A Takeaway from Budget Day, October 2026

MTD for Income Tax

The next wave of MTD for Income Tax is set to go ahead as previously confirmed, bringing landlords and sole traders who earned over £30,000 worth of qualifying income in 2025/26 into scope from 6th April, 2027. 

Clients who join MTD for Income Tax in April 2027 will not receive late filing penalties if they file any of their 2027/28 quarterly updates late.

Smaller, more regular contributions for Self Assessment bills

The government announced plans to change how Payments on Account will work for Income Tax. From April 2029, taxpayers who are within Self Assessment (which includes MTD for Income Tax) will have to make smaller, more regular contributions towards their tax bill throughout the year. This will replace the current system whereby taxpayers make two large lump-sum payments on 31st January and 31st July. 

The government says this “will help taxpayers budget and plan for their tax obligations, reducing the risk of large, unexpected tax bills and making it less likely that they fall behind on tax due and build up debt”.

HMRC will consult with stakeholders and affected taxpayers before implementing the new payment schedule. 

Direct Debits become mandatory for VAT and PAYE liabilities 

From April 2029, the government will require businesses to set up a Direct Debit instruction for their VAT and PAYE liabilities. Businesses do not need to actually pay by Direct Debit if they use another payment method to pay their bill ahead of the deadline - but the Direct Debit instruction will be used to collect any unpaid balances.

Investment in HMRC to ensure tax compliance

HMRC will get an additional 670 compliance officers by 2029/30, strengthening HMRC’s ability to tackle non-compliance and recover unpaid tax. This is in addition to previous commitments to recruit 5,500 more compliance officers by 2029/30.

Minimum wage to rise by almost 4%

The Chancellor announced rises to both the UK’s National Living Wage (which applies to workers aged 21 and over) and the National Minimum Wage (for those aged 18, 19 and 20). 

The National Living Wage will rise by 3.9%, moving from £12.71 to £13.21 per hour

The National Minimum Wage will also rise by 3.9%, going up from £10.85 to £11.27 an hour. This represents a slightly-above-inflation increase for 2.3 million people.

Parental pay introduced for self-employed dads, partners and adopters

About 150,000 self-employed dads, partners and adopters will qualify for a parental allowance for the first time from April 2029. Until now, only employees in these positions could qualify for state support. Under the new rules, they will be eligible for two weeks’ support worth up to £194 a week. The new rules will apply across Great Britain (so not in Northern Ireland).

First-year allowance to increase to 50%

The Chancellor announced that the first-year allowance will rise from 40% to 50% for qualifying expenditure incurred on or after 1st January 2027.

Writing down allowance to reduce to 12%

The Chancellor also announced that the main pool writing down allowance will fall from 14% to 12%, taking effect from 1st April 2027 for Corporation Tax and 6th April 2027 for Income Tax.

Capital Gains Tax and entrepreneurial support  

From 6th April 2027, the government will introduce changes to capital gains tax reliefs for business owners and founders. 

Founders’ Relief:

A new Capital Gains Tax Founders’ Relief will provide a reduced 10% CGT rate on up to £10 million in lifetime gains for qualifying founders of high-growth, innovative companies. The detailed eligibility criteria remain subject to technical consultation. 

Business Asset Disposal Relief (BADR): The lifetime limit on gains eligible for BADR will be reduced from £1 million to £500,000. 

Income tax from property and savings income to rise

Income tax from property and savings income will be increased by a further 2% from April 2027, on top of the 2% already announced, making a total rise of 4% from existing rates. Income Tax rates for property rental income for taxpayers (excluding Scottish taxpayers) will go up to 24%, 44% and 49% respectively for the basic, higher and additional rates. Income Tax rates for savings income for all UK taxpayers will be 24%, 44% and 49%.

Trading allowance tripled from £1k to £3k

In a boost to freelancers and side-hustlers, the trading allowance will be tripled from £1,000 to £3,000, starting from 6th April 2027. 

If your clients earn less than £3,000 per year from their self-employment, this means they will not need to register with HMRC or pay tax on those earnings. If clients earn more than £3,000 per year from their sole trade, they will still need to register with HMRC but they can use either the new increased trading allowance of £3,000, or their actual business expenses and capital allowances, against their income to work out their profit. Clients can’t of course use both the trading allowance and their actual costs against their income - they have to use one or the other.

Mileage rate rises

The government has announced an increase to mileage rates for both employees and the self-employed.

The mileage rate increase from 45p to 55p per mile for journeys up to 10,000 miles per tax year, which was introduced from 6th April 2026, has been made “permanent”. Meanwhile the rate for each mile your clients drive for their business over 10,000 miles per tax year is set to increase from 25p to 35p from 6th April 2027.

Fuel duty freeze to continue