Budget 2026: Key Tax Changes For Employers, Small Businesses And The Self-Employed

Higher business mileage allowances, changes to employee share schemes and new VAT administration requirements are among the measures businesses will need to prepare for following the Autumn Budget.

Chancellor John Healey delivered the Budget on 28 October, with HM Revenue and Customs subsequently outlining changes affecting employers, employees and business owners.

Implementation dates stretch from November 2026 to April 2029. Some measures require legislation, while others will involve further consultation and guidance.

Business Mileage Allowance To Increase

From 6 April 2027, the approved mileage rate for business travel above 10,000 miles will increase from 25p to 35p per mile for cars and vans.

The rate for the first 10,000 business miles remains 55p per mile, following an increase applying retrospectively from 6 April 2026.

The changes cover Approved Mileage Allowance Payments for employees using their own vehicles and simplified mileage rates for eligible self-employed businesses.

These are tax allowance rates rather than a requirement for employers to reimburse employees at a particular level.

Higher Business Rates Relief Thresholds In England

Qualifying retail, hospitality and leisure properties in England will benefit from higher Small Business Rate Relief thresholds from 1 April 2027.

The rateable value threshold for full relief will rise from £12,000 to £18,000. The upper threshold for tapered relief will increase from £15,000 to £21,000.

The measure applies to qualifying properties in England. Business rates arrangements in Wales, Scotland and Northern Ireland are determined separately.

Employee Share Option Limit To Double

The individual Company Share Option Plan limit will increase from £60,000 to £120,000 from 6 April 2027.

The maximum exercise period will also extend from 10 to 15 years, while CSOP options will no longer count towards an individual’s Enterprise Management Incentive limit.

The changes are due to be introduced through Finance Bill 2026–27.

Changes To R&D Claims And Investment Tax Certainty

Companies will no longer need to submit a claim notification form for research and development tax reliefs from 1 April 2027.

HMRC also plans to introduce a simplified Additional Information Form in autumn 2027, with further details to be published ahead of implementation.

For larger investment projects, access to HMRC’s Advance Tax Certainty Service will widen from 4 November 2026. The qualifying project threshold will fall from £1 billion to £300 million.

The service allows businesses to establish how UK tax rules will apply to qualifying major investments before committing funds.

Temporary Increase In Bank Tax Surcharge

The Bank Corporation Tax surcharge will rise from 3% to 6% for a 15-month period beginning on 1 January 2027.

The higher surcharge will remain in place until 31 March 2028, before returning to 3% on 1 April 2028. This is an additional charge applying to banks within the surcharge regime, rather than a change to the main Corporation Tax rate.

Fuel Duty Cut Extended

The temporary 5p-per-litre reduction in the main rates of fuel duty will continue until 30 June 2027.

The further 3.7p-per-litre reduction in specified rebated fuel rates will also be extended until that date. This covers qualifying uses of fuels including red diesel, biodiesel, bioblend and kerosene for excepted machinery other than heating.

VAT Changes For Overseas Services And Online Sales

From April 2027, the VAT reverse charge for services supplied from overseas will be restricted to receiving UK businesses that are VAT-registered.

Further changes will affect online marketplaces from October 2027. Platforms will become responsible for collecting VAT on covered sales by UK VAT-registered businesses and other UK businesses meeting a minimum annual sales threshold of £90,000 per platform.

The announced exclusions include personal sales, second-hand goods and business-to-business transactions.

Businesses selling through online platforms will need to review the detailed rules as implementation guidance becomes available.

Employment Expenses Claims To Be Simplified

From 6 April 2028, employees will no longer be required to enter Self Assessment solely because their claim for employment expenses exceeds £2,500.

Claims above that amount will instead be possible through PAYE, using form P87 or the PAYE Expenses service, with supporting evidence.

The government also intends to reform the benchmark and overseas scale rates used for qualifying travel and subsistence reimbursements from April 2028.

Separately, implementation of changes confirming that employment-related image rights payments are subject to Income Tax and National Insurance has been deferred until 6 April 2028.

E-Invoicing And Direct Debit Requirements From 2029

The government has published a roadmap towards requiring VAT e-invoicing from April 2029.

Businesses will also be required to have Direct Debit instructions in place for VAT and PAYE return liabilities from April 2029, subject to exceptions.

Other payment methods will remain available before a specified cut-off date, with Direct Debit acting as a safeguard for liabilities that remain unpaid.

A separate programme will introduce mandatory software standards for electronic and mobile point-of-sale systems to tackle electronic sales suppression. A technical consultation is planned for summer 2027.

For businesses, the timetable means preparations will need to cover payroll, expenses policies, employee incentives, accounting software and online sales processes. HMRC will publish further guidance and consultation material as the measures progress.

This article provides general information only and does not constitute financial or tax advice. Businesses should seek professional advice on their circumstances.