What it means for you
After months of speculation about what the announcements might include, John Healey has now delivered his first Budget as Chancellor.
For most of our clients, the headline is that nothing has significantly changed. Income tax rates, National Insurance, VAT, corporation tax and dividend tax all remain exactly as they were. The changes that may affect you will come into play in April 2027 and April 2028.
Mileage rates are changing
Back in May, the approved mileage rate for using your own car or van for business travel increased from 45p to 55p per mile, backdated to 6 April 2026. At the time, it was billed as a temporary measure, but has now been made permanent.
On top of that, the rate for business miles travelled above 10,000 in each tax year goes up from 25p to 35p on 6 April 2027, having previously been unchanged since 2011. In summary:
- 2026/27: 55p for the first 10,000 business miles, then 25p per mile after that
- 2027/28 onwards: 55p for the first 10,000 business miles, then 35p per mile after that
This applies whether you’re claiming through your limited company or as a sole trader. It’s for your own vehicle though, not a company car, and the motorcycle and bicycle rates haven’t changed.
Electric cars: three changes
1. The 100% write-off now has a deadline of 31 March 2027
At the moment, a new and unused electric car bought by your company gets a 100% first year allowance, so the whole cost comes off your profits straight away. That relief has been extended several times over the years but wasn’t extended in this budget. As things stand, any spend on an electric car after 31 March 2027 won’t receive 100% relief (or from 5 April 2027 if you’re a sole trader).
Instead, any spend on an electric vehicle will be subject to the ordinary main pool writing down allowances (these rates are coming down too, from 14% to 12% from April 2027). To give you an idea, a £50,000 car bought before the deadline takes £50,000 off your profit in year one. The same car bought after the deadline only takes off £6,000, with further relief only dribbling in over the years that follow. Cars are specifically excluded from the new 50% first year allowance.
2. Benefit in Kind rates will continue to increase
The Budget has now set them as far out as 2030/31:
| Tax year | Benefit in kind rate |
| 2026/27 | 4% |
| 2027/28 | 5% |
| 2028/29 | 7% |
| 2029/30 | 9% |
| 2030/31 | 10% |
3. New mileage charge from April 2028
Electric Vehicle Excise Duty will apply to electric and plug-in hybrid cars based on the miles actually driven. There’ll be a mileage estimation tool when it launches, so you don’t have to report mileage by hand.
Is an electric car still worth doing?
In some cases, yes, but the gap has significantly narrowed. The Benefit in Kind rates listed above are still far better than their petrol or diesel equivalents, and that’s often the main reason people decide to put a car through the company in the first place.
What’s changed is that the up-front relief is being drastically reduced. If you’ve been thinking about buying an electric car through your company, then 31 March 2027 is the date to keep firmly in mind. You’ll need to have the car delivered by then, not just ordered.
Tax on rental and savings income increases in April 2027
If you’ve got a buy-to-let, or some cash sitting in a savings account outside of an ISA, the tax rate on that income is set to increase from 6 April 2027.
Last year’s Budget added two percentage points to the basic, higher and additional rates of income tax for both savings and rental income. This Budget has added another two on top of that:
| Tax | Now (2026/27) | From 6 April 2027 |
| Basic rate | 20% | 24% |
| Higher rate | 40% | 44% |
| Additional rate | 45% | 49% |
No change to dividends or salary
If the only income being drawn from your company is comprised of a modest salary plus dividends, and you’ve no rental or savings income on the side, this does not affect you.
Some better news on the savings side: the planned cut to the cash ISA limit has been dropped, so it stays at £20,000, and the personal savings allowance is unchanged. A lot of people with moderate savings still won’t pay anything at all on their interest.
The Business Asset Disposal Relief lifetime limit is being halved
Business Asset Disposal Relief (BADR) can provide a reduced rate of Capital Gains Tax when selling or closing down your company. The rate is currently 18%, and there’s a lifetime cap on the capital gains which can be subject to BADR.
That cap is being reduced from £1 million to £500,000 for disposals made on or after 6 April 2027. The 18% rate isn’t changing.
This date is important if you’ve been building reserves in your company, and there’s a realistic chance that you’ll eventually close it down with more than £500,000 in reserves, meaning you’ll exceed the new cap.
If it sounds like this might be you, come and talk to us. There’s enough time to plan for the most tax efficient way to close your company.
One to watch: changes to taking money out of your company
The government is rewriting the rules on how money taken out of a company is taxed. The stated aim is to make sure similar transactions are taxed the same way, whatever legal form they take, wherever the company is resident, and however the transaction has been structured. In plainer language, they want to stop people choosing a route to take their money out of the company purely because it carries a lower tax rate.
At this stage, there isn’t much to go on. Changes are expected in 2028, and we’ll be following it closely as the draft legislation appears, getting in touch if anything starts to look like it changes what you should be doing.
A new Capital Gains Tax relief with a 10% rate for founders
There’s a brand-new Capital Gains Tax relief starting from 6 April 2027: Founders’ Relief gives a 10% rate on up to £10 million of lifetime gains.
The government describes it as being for founders of high-growth, innovative companies, whilst the Chancellor framed it as rewarding people who leave a secure job, take a real risk and build something that creates jobs here.
What the Budget doesn’t currently do is define any of that. The actual qualifying conditions, how long you need to have held your shares, what counts as innovative, how growth gets measured, are all going out to technical consultation first, with legislation to follow.
Inheritance Tax
Inheritance Tax barely featured in this Budget, although there are two previous announcements that will be coming into force over the next few years.
From 6 April 2027, unused pension funds and most pension death benefits come into your estate for Inheritance Tax. For a lot of people, the pension has been the most tax-efficient asset to leave behind, however this is about to change.
The nil rate band remains at £325,000, with the residence nil rate band at £175,000. Both are frozen until April 2031. Frozen thresholds and rising house prices quietly pull more estates into the net every year without anything having to be announced.
If you haven’t looked at your estate since the pension change was first announced, it’s worth doing before April 2027.
A few admin changes heading your way
None of these are dramatic, but they’ll change how and when you pay:
April 2027: payrolling Benefits in Kind becomes mandatory for company cars, vans, fuel and medical benefits. This was supposed to start in April 2026 and has been pushed back by a year. The remaining benefits follow in April 2028.
April 2029: if you already make payments on account under self-assessment, you’ll move to smaller, more frequent payments through the year instead of two big ones. The detail is still being worked out.
We know that 2029 is a long way off. We’ll remind you nearer the time of these changes.
Changes to tax relief available for sole traders
The trading allowance triples from £1,000 to £3,000 on 6 April 2027. If you’ve got a bit of casual income on top of your main work, that’s £3,000 you can earn before you need to declare it at all.
What do you need to do?
For most of our clients, nothing immediately. The way that you’re paid hasn’t changed, your corporation tax hasn’t changed, and your dividends haven’t changed.
The two things to keep in mind are Business Asset Disposal Relief, if there’s any realistic chance of you closing your company down in the next couple of years, and the new mileage rates (but FreeAgent will work those out for you).
Everything else is on our radar, and we’ll come back to you as the details are announced. In the meantime, if anything here looks like it affects you, get in touch.
