Autumn Budget 2026: Could Taxes Rise for UK Businesses?

The short answer is that nobody outside the Treasury knows, and that the field is narrower than the coverage suggests. Manifesto commitments rule out increases to the rates of income tax, employee National Insurance and VAT, and cap the headline rate of Corporation Tax at 25% for the Parliament. What remains open is real, but it is a smaller space than a fortnight of speculation implies.

The Chancellor confirmed the Budget date in a letter to the Treasury Select Committee on 31 July 2026. The Office for Budget Responsibility will publish its economic and fiscal forecast on 28 October 2026, accompanied by the Budget.

Between now and then there will be a great deal of commentary about what might happen. Very little of it will be information. This blog does the opposite job: it sets out the pressure the Chancellor is actually under, what is already decided and dated, what is genuinely open, and which decisions are worth taking before Budget day rather than after it.

The practical point is that for most SMEs, the measures that will change next year’s tax bill have already been announced. They are simply not being written about, because speculation is more interesting than legislation.

Who this applies to

UK SME owners, director-shareholders and finance directors planning through to the next financial year. It is most useful if you are weighing a dividend, a disposal, a succession decision, a capital investment or a property holding, and want to know which of those depend on 28 October and which do not.

The pressure behind this Budget

The Institute for Fiscal Studies published its Green Budget on 12 October 2026. Its analysis sets the context for what follows, and it is worth being precise about what it does and does not say.

• Avoiding cuts to departmental budgets could require a combined top-up of around £25 billion to day-to-day and investment spending by 2030-31, on assumptions including health spending growth of 2.7% a year in real terms and inflation running above the spring forecasts.
• Raising defence spending to 3% of GDP by 2030 would cost roughly a further £11 billion in 2030-31.
• Meeting both could require tax rises or benefit cuts in the order of £35 billion.
• On a plausible scenario, headroom against the binding fiscal rule is around £20 billion in 2029-30, against £24 billion forecast in March. The IFS stresses that the uncertainty is very high, and that a change in the earnings forecast alone could move the figure by about £10 billion either way.

Those are conditional estimates of what would be needed under stated assumptions. They are not a confirmed shortfall that must be filled by tax rises on 28 October, and the IFS does not present them that way. The £35 billion figure now circulating widely is the combination of two scenarios, not a hole in the public finances.

The Resolution Foundation published its own Budget report, Hitting the Buffers, the following day. It puts headroom at as little as £12 billion against £24 billion in the spring, recommends rebuilding it to at least £20 billion, and sets out options including moving 2p of National Insurance onto income tax, which it estimates would raise £6 billion. Press reporting has attributed a wider set of recommendations to the full report, including changes to Capital Gains Tax exemptions and National Insurance on partnership income.

Those two numbers are worth sitting with. The IFS describes a plausible scenario of around £20 billion of headroom. The Resolution Foundation, a day later, says as little as £12 billion. Both are careful organisations working from the same public data. The gap between them is the honest measure of how much anyone knows about this Budget a fortnight out.

What both agree on is that the revenue question is real, which is why the pre-Budget commentary is unusually loud this year.

What is already decided

The following are either in force now or announced with a start date. A Budget can change any of them for the future, but these are the figures you plan from today, and several take effect whatever is said on the day.

Measure	Position	From
Dividend rates	10.75% ordinary, 35.75% upper, 39.35% additional. £500 dividend allowance	6 April 2026
Savings income rates	Rising to 22%, 42% and 47%	April 2027
Property income rates	Separate rates of 22%, 42% and 47%, with finance cost relief at 22%	April 2027
Capital Gains Tax main rates	18% and 24%, annual exempt amount £3,000	In force
Business Asset Disposal Relief	18%	6 April 2026
Corporation Tax	25% main rate above £250,000, 19% small profits rate to £50,000, marginal relief between	In force
Employer NIC	15%, secondary threshold £5,000, Employment Allowance £10,500, Class 1A 15%	2026-27
IHT business and agricultural property relief	100% relief to £2.5m, 50% above, allowance transferable between spouses	6 April 2026
High Value Council Tax Surcharge	England only, £2m threshold, £2,500 to £7,500 a year by band, rising with CPI	April 2028
Pubs and live music venues business rates relief	15% off bills, nightclubs and theatres excluded	2026-27 billing year

One technical note on the inheritance tax line. The increase from £1m to £2.5m was announced on 23 December 2025 to apply from 6 April 2026, and the announcement also made the allowance transferable between spouses, giving up to £5m across a couple. HMRC’s main summary guidance page still describes the original £1m allowance as non-transferable. If you are relying on this for a succession decision, work from the later announcement and confirm the current legislative position rather than the older guidance page.

