Budget 2026: what it means for owner-managed businesses
The Budget halves the lifetime limit on Business Asset Disposal Relief, raises the first-year allowance to 50% and triples the trading allowance. Here is what changes, and when.
Budget 2026 was delivered on 28 October. For owner-managed businesses, the changes that matter most sit in reliefs, allowances and timing, and most of them take effect in 2027. That leaves a window to plan.
Selling your business: a lower limit, and a new relief
The lifetime limit for Business Asset Disposal Relief, which taxes qualifying gains on selling a business at a reduced 18% rate, falls from £1 million to £500,000 for disposals from 6 April 2027. The government expects three in four claimants still to get relief on their whole gain, but owners expecting larger gains should look at timing now.
Show the data
| Until 5 April 2027 | £1,000,000 |
|---|---|
| From 6 April 2027 | £500,000 |
Alongside it comes a new Founders’ Relief: a 10% rate of Capital Gains Tax on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies, from 6 April 2027. A technical consultation on the detail runs until 30 November 2026, so the rules may still change.
Investing in equipment: a bigger first-year allowance
The main-rate first-year allowance rises from 40% to 50% for qualifying spending on or after 1 January 2027, while the main rate of writing-down allowance falls from 14% to 12% from April 2027. Full expensing for companies continues. For a business planning a large purchase, the date of the spend now matters more.
Side income and sole traders
The trading allowance rises from £1,000 to £3,000 from 6 April 2027, so many people with small side incomes will no longer pay tax on them. For sole traders and landlords joining Making Tax Digital for Income Tax in April 2027, late quarterly updates will not earn penalty points during 2027-28.
Shops, pubs and venues
From April 2027, full Small Business Rates Relief for qualifying retail, hospitality and leisure properties in England extends to a rateable value of £18,000, up from £12,000, tapering to nothing at £21,000. Pubs, social clubs and most live music venues get relief of 35%, up from 15%.
The dates to plan around
- 30 Nov 2026Consultation on Founders’ Relief closes
- 1 Jan 2027Main-rate first-year allowance rises to 50%
- 1 Apr 2027Writing-down allowance falls to 12% for companies; new rates relief thresholds for shops, pubs and venues
- 6 Apr 2027BADR limit falls to £500,000; Founders’ Relief and the £3,000 trading allowance begin; Making Tax Digital reaches £30,000
Based on the Budget documents published on 28 October 2026. The measures are subject to legislation in Finance Bill 2026-27 and may change; we will update this briefing as the Bill is published.
Sources
This insight is general information, not advice for your circumstances. Talk to us before acting on it.