For the first time in three years, the UK’s autumn Budget has arrived without a sweeping package of tax increases aimed squarely at business owners. Chancellor Healey’s debut Budget themed “Breathing Space for Today, Fresh Hope for the Future”, is a more restrained affair than those that preceded it. After the landmark employer NIC rises and CGT increases of the 2024 Budget, and the dividend tax hikes and salary sacrifice cap of 2025, the Chancellor appears to have chosen stability over further upheaval.
That does not mean there is nothing of substance here for SME owners and entrepreneurs. Far from it. There are encouraging announcements, particularly for founders and high-street businesses, alongside fresh concerns around the cost of capital and the continuing cumulative weight of recent years’ changes.
Capital Gains Tax 2026: rates held and Founders’ Relief confirmed
The biggest collective sigh of relief from the business community may well be what the Chancellor did not do. Capital Gains Tax rates, which rose sharply in the October 2024 Budget from 10% and 20% to their current 18% and 24%, remain unchanged. After months of speculation, no further increases were announced, providing the certainty that founders and owner-managers have been craving.
Emma van Rooyen, Interim Managing Director at Vistage UK & Ireland, welcomed the decision: “Leaving Capital Gains Tax untouched is welcome news for founders and owner-managers. Founders take the risk, and they need to know the rules will not shift when they come to realise the reward. With 55% of SME leaders telling us they have no credible succession plan, certainty on exit is what lets them start planning for the next chapter and get back to hiring and growth. The real test is whether it lasts long enough for business owners to act on it.”
Andreas Adamides, CEO of Helm, the UK’s largest community of scale-up founders and chair of the Stop the Creep campaign, which had lobbied for the return of Founders’ Relief, went further: “Founders’ Relief is a huge win for Britain’s business builders, and proof that the Chancellor has listened. Founders who risk everything to build a company now have a reason to stay here and a reason to keep growing in the UK.”
More than just a stay of execution, the Budget introduces a new Founders’ Relief from April 2027, offering a 10% CGT rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies. For the entrepreneurs building the next generation of UK businesses, this is a meaningful incentive, and a significant improvement over the relief available under the previous regime.
There is, however, a sting in the tail. The lifetime limit for Business Asset Disposal Relief (BADR), which offers an 18% CGT rate on qualifying disposals, will be cut from £1 million to £500,000 from April 2027. Those planning an exit will want to review their position carefully against the new thresholds and consider whether the incoming Founders’ Relief offers a more advantageous route, depending on their circumstances.
Business rates 2026: SBRR threshold raised and 20% cut for pubs and venues
For retail, hospitality, and leisure businesses, this Budget delivers on long-standing promises. The Small Business Rate Relief (SBRR) threshold is being raised, taking a further 70,000 businesses, including hairdressers, beauty salons, and small retailers, out of business rates entirely. Pubs, music venues, and social clubs will receive a 20% cut in their rates from April 2027, and all other retail, hospitality, and leisure properties will see a real-terms freeze for two years.
Taken together, no qualifying business in England should face an above inflation increase in its rates bill. For high-street entrepreneurs, this is a meaningful and long overdue development.
The cost of capital: banks squeezed, SMEs at risk
One area deserving close attention from any business owner who relies on external finance is the government’s decision to temporarily increase the Bank Corporation Tax Surcharge from 3% to 6% for 15 months from January 2027. The levy is designed to fund the £2.6 billion Household Energy Payment, and the Chancellor has emphasised it is time limited.
Alex Read, CEO and Founder of Portman Finance Group, is not entirely reassured: “While lower than expected, higher taxes on banks is still undoubtedly bad news for small businesses. It is likely to increase the cost of capital and make lenders much more selective about who they lend to – a real problem for SMEs who already face barriers when trying to access finance, from high interest rates to increasingly complex application processes. As banks become more restrictive, specialist lenders will have an increasingly important role to play in ensuring SMEs can still access the finance they need to grow.”
On the other side of the ledger, the Budget provides a £5 billion uplift to the British Business Bank’s capacity, including £1.4 billion for equity funds backing high-growth businesses and £450 million for a new venture debt product providing non-dilutive finance to innovative firms. For scaling companies, this could be significant, though many smaller SMEs will find themselves outside the scope of high-growth funding programmes.
Self-employed and sole traders: small steps forward
After years of feeling overlooked, the self-employed receive a handful of tangible improvements. The tax-free Trading Allowance is tripled from £1,000 to £3,000 from April 2027, a meaningful step for those with multiple income streams. The higher tax-free mileage rate increases permanently from 45p to 55p for the first 10,000 miles and from 25p to 35p per mile above that. Parental pay is also extended to self-employed fathers and partners for the first time.