The change nobody is writing about

The most consequential item in that table for many owner-managers is the one furthest down the agenda: separate property and savings income rates from April 2027.

From that date, property income is taxed at its own rates of 22%, 42% and 47%, two percentage points above the equivalent general rates, with finance cost relief given at the 22% property basic rate rather than 20%. Savings income rises on the same basis. This was announced alongside the dividend increase, takes effect whatever happens on 28 October, and applies to a large number of SME owners who hold property personally alongside their trading company.

Worked example: what is actually changing for you

Take a director-shareholder who is a higher rate taxpayer and holds two residential properties personally, producing £30,000 of net rental profit after allowable expenses, with £8,000 of mortgage interest in the year. Assume the properties are held individually rather than through a company, and that the 2026-27 and announced April 2027 rates apply as published.

	2026-27	From April 2027
Tax on £30,000 property profit at higher rate	40%, £12,000	42%, £12,600
Finance cost tax reducer on £8,000 interest	20%, £1,600	22%, £1,760
Net position	£10,400	£10,840

An increase of £440 a year on these assumptions. Not dramatic in isolation, and that is rather the point. It is a known, dated, arithmetically checkable change that you can plan around now, which is more than can be said for anything you will read about the Budget between now and the end of the month. Scale it to a larger portfolio and the number stops being small. The figures are illustrative and depend on the assumptions stated.

What is genuinely open

Rather less than the commentary suggests, and rather more than anyone can tell you with confidence.

The government’s manifesto rules out increases to the rates of income tax, employee National Insurance and VAT, and commits to capping the headline rate of Corporation Tax at 25% for the Parliament. Those four together account for the large majority of receipts, which narrows the field considerably. Wider business rates reform has been promised for this Budget, including changes to Small Business Rates Relief, and that is the clearest SME-relevant item to watch.

Capital Gains Tax is the area most often raised with us. Aligning CGT rates with income tax rates has been reported as rejected by the Chancellor, which if right removes the largest single change people have been worrying about. It does not rule out narrower measures. The Resolution Foundation has proposed removing certain exemptions, including on death and on leaving the UK, and reliefs and exemptions are a quieter way to raise revenue than a headline rate. For an owner contemplating a disposal or a succession, that distinction is the one that matters: the rate looks settled, the surrounding rules less so.

Sector-specific taxation, including on banking, has been widely reported as under consideration. Nothing has been announced. The reason it matters to SMEs is indirect rather than direct: industry bodies have argued that higher sector taxation would feed through to the cost and availability of lending. Whether that holds is contested, and it is worth separating the argument from the outcome. For a business planning capital expenditure, the cost of finance is a real input, but it is not one that should be modelled off a pre-Budget briefing.

One real consultation worth knowing about

Separately from the Budget noise, HMRC has consulted on modernising the taxation of distributions and repayments of capital from companies. The consultation ran from 23 June to 14 September 2026 and is now closed. HMRC is analysing responses and has not published an outcome.

It matters to owner-managed businesses because it goes to whether particular payments to shareholders are treated as income or as capital, across seven parts of a framework HMRC notes has changed little since 1965. Capital reductions, share buybacks and demergers all sit in that territory, and the difference between an income and a capital outcome is the difference between dividend rates and Capital Gains Tax rates. HMRC has said the intention is clarity rather than disruption to genuine commercial activity, and that the focus is individual rather than corporate shareholders.

Nothing obliges the government to legislate on 28 October, and a closed consultation with no published response is not a measure. It is, though, a real process with a real document behind it, which puts it several rows above most of what you will read this fortnight.

How to read Budget commentary

A simple test separates most of it. Ask where a claim sits on this scale, and discount accordingly:

Status	What it means	Weight for planning
Enacted, with a start date	It is the law	Full
Announced by government with a date	Policy intent, legislation to follow	High, but confirm before acting
Consultation open or recently closed	A direction of travel, details unsettled	Track it, do not plan on it
Reported as under consideration	Someone briefed a journalist	Context only
Predicted by a commentator	An informed guess	None

The High Value Council Tax Surcharge is a useful illustration of how those rows differ. The measure itself is announced and detailed: England only, properties valued at £2m and above, annual charges from £2,500 to £7,500 by band, rising with CPI, with liability starting April 2028 and the consultation closed on 14 July 2026. That belongs in the second row. Reporting that the threshold might be lowered to £1.5m belonged in the fourth, and has since been reported as ruled out. Anyone who restructured a property holding on the strength of the lower figure spent money on a story.

