Budget 2026: What It Means for Business Owners, High Earners and Retirees

Already law before the Budget

Some big changes were already set before 28 October. They still apply.

• Pensions and inheritance tax. From 6 April 2027, most unused pension savings will count towards your estate for inheritance tax. Inheritance tax is the tax your family may pay on what you leave when you die.
• Inheritance tax allowances stay frozen. The nil rate band of £325,000 and the residence nil rate band of £175,000 are frozen until April 2031.
• Income tax thresholds stay frozen until April 2031. As pay rises, more of it falls into higher tax bands. This is sometimes called a stealth tax.
• Dividend tax went up in April 2026, to 10.75% for basic rate taxpayers and 35.75% for higher rate taxpayers.
• The salary sacrifice cap. From April 2029, only £2,000 a year of pension paid through salary sacrifice will be free of National Insurance.
• Tax on savings and property income was already due to rise by 2 percentage points from April 2027. That was announced in the November 2025 Budget. This Budget adds another 2 points on top. See below.
• A council tax surcharge on homes worth over £2 million in England starts in April 2028. This Budget confirmed deferrals, discounts and exemptions.

1. Selling your business

What we were watching: the tax on selling a business, through Capital Gains Tax and Business Asset Disposal Relief. Also the relief for selling to an Employee Ownership Trust, and talk of removing the “uplift on death”.

What was announced:

• Business Asset Disposal Relief is halved. This relief cuts the tax on selling a business to 18%. From 6 April 2027, it will cover £500,000 of gains in your lifetime, down from £1 million. The 18% rate itself is unchanged.
• The government says three in four people who claim the relief will still get it on their whole gain. Those are mostly smaller sales. Larger sales lose out.
• A new Founders’ Relief. From 6 April 2027, qualifying founders of “high-growth, innovative companies” will pay 10% Capital Gains Tax on up to £10 million of lifetime gains. Who qualifies is still being decided. The government is asking for views on the rules until 30 November 2026.
• The main Capital Gains Tax rates stay at 18% and 24%.
• The uplift on death was not removed.
• Employee Ownership Trusts: companies moving to one keep access to Enterprise Management Incentive (EMI) share options. EMI is a tax-friendly share option scheme for staff. No change was announced to the relief for selling to a trust.

What it means, with an example (illustrative only):

A director sells their company and makes a £2 million gain.

Both figures are before the £3,000 annual exempt amount. The extra tax is £30,000. That is the most anyone can lose from this change, because £500,000 moves from 18% to 24%.

If your total lifetime gains qualifying for the relief are £500,000 or less, nothing changes for you.

What to do now:

• If you plan to sell in the next year or so, the date of the sale now matters. A sale completed before 6 April 2027 can still use the £1 million limit. Special rules apply to sales agreed before that date but completed after it. Check the timing with us first.
• Don’t rush a sale just to save tax. A worse price or rushed terms can cost more than £30,000. Talk it through first.
• If your company is a fast-growing, innovative business, ask us whether the new Founders’ Relief might apply. We’ll know more once the rules are published.

Read next: Selling your business hub, Capital Gains Tax calculator, Business valuation calculator, Business Asset Disposal Relief

2. Paying yourself from your company

What we were watching: dividend tax, how much salary to take, company pension payments and their National Insurance treatment, and Corporation Tax.

What was announced:

• Dividend tax is unchanged. The Chancellor said there would be no change to tax on dividends or on income from work.
• Corporation Tax main rate: no change announced.
• Company pension payments: no change to their National Insurance treatment.
• New rules on “distributions” from April 2028. A distribution is money a company pays out to its shareholders, like a dividend. The government will rewrite how these are taxed, so that similar payouts are taxed the same way. It wants to stop people “structuring” how they take profits to get a lower rate. Genuine sales and families passing on a business are protected. Draft rules come in 2027.
• Tax-free mileage rates rise to 55p a mile for the first 10,000 business miles.
• Interest on money left in the company: if you take interest or hold cash personally, the savings tax rise applies. See section 4.

