TRW & Co · UK tax
UK Budget Tax Changes: What Businesses and Individuals Need to Know
The UK Budget tax changes that matter most in October 2026 come from Budget 2025 and the Finance Act 2026: higher dividend tax from April 2026, frozen thresholds to 2031, an 18% Business Asset Disposal Relief rate and a £2.5 million cap on full business and agricultural relief. Here is what changed, when, and what to do before the next Budget.
Key pointMost recent measures are already law, so the safest plan is built on the Finance Act 2026 as it stands, not on rumours about the 28 October 2026 Budget.
At a glance
Dividend tax rises
From 6 April 2026 the dividend ordinary rate is 10.75% and the upper rate 35.75%, while the additional rate stays at 39.35%.
Thresholds frozen
The Personal Allowance of £12,570 and higher rate threshold of £50,270 are frozen until April 2031, dragging more income into higher bands each year.
Business sale rate up
Business Asset Disposal Relief now charges 18% on qualifying gains from 6 April 2026, with the £1 million lifetime limit unchanged.
Relief allowance capped
From 6 April 2026, 100% agricultural and business property relief is limited to a combined £2.5 million, with 50% relief above, transferable between spouses.
Next Budget date
The government has confirmed the next Budget will be held on 28 October 2026; until then, reported proposals are speculation rather than policy.
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The short answer: which UK Budget tax changes matter now
As of October 2026, the UK Budget tax changes that shape most plans are the ones announced at Autumn Budget 2024 and at Budget 2025 on 26 November 2025, most of which are now law in the Finance Act 2026. That Act received Royal Assent on 18 March 2026. The next Budget is set for 28 October 2026, so anything you hear about it is, for now, speculation.
For individuals, the headline points are higher income tax on dividends from 6 April 2026, higher rates on savings and property income from 6 April 2027, and personal tax thresholds frozen until April 2031. For business owners, the rate of Business Asset Disposal Relief rose to 18% from 6 April 2026. In the same month, the new combined £2.5 million allowance for 100% agricultural and business property relief took effect.
Other changes are less visible but just as costly. Carried interest moved into the income tax system, relief on sales to employee ownership trusts was halved, and unused pension funds will fall into estates for inheritance tax from April 2027. This briefing sets out what changed, when each change bites, who is affected and what to do before the next fiscal event.
How Budget measures become law, and why the dates matter
A Budget speech is a statement of policy, not law. HM Treasury and HMRC publish the detail on Budget day in the Overview of Tax Legislation and Rates (OOTLAR) and in tax information and impact notes. These documents confirm the intended effective date of each measure. Most measures are then legislated in a Finance Bill introduced shortly afterwards.
Budget 2025 measures were carried by the Finance (No. 2) Bill 2025-26, which completed its passage through Parliament in March 2026 and became the Finance Act 2026. Some provisions apply from Budget day itself (for example, the restriction of relief on disposals to employee ownership trusts). Others apply from the start of a later tax year, and a few depend on secondary legislation or a further Finance Bill.
This matters for planning because the law can apply before Royal Assent. Where a change takes effect from Budget day, transactions completed between the speech and Royal Assent are generally caught once the Act is passed. Advisers therefore treat the OOTLAR as the working rulebook from the moment it is published.
Who sets the rates in Scotland and Wales
Income tax rates and bands on earnings and pensions are set by the Scottish Parliament for Scottish taxpayers, and Wales has partial powers. The government has said it will give the devolved governments the ability to set the new property income rates. When you read UK Budget tax changes to income tax, check whether the rate applies to you as an English, Welsh, Scottish or Northern Irish taxpayer.
Key UK Budget tax changes already legislated
The table below summarises the measures most likely to affect owners, investors and families. Dates are the effective dates published by the government and legislated in the Finance Act 2026 unless stated otherwise.