R&D relief, Patent Box and EOTs

Pre-Budget engagement with the technology, automotive and artificial intelligence sectors has been widely reported, and innovation and productivity are likely to feature in the Budget language. That is not the same as a proposal to change the reliefs.

On the three we work in, the position today is straightforward. Nothing currently in the public domain establishes a specific measure affecting R&D Tax Relief, the Patent Box or Employee Ownership Trusts on 28 October. No consultation is open on the rate or scope of any of them. On that basis we are not advising clients to do anything differently before Budget day.

What we will not do is tell you that nothing will change, and our own subject matter is the reason.

Relief on a disposal of shares to the trustees of an Employee Ownership Trust was restricted at Budget 2025. For disposals made on or after 26 November 2025, 50% of the gain is treated as the disposer’s chargeable gain rather than held over in full, and Business Asset Disposal Relief and Investors’ Relief cannot be claimed on a disposal where section 236H relief has been taken. The stated rationale was that the relief had come to cost significantly more than anticipated when it was introduced in 2014, and the certified Exchequer impact rises to £985 million by 2030-31. The change took effect on the day, without a forestalling window.

That is the honest counterweight to any reassurance on this page. A relief whose cost is running ahead of forecast is precisely what a Chancellor under revenue pressure looks at, and EOT relief went from untouched to halved in a single line of a Budget.

Two things make the R&D and Patent Box position look steadier, though neither is a guarantee. The merged R&D scheme only applies for accounting periods beginning on or after 1 April 2024 and is still bedding in alongside an advance assurance pilot, so the recent direction of travel has been administrative rather than rate-driven: mandatory digital claims, the Additional Information Form, tighter evidencing. Changing the architecture again this soon would cut across that work. The Patent Box sits within an agreed international framework linking relief to where the underlying development took place, which limits what can sensibly be changed unilaterally.

So: no action warranted now, and no prediction from us either. If you are mid-transaction on an EOT or a share disposal, the lesson from last November is not to rush, it is that timing certainty has a value and your adviser should be raising it with you before the day rather than after it. We will set out what the Budget actually does to these reliefs once it has done it.

What to decide before 28 October, and what to leave

Some decisions have their own commercial logic and a deadline that happens to sit near Budget day. Others are being accelerated purely on rumour, which is a poor basis for an irreversible transaction.

Worth settling now, if the commercial case already stands:

• An interim dividend you were going to declare anyway this quarter. We looked at the timing question in detail in our blog on taking an interim dividend before the Budget.
• A disposal that is already documented, priced and close to completion.
• Anything with a statutory deadline of its own in the next few weeks, which the Budget does not affect either way.

Worth leaving until after 28 October:

• A sale or succession structure being restructured to pre-empt a rumoured change. The transaction costs of getting it wrong usually exceed the tax at stake. Our comparison of sale, EOT and management buyout routes sets out what each actually involves.
• Incorporating or disincorporating a property portfolio on the strength of speculation.
• Deferring a capital investment that already pays for itself, on the chance that something better might be announced.

The test is straightforward. If the decision would be right even if nothing changes on 28 October, take it on that basis. If it is only right in one version of the Budget, it is a bet rather than a plan.

Lexmore’s View

We are not going to publish a list of predictions. There are plenty available and they will be scored against the actual Budget in a fortnight, at which point the ones that were right will look like insight and the ones that were wrong will quietly disappear. Neither outcome helps a business owner decide anything today.

The revenue pressure is real and the IFS has set it out carefully. What follows from that is a range of options, not a known answer, and the gap between a briefed story and a Finance Bill clause is where most pre-Budget advice goes wrong. A good deal is already fixed, carries a start date, and will apply whatever is announced. Plan from what is decided. Watch what is promised. Ignore what is predicted.

We will publish an analysis of what the Budget actually contains for SMEs once it has been delivered, as we did for Autumn Budget 2025.

References

• Chancellor letter to the Treasury Select Committee: Budget 2026 date
• HMRC: Changes to tax rates for property, savings and dividend income
• HMRC: Capital Gains Tax rates and allowances
• GOV.UK: Corporation Tax rates and reliefs
• HMRC: Rates and thresholds for employers 2026 to 2027
• GOV.UK: Inheritance tax reliefs threshold to rise to £2.5m
• GOV.UK: High Value Council Tax Surcharge consultation
• GOV.UK: Pubs and live music venues business rates relief
• HMRC: Capital Gains Tax, Employee Ownership Trusts relief reduction
• HMRC: Modernising the distributions framework consultation
• Institute for Fiscal Studies: Green Budget 2026
• Resolution Foundation: Hitting the Buffers