What it means, with an example (illustrative only):

A director takes a £12,570 salary and £50,000 in dividends in 2026/27. They pay about £8,396 in income tax on the dividends. Their company pays about £1,136 in employer National Insurance on the salary. There is no employee National Insurance at that salary.

Paying yourself works the same way as before. Salary up to £12,570, then dividends, with company pension payments on top, is still the usual starting point. The right mix depends on your own figures.

What to do now:

• Check your plan for the rest of this tax year, which ends on 5 April 2027.
• Does your company pay you interest or rent? Ask us how the April 2027 tax rise changes your mix.
• Run your own numbers with the profit extraction check.

Read next: Paying yourself from your company hub, Profit extraction check, Salary or dividends calculator, Dividend tax calculator

3. Planning for retirement

What we were watching: a cap on tax-free cash, the State Pension and tax, the State Pension age, and the Money Purchase Annual Allowance (MPAA).

What was announced:

• Tax-free cash was left alone.
• A new “Pension Tax Allowance”. From 6 April 2027, pensioners whose total income is no more than the full new State Pension will pay no income tax.
• The Triple Lock changes from April 2030. The Triple Lock is the promise to raise the State Pension each year by the highest of inflation, earnings growth or 2.5%. Until April 2029 it carries on as now. From April 2030, the earnings part changes so the State Pension keeps pace with earnings rather than rising faster.
• State Pension age: no change announced.
• MPAA and annual allowance: no change announced.
• Savings interest will be taxed more from April 2027. See “Savings and rental income” below.

Tax-free cash (illustrative only):

Tax-free cash was left alone, for the third Budget in a row. If you were thinking of taking it only because of the rumour, there is no longer a reason to rush. You can still usually take 25% of your pension tax-free, up to £268,275 in total.

The State Pension and the new Pension Tax Allowance:

The State Pension isn’t becoming tax-free. It is still taxable income. The new allowance is a small tax reduction for pensioners on low total incomes.

• In 2027/28 the full new State Pension will be about £13,036 a year. That is £466 above the £12,570 Personal Allowance, the amount you can earn before paying income tax.
• The allowance is worth up to about £94 a year. That cancels the tax on that £466.
• It counts all your income, not just the State Pension. A private pension, rent, savings interest and dividends all count. ISA income doesn’t.
• It shrinks once your income goes above about £13,036. It stops altogether at £13,319.
• HMRC applies it automatically. You don’t need to claim.
• It runs from April 2027 to April 2030.

What it means: if you have a private pension as well as the State Pension, this probably won’t apply to you. Most of our clients have income well above £13,319.

Pension death benefits: this change started on 28 October 2026. Some pensions can be passed on tax-free after a death. Until now, that payment became taxable if the pension scheme took more than two years to make it. That rule has gone. It removes a trap for families when paperwork takes a long time.

What to do now:

• If you are within three years of retiring, there is no Budget reason to change when you take tax-free cash.
• If you hold a lot of cash outside an ISA or pension, read the savings section below before April 2027.
• Take our five-question retirement check to see your stage.

Read next: Planning for retirement hub, Tax-free cash and the Budget, MPAA explained, When can I retire calculator, How much can a pensioner earn before paying tax

Inheritance tax and passing money on

What was announced:

• Gifts out of surplus income were left alone.
• There is no flat inheritance tax charge on every estate.
• Pensions still come into inheritance tax from 6 April 2027, as planned. No change was announced.
• A technical change on trusts started on 28 October 2026. Debts linked to trust property can now reduce its value for inheritance tax in fewer cases. It stops some avoidance schemes.

An example (illustrative only): a widow with £70,000 of pension income and £14,000 of other income spends £42,000 a year. After tax she has about £20,968 a year of surplus income she could give away.

The exemption was left alone. With pensions coming into inheritance tax from April 2027, giving spare pension income away is still one of the most useful plans we see.