| Measure | What changes | Effective from | Most affected |
|---|---|---|---|
| Dividend income tax rates | Ordinary rate rises to 10.75% and upper rate to 35.75%; additional rate stays at 39.35% | 6 April 2026 | Owner-managers, investors |
| Savings income rates | Savings basic, higher and additional rates rise by 2 points to 22%, 42% and 47% | 6 April 2027 | Savers with taxable interest |
| Property income rates | New separate property rates of 22%, 42% and 47% in England, Wales and Northern Ireland | 6 April 2027 | Individual landlords |
| Income tax thresholds | Personal Allowance £12,570 and higher rate threshold £50,270 frozen | Until April 2031 | Most taxpayers |
| Business Asset Disposal Relief | Rate rises from 14% to 18%; £1 million lifetime limit unchanged | 6 April 2026 | Business sellers |
| Agricultural and business property relief | 100% relief limited to a combined £2.5 million allowance; 50% relief above it | 6 April 2026 | Family businesses, farmers, AIM investors |
| Carried interest | Carry taxed as trading profits within income tax | 6 April 2026 | Fund managers |
| Employee ownership trusts | CGT relief on sales to an EOT reduced from 100% to 50% of the gain | 26 November 2025 | Founders planning succession |
| Pensions and inheritance tax | Unused pension funds and death benefits brought into the estate | 6 April 2027 | Anyone with a defined contribution pot |
The government also confirmed that the inheritance tax nil-rate band (£325,000) and residence nil-rate band (£175,000) stay frozen until 5 April 2031. The Corporation Tax main rate stays at 25%, with a small profits rate of 19%. For business investment, Budget 2025 introduced a 40% first-year allowance for qualifying spending from 1 January 2026, and the main rate writing-down allowance fell to 14% from April 2026.
What the UK Budget tax changes mean for individuals and families
The biggest effect on household finances is the threshold freeze. Frozen allowances mean that pay rises pull more income into higher bands each year, which raises tax without a headline rate change. Combined with higher rates on dividends, savings and rental income, the overall effect is to tax income from assets more heavily than before.
Budget 2025 also changed the order in which reliefs and allowances are set against income from 6 April 2027. Reliefs and allowances will be set against non-savings, dividend and property income first. People with mixed income sources should expect their liabilities to shift even where their total income stays the same.
Savings, ISAs and pensions
The Budget 2025 document confirmed that, from 6 April 2027, the annual cash ISA limit will be £12,000 within the overall £20,000 ISA allowance, with savers over 65 keeping the full cash limit. From 6 April 2029, pension contributions made through salary sacrifice will attract employer and employee National Insurance above £2,000 a year.
The pension change with the widest reach is inheritance tax. From 6 April 2027, unused pension funds and death benefits will form part of the estate, and personal representatives will be responsible for reporting and paying the tax. Our article on pensions and inheritance tax explains the mechanics, and our inheritance tax planning guide covers the wider estate picture.
Property owners
Owners of homes in England worth £2 million or more face a new High Value Council Tax Surcharge from April 2028. According to the Budget document, it will be charged on owners rather than occupiers, at rates starting at £2,500 a year and rising to £7,500 for properties valued above £5 million. The government said it would consult on implementation, so the detailed rules are still subject to change.
What the UK Budget tax changes mean for business owners and investors
For owner-managers, the main rate changes compound one another. Dividends cost more in income tax from April 2026. The rate on a qualifying business sale has risen, and family companies passed on death or by gift now face a cap on full inheritance tax relief. Our guides to Business Asset Disposal Relief and business property relief reform explain each in detail.
There are some reliefs pointing the other way. The Enterprise Management Incentive limits rise from 6 April 2026: the company option limit goes from £3 million to £6 million, gross assets from £30 million to £120 million, employees from 250 to 500, and the exercise period from 10 to 15 years. Enterprise Investment Scheme and Venture Capital Trust limits also rose, but VCT income tax relief fell from 30% to 20%.
Transaction-specific changes
- Incorporation relief now needs a claim. For transfers of a business to a company on or after 6 April 2026, the relief no longer applies automatically and must be claimed.
- Share exchanges and reorganisations. The anti-avoidance rules were modernised for issues of shares or debentures on or after 26 November 2025, which matters for share-for-share deals and pre-sale reorganisations.
- Listing relief. Securities of a company newly listed on a UK regulated market get relief from the 0.5% Stamp Duty Reserve Tax charge for three years from listing, from 27 November 2025.
- Tax advisers. Advisers who interact with HMRC for clients must register with HMRC and meet minimum standards from May 2026, alongside new powers against adviser-facilitated non-compliance.
For deal-specific planning, our transaction tax team works alongside corporate colleagues so that tax structuring and the sale documents stay aligned.
A practical pre-Budget review in seven steps
The next Budget will be held on 28 October 2026, according to the Chancellor’s letter to the Treasury Select Committee. Whatever it contains, a disciplined review of decisions already in train is more valuable than reacting to rumours.
- Map exposure by tax. List the income, gains and assets that each measure touches: dividends, rental income, savings, business shares, agricultural land, pension pots and carried interest. Note the effective date for each.
- Separate law from announcement. Mark each item as in force, legislated with a future start date, or announced and subject to consultation. Only the first two should drive irreversible steps.
