Budget 2026: what small business owners need to know

If you have seen the Budget headlines and wondered, “What does this actually mean for me?”, you are probably not alone.

When you run your own business, the practical questions make a difference. Will your costs go up? Can you claim more for business mileage? Will you need to change how you put money aside for tax?

There are some welcome announcements this year, alongside changes that will need planning. We’ve picked out the key points for sole traders and limited company directors, as well as what’s happening to ISAs and savings.

More support for business mileage

If you spend a lot of time visiting clients, travelling between jobs or driving to sites, you’ll know how quickly the costs add up.

The Budget confirms higher mileage rates for people using their own car or van for qualifying business journeys:

Business miles in the tax year – new/confirmed rates

– First 10,000 miles: 55p per mile from 6 April 2026

– Miles above 10,000: Increasing from 25p to 35p per mile from 6 April 2027

The changes cover approved mileage payments for employees and simplified mileage expenses for eligible self-employed people.

For a sole trader using simplified mileage expenses, the mileage amount reduces your taxable profit. HMRC doesn’t pay it back to you.

For a limited company director using their own vehicle, the company can reimburse qualifying business mileage within the approved rates without creating a taxable benefit.

At the new rates, 15,000 qualifying business miles would total £7,250: £5,500 for the first 10,000 miles and £1,750 for the remaining 5,000.

Keep a record of the date, journey, business purpose and miles travelled. A quick note as you go is much easier than trying to remember everything months later.

The fuel duty freeze and temporary 5p cut are also being extended to 1 July 2027, although pump prices can still change.

Self-employed dads and partners parental pay

This one is exciting.

A new parental allowance will support eligible self-employed fathers, partners and adopters from April 2029, subject to work and earnings history. The announced support covers two weeks, currently worth up to £194 a week.

This is a welcome step for families who have previously missed out.  Just make a note that this isn’t coming into effect until April 2029.

Making Tax Digital: check whether you are joining in April

If your combined income from self-employment and property was more than £30,000 before expenses in 2025/26, you’ll generally need to use Making Tax Digital for Income Tax from 6 April 2027, unless an exemption applies.

The threshold is based on qualifying income before expenses, rather than profit.

The Budget gives those joining in April 2027 some breathing space: no late-submission penalty points for their first four quarterly updates. You’ll still need to keep digital records and submit the updates.

If you’re unsure whether this includes you, get in touch. We can help you check and prepare.

Payments on account are changing
Payments on account are something we often explain to clients, and we understand why they can come as a surprise.

You’ve worked out your tax bill, only to discover that January’s payment also includes an advance towards the following year.

Currently, payments on account are usually two instalments, due on 31 January and 31 July, based on the previous year’s tax liability.

From April 2029, people who make payments on account will move towards smaller, more regular payments during the year. Automated payments, such as Direct Debit, will be the default. Those with sufficient PAYE income will be able to opt to pay through PAYE instead.

This will affect sole traders and directors who make payments on account towards their personal tax bills. Smaller payments may be easier to budget for, but paying tax closer to when you earn the income could affect your available cash.

Further details, including payment frequency and transition arrangements, are expected in 2027. For now, keep setting money aside for your existing deadlines.

Direct Debit instructions for PAYE and VAT

There’s also a change coming to how businesses arrange their PAYE and VAT payments.

From April 2029, businesses with PAYE or VAT return liabilities will need a Direct Debit instruction in place with HMRC.

You’ll still have the flexibility to pay by another method before a specified cut-off date. The Direct Debit will collect any balance left unpaid, helping to reduce missed payments and errors.

If you usually make payments manually, it’s something to prepare for nearer the time. Keeping track of payment dates and the money available in your account will still be important.

Savings changes (or not)

Cash ISAs: the £20,000 limit stays

There’s welcome news if you prefer to keep some of your personal savings in cash.

The planned reduction in the cash ISA limit has been reversed, with the government retaining £20,000 from April 2027. This sits within the overall annual ISA allowance; you don’t get a separate £20,000 allowance for each ISA type. Interest earned within a cash ISA remains tax-free.

For business owners building a personal emergency fund, this is worth knowing about alongside the changes to savings tax.

Savings outside an ISA will face higher tax

From 6 April 2027, the announced tax rates on savings income are:

– Basic rate tax payers will pay 24% (currently 20%)
– Higher rate tax payers will pay 44% (currently 40%)
– Additional rate tax payers will pay 49% (currently 45%)

The Personal Savings Allowance remains £1,000 for basic-rate taxpayers and £500 for higher-rate taxpayers. Tax applies to interest after available allowances and reliefs.

If you keep your personal emergency fund or money for a future tax bill in an interest-paying account, this will affect you. Tax applies to the interest, not the amount you’ve saved.

For directors, company savings need separate consideration: company investment income falls within Corporation Tax rules.

Have rental income as well as your business?

From 6 April 2027, the announced tax rates on personally held rental property income will be 24%, 44% and 49% in England, Wales and Northern Ireland.

If rent forms part of your household income, factor this into how much you set aside for tax. Property held through a limited company needs separate consideration.

A higher trading allowance

From 6 April 2027, the trading allowance and trading income reporting threshold rise from £1,000 to £3,000.

This may help smaller side businesses. The allowance relates to income before expenses and generally provides an alternative to deducting actual costs, rather than an extra deduction on top.

Minimum wage changes

The announced minimum hourly rates from 1 April 2027 are:

– Aged 21 and over: £13.21
– Aged 18 to 20: £11.27
– Aged 16 to 17 and eligible apprentices: £8.31

Build these into your staffing budget alongside associated employment costs.

Business rates help for the high street

For qualifying retail, hospitality and leisure properties in England, full Small Business Rate Relief will extend to £18,000 rateable value from April 2027, with tapered relief up to £21,000.

The government also announced a two-year real-terms freeze for qualifying properties. This means increases are capped by inflation, subject to exceptions; it doesn’t necessarily mean your bill will stay the same.

Check what applies to your premises before updating your forecast.

Other changes to keep on your radar

– Company benefits: Mandatory payrolling starts in April 2027 for company cars, vans, fuel and medical benefits. Most other benefits follow in April 2028, with exceptions.

– Equipment: The main first-year capital allowance rises to 50% from January 2027; the main writing-down allowance falls to 12% from April 2027. Check which relief applies to a planned purchase.

– Selling your business: The Business Asset Disposal Relief lifetime limit on qualifying gains falls from £1 million to £500,000 for disposals from 6 April 2027. This refers to gains eligible for relief, rather than the sale price.

– Digital invoicing: VAT e-invoicing is planned from April 2029.

– Online sellers: Marketplace VAT collection rules will extend to relevant UK business sales from October 2027, with thresholds and exclusions to check.

What should you do now?

Think about your plans. A new baby, an equipment purchase or a business sale could make some announcements especially relevant. If Making Tax Digital applies to you from April 2027, start preparing now.

At Blue Leaf Accounting, we can help you work out what applies to you, update your forecasts and prepare for the dates that matter.

Get in touch if you’d like to talk through what Budget 2026 means for you and your business. We’ll help you make sense of it.

Based on Budget announcements published on 28 October 2026 and guidance reviewed on 29 October 2026. Some measures require legislation or further guidance before taking effect.