Read next: Gifts out of surplus income, Pension inheritance tax changes in 2027, Inheritance tax calculator

4. High earners

What we were watching: the 60% tax trap, the High Income Child Benefit Charge, pension tax relief, and the salary sacrifice cap.

What was announced:

• The 60% tax trap is unchanged.
• Pension tax relief is unchanged. There’s no single flat rate.
• The salary sacrifice cap still starts in April 2029, at £2,000 a year.
• High Income Child Benefit Charge: HMRC will now offset any Child Benefit you were overpaid against the charge automatically. This is an admin change. The £60,000 threshold isn’t changing.
• Savings and rental income will be taxed more from April 2027. See below.

What it means, with an example (illustrative only):

Someone earning £110,000 pays about 60% tax on the £10,000 above £100,000. Paying £10,000 into a pension brings their income back to £100,000, which restores the lost allowance.

The 60% band and the ways to avoid it haven’t changed. Paying into a pension is still the main way to bring your income back under £100,000.

What to do now:

• Before 5 April 2027, check whether a pension payment would take you back under £100,000.
• If you have savings or rental income, read the next section. It is the main Budget change for this group.
• Use the high earner tax check to see where you stand.

Read next: Financial planning for high earners hub, High earner tax check, The £100k tax trap, Salary sacrifice changes 2029, Pension tax relief calculator

Savings and rental income: the tax rise from April 2027

What was announced: from 6 April 2027, income tax on savings interest and on rental profits goes up by 4 percentage points in total, compared with today. The November 2025 Budget had already added 2 points from that date. This Budget adds 2 more.

• The savings rates apply across the UK. The property rates apply in England, Wales and Northern Ireland.
• Tax on earnings and dividends doesn’t change.
• ISAs are still tax-free. The cash ISA limit stays at £20,000 a year.
• The Personal Savings Allowance stays. This is the interest you can earn tax-free each year: £1,000 for basic rate taxpayers and £500 for higher rate taxpayers.
• The government says 84% of income taxpayers are unaffected.

Example 1, savings (illustrative only): a higher rate taxpayer has £200,000 in a savings account paying 4%. That is £8,000 of interest. After the £500 allowance, £7,500 is taxed. At 40% today that is £3,000 a year. At 44% from April 2027 it is £3,300. That’s £300 a year more.

Example 2, rental income (illustrative only): a higher rate taxpayer has £20,000 a year of rental profit and no mortgage. At 40% today the tax is £8,000. At 44% from April 2027 it is £8,800. That’s £800 a year more.

What to do now:

• Use your ISA allowance before 5 April 2027, and again after. Interest inside an ISA is tax-free.
• If you’re married or in a civil partnership, check who holds the savings. Moving them to the partner who pays a lower rate can help.
• Pension savings grow free of this tax. For some people, paying more into a pension makes more sense than holding cash.
• Landlords should review how property is owned before April 2027. Don’t change ownership without advice, because it can trigger other taxes.

What did not change

These were rumoured before the Budget. They didn’t happen.

• A cap on tax-free cash from pensions, often quoted at £100,000.
• A flat rate of pension tax relief for everyone.
• A flat inheritance tax charge on every estate.
• A limit on gifts out of surplus income.
• Removing the Capital Gains Tax “uplift on death”.
• A rise in dividend tax.
• A cut to the cash ISA limit. This was planned from April 2027 and has now been scrapped. The limit stays at £20,000.
• Changes to the £100,000 tax trap.

When the changes start

What we will do next

We are updating our guides and calculators that the Budget affects. That includes our Business Asset Disposal Relief guide and calculator, and our tax-free cash guide. Detailed rules often follow weeks later, in draft legislation and HMRC guidance. We will update this page when they are published.

Important information

This article is for general information only and is not personal financial advice. Examples are illustrative only. Tax rules can change, and their effect depends on your own circumstances. Figures are based on the Budget documents published on 28 October 2026 and on 2026/27 rates for England, Wales and Northern Ireland. Frazer James Financial Advisors is authorised and regulated by the Financial Conduct Authority, number 834451.

About The Author

About The Author