- Check transactions in progress. For any sale, gift, restructuring or trust appointment, confirm the date a disposal or transfer is treated as made. For capital gains tax that is usually the date of an unconditional contract, not completion.
- Review remuneration and extraction. With higher dividend rates and frozen thresholds, retest the mix of salary, dividends, pension contributions and retained profit for owner-managers.
- Refresh estate documents. Wills, letters of wishes and shareholder agreements drafted before the inheritance tax changes may no longer allocate relief efficiently. The transferable relief allowance between spouses changes the analysis.
- Model the downside. Run figures on the current law rather than hoped-for changes. If a decision only works if the rules soften, it is a speculative decision.
- Document the reasons. Keep a short note of why each step was taken and on what advice. It helps if HMRC later questions the commercial purpose.
Avoid acting on Budget rumours. A disposal or gift made in haste can lock in a worse position than waiting, and announcements often come with anti-forestalling rules aimed at exactly the transaction people rushed to complete.
Illustrative scenario: UK Budget tax changes for a family company owner
Illustrative only; generic parties and simplified figures. A founder owns all the shares in a profitable trading company and takes most of her income as dividends. She also owns the building the company trades from, has a significant defined contribution pension, and expects to sell part of the business to a private equity investor within two years.
Under the current rules, her dividends above the basic rate band are taxed at the higher 35.75% upper rate from April 2026, so the team reviews whether part of the profit should instead fund pension contributions or stay in the company. On the sale, Business Asset Disposal Relief now gives an 18% rate on up to £1 million of lifetime gains. That is a saving against the 24% higher CGT rate, but much smaller than under the old regime. The gain on the building may qualify as an associated disposal only in part if the company paid rent.
On the estate side, her shares and the building may qualify for business property relief. The £2.5 million allowance means relief at 100% is limited, and her spouse’s unused allowance may later be transferable. From April 2027 her unused pension will also count towards the estate. The result is a coordinated plan: sale structure, will review, and pension and gifting strategy considered together rather than one at a time.
Risks and common mistakes
Treating a Budget announcement as final law
Measures announced in a Budget can change before Royal Assent, and consultation responses sometimes alter the design substantially. The agricultural and business property relief allowance is a good example. It was announced at £1 million and later increased to £2.5 million before the Finance Act 2026 was passed. Plans built tightly around the original figure had to be revisited. Where a measure is still in consultation, such as the implementation of the High Value Council Tax Surcharge, build flexibility into any step you take, and avoid irreversible gifts or restructures that only make sense on one version of the rules.
Missing anti-forestalling and Budget-day start dates
Several recent measures took effect on Budget day itself, such as the employee ownership trust relief restriction and the changes to share exchange anti-avoidance rules. Others contain specific rules for contracts entered into before a change but completed after it. Sellers sometimes assume that signing quickly locks in the old rate, only to find that the legislation looks at the date of completion, the date conditions are satisfied, or the purpose of the arrangement. Always check the commencement and transitional provisions of the Act itself rather than relying on a summary.
Forgetting that some reliefs now need a claim
Incorporation relief, which used to apply automatically on transferring a business to a company for shares, must be claimed for transfers on or after 6 April 2026. Business Asset Disposal Relief, investors’ relief and the four-year foreign income and gains regime also require claims within statutory time limits. A missed claim cannot usually be rescued later, and HMRC has no general discretion to extend the deadline. Diary the claim deadline as soon as the transaction completes, and make sure whoever prepares the tax return knows a claim is needed.
Overlooking devolved tax differences
Scottish taxpayers pay income tax on earnings at Scottish rates and bands, and land transactions in Scotland and Wales are subject to their own taxes rather than Stamp Duty Land Tax. The new property income rates will initially apply in England, Wales and Northern Ireland, with devolved governments being given powers to set their own. A plan modelled on English rates may give the wrong answer for a client resident in Scotland or with property in Wales.
Cross-border angle: non-residents and international families
Several recent measures land on people outside the UK. Since 6 April 2025, the residence-based regime has replaced the remittance basis for people who were not UK-domiciled. Our guide to non-dom tax changes and the FIG regime explains the four-year relief for new arrivals and the inheritance tax test based on long-term residence.
From 6 April 2026, the notional tax credit for non-UK residents receiving dividends from UK companies is abolished, and all dividends received during a period of temporary non-residence become chargeable on return. Families with ties to Bangladesh should also check how UK and Bangladeshi rules interact through the UK–Bangladesh double tax treaty, particularly on dividends and gains.
