What Does the Autumn Budget 2026 Change for UK Company Directors and Sole Traders?
What the 28 October 2026 Budget means for company directors and sole traders: tax rates, NI, trading allowance, capital allowances, MTD dates.
Quick answer
The Budget on 28 October 2026 did not raise the headline tax rates for directors or sole traders. Corporation tax stays at 25% and 19%, and the 2027-28 dividend, income tax and Class 4 rates in the official rates annex match 2026-27. The changes that matter are the trading allowance rising to £3,000 from 6 April 2027, a bigger first-year allowance, a lower Business Asset Disposal Relief limit, and a reform of how company distributions are taxed from April 2028.
What did the Budget change for directors and sole traders?
Most of this Budget is about what stayed put. The Chancellor's speech says there is no change to tax on income from dividends and no change to tax on income from employment. The changes that touch a small company or a self-employed person are narrower, and most start in April 2027 or later. Nothing below needs action this week. Some of it is worth planning around.
Every figure on this page comes from the Budget documents on GOV.UK and the HMRC guidance linked in the text. Where the Budget has not published a rate or detail yet, we say so rather than guess.
Which changes start when?
| Measure | Effective date |
|---|---|
| Trading allowance rises from £1,000 to £3,000 | 6 April 2027 |
| Business mileage above 10,000 miles rises from 25p to 35p a mile | 6 April 2027 |
| Property and savings income rates up 2 percentage points | 6 April 2027 |
| Business Asset Disposal Relief lifetime limit falls from £1 million to £500,000 | Disposals on or after 6 April 2027 |
| Main rate first-year allowance rises from 40% to 50% | Spending from 1 January 2027 |
| Main rate writing-down allowance falls from 14% to 12% | 1 April 2027 (Corporation Tax), 6 April 2027 (Income Tax) |
| Mandatory payrolling of company cars, vans, fuel and medical benefits | 6 April 2027 |
| MTD for Income Tax threshold drops to £30,000 | 6 April 2027 |
| Company distributions framework modernised | April 2028 |
| Self Assessment payments on account become more regular | April 2029 |
Is corporation tax changing?
No rate change. The Budget's rates annex lists the main rate at 25% and the small profits rate at 19% for the financial years starting April 2026, April 2027 and April 2028. The lower and upper profit limits are £50,000 and £250,000, with marginal relief between them. The annex is the official source: Annex A: rates and allowances.
What happens to dividend tax and the salary and dividend mix?
The annex lists the same dividend figures for 2026-27 and 2027-28: a £500 Dividend Allowance, and rates of 10.75% (ordinary), 35.75% (upper) and 39.35% (additional).
The one dividend item that is new is structural. The Budget confirms the government is going ahead with changes to how distributions and capital repayments from companies are taxed, from April 2028. Draft legislation is due in 2027, and no detail of the new rules is published yet. Treat anything you read about what the reform will do as speculation until the draft appears.
For the usual salary question, the inputs the Budget documents list for 2027-28 are the same as this year. The Class 1 primary threshold is £242 a week (£12,570 a year) and the employer secondary threshold is £96 a week. Employer NIC is 15% above that threshold. Which mix suits you depends on your whole position, so it is a question for you and your adviser rather than a rule of thumb.
What changes for income tax, National Insurance and VAT?
Income tax: the annex shows the Personal Allowance at £12,570 and the basic rate limit at £37,700 in both 2026-27 and 2027-28, with rates of 20%, 40% and 45%. The separate freeze on those thresholds until 5 April 2031 was announced at the previous Budget, and the HMRC policy paper still sets it out.
The one rate rise is on income that is not a salary or a dividend. From 6 April 2027, property income and savings income are taxed at 24% (basic), 44% (higher) and 49% (additional). That affects a director with rental income or large interest outside the company. Property income rates apply in England, Wales and Northern Ireland.
National Insurance: Budget 2026 keeps the Class 4 rates at 6% and 2% in the annex, and states that other NIC limits stay at 2026-27 levels until 2030-31. For 2027-28 it sets the Lower Earnings Limit at £6,916 a year, the Small Profits Threshold at £7,355 and the voluntary Class 2 rate at £3.80 a week. Employer NIC stays at 15%, and the Employment Allowance stays at £10,500 in the annex.
