. The main change is for landlords: from 6 April 2027, property income will be taxed at 24%, 44% and 49%. Sole traders get a larger trading allowance and permanent higher mileage rates. Companies get a bigger first-year allowance on new equipment, but a lower main rate writing-down allowance. Most of the changes start from 6 April 2027, so there is time to plan.
This summary covers the measures that affect sole traders, owner-managed companies, landlords and CIS subcontractors. Every point comes from the Budget 2026 document and HMRC's overview of tax legislation and rates, as published on 28 October and checked on 29 October 2026. Most of these changes still have to pass through Finance Bill 2026 to 2027, so the detail can move before they become law.
Budget 2026 for landlords: higher tax on property income
From 6 April 2027, property income gets its own Income Tax rates, separate from the rates on wages and trading profits. According to the Budget 2026 rates and allowances, the rates for the 2027 to 2028 tax year will be:
- property basic rate: 24%
- property higher rate: 44%
- property additional rate: 49%
For the current tax year, 2026 to 2027, rental profits outside Scotland are still taxed at the main rates of 20%, 40% and 45%. Budget 2025 had already announced a two point rise from April 2027. This Budget adds a further two points on top, from the same date. The new rates apply in England, Wales and Northern Ireland.
If you let property personally, the 2027 to 2028 tax year is the first one affected, and the return for that year is due by 31 January 2029. Now is a good time to look at who owns each property, in what shares, and how the profit is likely to fall. Our landlord tax return guide explains how rental profit is worked out at the moment.
Selling a rental property: Capital Gains Tax
Capital Gains Tax rates on property did not change. The rates and allowances annex shows 18% for basic rate taxpayers and 24% for higher rate taxpayers in both 2026 to 2027 and 2027 to 2028, with an annual exempt amount of £3,000.
There is one change to penalties. If you sell a UK residential property and make a chargeable gain, you must still report it and pay the tax within 60 days of completion. Until now, if you missed that deadline and reported the sale on your Self Assessment return instead, late filing penalties could keep building on the missed 60 day return. HMRC's note on the change says those penalties will stop building once the sale is reported on a Self Assessment return sent on or after 28 October 2026.
The Budget also says the government will consult on asking more third parties to report property income data to HMRC.
What the Budget means for sole traders
Trading allowance. The trading allowance triples from £1,000 to £3,000 from 6 April 2027. HMRC's note on the trading allowance says the Self Assessment reporting threshold for trading income rises to £3,000 at the same time. If your takings are higher, you can still choose between the allowance and your actual expenses, as now.
Mileage. According to the Budget 2026 document, the tax-free mileage rate for a car or van is now permanently 55p a mile for the first 10,000 business miles, from 6 April 2026. The rate above 10,000 miles rises from 25p to 35p from 6 April 2027. This applies to self-employed people who use simplified mileage, and to employees who are paid mileage for their own car.
Making Tax Digital. The Budget did not move the next stage. GOV.UK still says sole traders and landlords with qualifying income over £30,000 in the 2025 to 2026 tax year must use Making Tax Digital for Income Tax from 6 April 2027, and those over £20,000 in 2026 to 2027 from 6 April 2028. What changed is the penalty position. People who join in April 2027 will not get late submission penalty points for their quarterly updates in the 2027 to 2028 tax year, but they must still send all the updates before they can submit that year's return. Our Making Tax Digital for Income Tax guide covers the rules in full.
Payments on account. From April 2029, people who make payments on account will pay smaller amounts more often during the year instead of two large payments. The government says it will work out the detail with taxpayers and advisers first. Our post on payments on account explains how the current system works.
What the Budget means for limited companies and directors
Capital allowances. HMRC's overview says the main rate first-year allowance rises from 40% to 50% for spending on or after 1 January 2027. The main rate writing-down allowance falls by two points to 12%, from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax. Full expensing for companies stays. If you are planning to buy equipment, talk to us about the timing before you commit.
Dividends. Dividend tax rates stay at 10.75%, 35.75% and 39.35% for 2027 to 2028, with the £500 dividend allowance unchanged. Separately, the government plans to modernise how company distributions to shareholders are taxed, from 6 April 2028. Draft legislation is due in 2027, so there is nothing to act on yet.
Selling your business. The lifetime limit for Business Asset Disposal Relief, which gives an 18% Capital Gains Tax rate on qualifying business disposals, halves from £1 million to £500,000 for disposals made on or after 6 April 2027. A new Founders' Relief will offer a 10% rate on up to £10 million of lifetime gains from the same date, but it is aimed at founders of high-growth, innovative companies and the rules are still out for consultation until 30 November 2026.
Staff costs. On 1 April 2027 the National Living Wage rises by 3.9% to £13.21 an hour. The main Class 1 National Insurance thresholds are unchanged for 2027 to 2028 (Primary Threshold £242, Secondary Threshold £96, Upper Earnings Limit £967 a week). The Lower Earnings Limit rises from £129 to £133 a week.
Allowances and thresholds that have not changed
According to the rates and allowances annex, these stay the same for 2027 to 2028:
- Personal Allowance of £12,570, reduced by £1 for every £2 of income over £100,000
- basic rate band up to £37,700 of taxable income, and the additional rate starting above £125,140
- VAT registration threshold of £90,000
- Class 4 National Insurance at 6% between £12,570 and £50,270 of profit, and 2% above
CIS subcontractors
We found no measure aimed at the Construction Industry Scheme in the Budget documents. The sole trader changes above still apply to subcontractors. Our guide to claiming back CIS deductions is unchanged by the Budget.
What to do now
Most of the changes do not affect the 2025 to 2026 tax return due on 31 January 2027. The exception is the 60 day penalty change above, which applies to Self Assessment returns sent from 28 October 2026. For the rest, look at 2027 to 2028: rental profits, plans to sell a property or a business, and any large equipment purchases. If Finance Bill 2026 to 2027 changes any of it, we will update this post.
If you would like to talk through what Budget 2026 means for your own tax, contact Affinity Associates Isaacs & Co in Eccles. Our tax planning service works with landlords, sole traders and owner-managed companies across Salford and Greater Manchester. You can get in touch here.