Overseas investors in UK agricultural property held through offshore structures were also targeted: from 6 April 2026, such property is treated in the same way for inheritance tax as if held directly. Holding structures set up for older rules should be reviewed.
What to do next: a checklist
- Confirm which of the UK Budget tax changes in this briefing apply to you, and from which date.
- Re-run owner-manager remuneration for 2026-27 and 2027-28 using the new dividend, savings and property rates.
- For any planned business sale, check Business Asset Disposal Relief eligibility now, while there is time to fix gaps in the two-year conditions.
- Review wills and shareholder agreements against the £2.5 million relief allowance and its transfer between spouses.
- Add pension pots to inheritance tax estimates ahead of April 2027.
- Diary claim deadlines for reliefs that are no longer automatic.
- Wait for the 28 October 2026 Budget before making irreversible moves that depend on rumoured changes.
TRW & Co’s London office is authorised and regulated by the Solicitors Regulation Authority. Our tax lawyers in London advise businesses, founders and families on how each Budget changes their position, and we coordinate with private client colleagues on succession. To discuss your position, contact our London team at info@trw.co or +880 1779 127165.
Frequently asked questions
01When is the next UK Budget?
The government has confirmed that the next Budget will be held on 28 October 2026, in a letter from the Chancellor to the Treasury Select Committee published on GOV.UK. Measures announced on that day will be set out in a new Overview of Tax Legislation and Rates and are usually legislated in a Finance Bill over the following months. Until the speech is delivered, reports of what it may contain are speculation, and it is generally unwise to make irreversible decisions on the strength of them.
02What is the dividend tax rate from April 2026?
From 6 April 2026, the dividend ordinary rate rose by two percentage points to 10.75% and the dividend upper rate rose to 35.75%. The dividend additional rate stays at 39.35%. The change was announced at Budget 2025 and legislated in the Finance Act 2026. Owner-managers who extract profit mainly by dividend should review the balance between salary, dividends, pension contributions and retained profit, because the change interacts with frozen income tax thresholds.
03Has the Finance Act 2026 been passed?
Yes. The Finance (No. 2) Bill 2025-26, which carried most Budget 2025 measures, received Royal Assent on 18 March 2026 and became the Finance Act 2026. It includes the new property, savings and dividend rates, the carried interest regime, the agricultural and business property relief reforms and the restriction of employee ownership trust relief. Some measures announced at Budget 2025, such as the High Value Council Tax Surcharge and the salary sacrifice change, will be delivered through other legislation later.
04Are income tax thresholds still frozen?
Yes. Budget 2025 extended the freeze so that the Personal Allowance remains £12,570 and the basic rate limit £37,700 up to and including the 2030-31 tax year, keeping the higher rate threshold at £50,270. The inheritance tax nil-rate band and residence nil-rate band are also frozen until 5 April 2031. Scottish taxpayers pay income tax on earnings at rates and bands set by the Scottish Parliament, so their position differs.
05When do pensions become subject to inheritance tax?
Unused pension funds and death benefits payable from a pension will be brought into a person’s estate for inheritance tax from 6 April 2027. Personal representatives will be responsible for reporting and paying any inheritance tax due on those funds. Anyone with a significant defined contribution pot should revisit their nominations, will and lifetime gifting strategy before that date, and include the pension when estimating the estate’s exposure.
06Should I sell my business before the next Budget?
Not simply to beat a rumoured change. The Business Asset Disposal Relief rate is already 18% for disposals from 6 April 2026, and the main capital gains tax rates are 18% and 24%. Changes are often announced with anti-forestalling rules aimed at rushed transactions. A sale should be driven by commercial readiness and buyer interest, with tax structuring done properly. Take advice on timing, conditions and documentation rather than racing a speech.
Sources and official materials
- Budget 2025: Overview of tax legislation and rates (OOTLAR) — HM Treasury and HMRC summary of every tax measure and its effective date
- Budget 2025 document — Policy decisions including the High Value Council Tax Surcharge, ISA reform and eVED
- Finance Act 2026 — Statutory text implementing most Budget 2025 tax measures
- Finance (No. 2) Bill 2025-26: bill stages — Parliamentary passage and Royal Assent of the Finance Bill
- Chancellor letter to the Treasury Select Committee: Budget 2026 date — Confirms the Budget will be held on 28 October 2026
General information only, current as at 21 October 2026. It is not legal advice and does not create a solicitor–client relationship. It reflects the law of England and Wales unless stated otherwise; Scotland and Northern Ireland have separate legal systems, and the law changes frequently. Check current official sources and take advice on the facts of your matter.