Michelle Ovens CBE, CEO and Founder of Small Business Britain, who met the Chancellor at Downing Street ahead of the Budget statement, struck a broadly positive note: “The increased trading allowance is particularly welcome. With more people starting businesses as side hustles, we need to make it easier for those ambitions to become thriving businesses. For young people, the Young Entrepreneurs Allowance is a welcome nod towards the changing nature of work and giving this group a launchpad to get started. Today is a positive step forward, and we must keep working to ensure everyone, whatever their background, has the opportunity to start and grow a business.”
Josh Toovey, Head of Policy and Research at IPSE, the UK’s Self-Employed Association, acknowledges the improvements while calling out what remains undone: “Some of these tweaks are genuinely helpful. Reversing the Cash ISA cut, better mileage rates, parental pay, and an increased trading allowance will all make a difference, and business rates reform is a welcome boost for our smallest high-street businesses. But taken together, they do not go anywhere near far enough. The biggest problem facing the self-employed is finding work – but the cost of hiring is still too high across the board. Add the rising cost of simply being in business, from Companies House fees to Making Tax Digital and a dividend allowance cut to the bone, and starting and running a business on your own has never felt like a bigger gamble.”
Savings, investment, and looking ahead
The reversal of the planned cut to the Cash ISA allowance, which will remain at £20,000 rather than being cut to £12,000 as previously proposed, is straightforwardly positive for those using tax-free cash savings as part of their broader wealth strategy.
For businesses investing in their own future, full expensing is maintained, the corporate tax rate remains capped at 25%, still the lowest headline rate in the G7, and the government has enhanced the EMI employee share scheme, doubling the value of tax-advantaged options employees can hold from £60,000 to £120,000 from April 2027. For scaling businesses competing for talent, this is a practical and welcome tool. A pilot Young Entrepreneurs Allowance will also provide living cost support to successful applicants during their first year in business, a small but thoughtful recognition that starting a business is often a question of financial resilience, not just good ideas.
Sam Smith, entrepreneur and co-founder of The SuperScalers, a community dedicated to helping underrepresented founders scale, welcomed the package: “I am particularly pleased to see the Founders’ Relief measures, which will provide a real boost, alongside the expansion of EMI and the female founders scale-up programme. Together, these send an encouraging message of support for entrepreneurs and their role in driving growth.”
The big picture: stability, not resolution
Scott English, Founder of Elite Business, cuts to the point: “There is some welcoming news here, particularly the business rates support for eligible high street businesses in England. But for small business owners, it comes down to what is left in the bank once the bills and wages are paid, especially with wage costs rising again next April. Cash is king, and any saving needs to give owners room to invest, build their teams and keep growing. That is how I will judge this Budget: what difference does it make to the day-to-day reality of running a business?”
The headline from Budget 2026 is clear: no broad-based tax rises, and some genuinely positive steps for founders and high-street businesses. After the scale of change in 2024 and 2025, that restraint is not nothing.
But business owners should not mistake a quieter Budget for a resolved situation. Employer NIC costs remain structurally higher than they were three years ago. The salary sacrifice cap announced last year is still incoming. Fiscal drag continues to pull more owner-directors into higher tax bands. The complexity of the rules around BADR, the new Founders’ Relief, and business rates thresholds means the planning landscape is, if anything, more nuanced than it was this time last year.
This Budget offers a degree of stability that business owners will welcome after the significant changes of 2024 and 2025. The Founders’ Relief is a real positive, and the CGT reprieve gives those planning exits more certainty. But the cumulative tax burden on SME owners remains at historically high levels, and the rules around exit planning, employee ownership, and business rates have rarely been more detailed. Whether you are planning growth, considering a sale, or thinking about how to pass your business on, now is not the moment to set plans on autopilot. A fresh review of your structure, remuneration strategy, and long-term plans has never been more worthwhile.
The 2026 Budget is the first in three years not to introduce broad-based tax rises on business owners, but the cumulative burden from 2024 and 2025 remains.
Key takeaways
- Capital Gains Tax rates remain unchanged at 18% and 24%, and a new Founders’ Relief will offer a 10% CGT rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies from April 2027.
- Business Asset Disposal Relief’s lifetime limit will be cut from £1 million to £500,000 from April 2027, meaning founders planning an exit should review whether the incoming Founders’ Relief offers a more advantageous route depending on their qualifying gains.
- The Small Business Rate Relief threshold is being raised to remove a further 70,000 businesses from rates entirely, while pubs, music venues and social clubs receive a 20% cut from April 2027 and all retail, hospitality and leisure properties receive a real-terms two-year freeze.
- The Bank Corporation Tax Surcharge will temporarily increase from 3% to 6% for 15 months from January 2027, which is likely to raise the cost of capital and make lenders more selective, though a £5 billion uplift to the British Business Bank includes £450 million in new venture debt for innovative firms.
- The tax-free Trading Allowance triples from £1,000 to £3,000 from April 2027, the tax-free mileage rate rises permanently to 55p for the first 10,000 miles, and the EMI employee share scheme doubles the value of tax-advantaged options employees can hold from £60,000 to £120,000.