VAT: the annex lists the registration threshold at £90,000 and the deregistration threshold at £88,000 from both April 2026 and April 2027.
What is new for sole traders?
The trading allowance triples from £1,000 to £3,000 from 6 April 2027, and the Self Assessment reporting threshold for trading income rises to £3,000 too.
The mileage rate for business miles above 10,000 a year rises from 25p to 35p from 6 April 2027, and that includes the simplified mileage rate for the self-employed.
The Budget also reforms Self Assessment payments from April 2029. People who make payments on account will pay more regularly during the year, with the option to pay through PAYE where eligible. Our guide to how to pay yourself as a sole trader covers how payments on account work today.
What are the MTD for Income Tax dates?
Making Tax Digital for Income Tax is already in force for sole traders and landlords with qualifying income over £50,000. HMRC's sign-up guidance sets the next steps:
- Over £30,000 (based on 2025-26 income): from 6 April 2027.
- Over £20,000 (based on 2026-27 income): from 6 April 2028.
Qualifying income is gross turnover from self-employment and property before expenses. Quarterly updates are due by 7 August, 7 November, 7 February and 7 May.
Budget 2026 adds a penalty easement: late submission penalty points will not apply to quarterly updates for 2027-28 for people who must join in April 2027. The quarterly updates are still required before the tax return can be filed. Three groups are exempt until further notice, including people eligible for qualifying care relief and non-UK resident foreign entertainers and sportspeople. See our guide on when the MTD threshold drops to £20,000.
What about capital allowances and equipment?
For spending from 1 January 2027, the main rate first-year allowance rises from 40% to 50%. The main rate writing-down allowance falls from 14% to 12% from April 2027. The annex still lists the Annual Investment Allowance at £1 million and 100% full expensing for qualifying companies. The speech says full expensing is maintained for eligible assets.
Does anything change if I sell my company or shares?
Yes. The Business Asset Disposal Relief rate stays at 18% in the annex, but the lifetime limit falls from £1 million to £500,000 for disposals on or after 6 April 2027. A new Founders' Relief, a lower Capital Gains Tax rate for qualifying share disposals, starts on or after 6 April 2027. The consultation closes on 30 November 2026 and the rate is not stated in the documents we checked, so this page does not quote one.
What about company cars and benefits?
From 6 April 2027, company cars and vans, car and van fuel, and medical benefits must be payrolled. Most other benefits follow from 6 April 2028. Directors who receive these benefits will see them reported through payroll instead.
Related guides
- How to pay yourself as a UK sole trader
- Taking on your first employee as a limited company
- UK freelancer income tax rates for 2026-27
Frequently asked questions
Did the Autumn Budget 2026 raise corporation tax?
No. The rates annex lists the main rate at 25% and the small profits rate at 19% for the financial years starting 2026, 2027 and 2028, with the same £50,000 and £250,000 limits.
Did dividend tax go up in the Budget?
No. The Chancellor's speech says there is no change to tax on income from dividends. The annex lists the same rates for 2026-27 and 2027-28: 10.75%, 35.75% and 39.35%, with a £500 allowance.
When does the trading allowance go up to £3,000?
From 6 April 2027. It rises from £1,000 to £3,000, and the Self Assessment trading income reporting threshold rises with it.
Is the VAT registration threshold changing?
The annex lists £90,000 for registration and £88,000 for deregistration from both April 2026 and April 2027.
Has the Employment Allowance changed?
The annex lists £10,500 for both 2026-27 and 2027-28. A company where the director is the only employee paying secondary Class 1 NIC cannot claim it. See HMRC's eligibility rules.
When does MTD for Income Tax reach me?
If your qualifying income was over £30,000 in 2025-26, from 6 April 2027. If it was over £20,000 in 2026-27, from 6 April 2028.
Will Budget 2026 change how directors are paid dividends?
Not yet. The government will modernise how company distributions are taxed from April 2028. Draft legislation is due in 2027, and the detail is not published.
Do these changes need Finance Bill approval?
Several are announced as measures for Finance Bill 2026-27, and the details can change as legislation is drafted. Check the dates again when the Bill is published.
Finn, the AI accountant in AccountsOS, keeps your books and deadlines in one place, so changes like these are easy to check against your real numbers.