According to Chancellor John Healey, 2026’s Autumn Budget was all about balancing fiscal discipline with immediate action.
The backdrop of this release were the “global economic storms” – the wars in Ukraine and the Middle East that are directly contributing to the cost of living crisis (or “cozzie livs” as it is less affectionately known by the rest of us).
The Burnham government committed to addressing the increase in energy and fuel costs, while also specifically ruling out increases in Income Tax, National Insurance contributions, and VAT. The result is a budget they hope supports the majority of households and businesses.
“This is a Labour budget for the worker, the sole trader, the parent at the school gate,” said Chancellor John Healey, as part of his closing remarks.
Important updates for sole trader businesses
No late-submission penalty points for MTD submissions for tax year 2027/28
Just like in 2026/27, the government will not be applying late-submission penalty points for Making Tax Digital (MTD) submissions for 2027/28.
Trading allowance to increase from £1,000 to £3,000
This one’s the big one!
From 6 April 2027, the trading allowance is set to increase from £1,000 to £3,000.
Each tax year, sole traders can generally claim either the actual cost of their allowable expenses, or the trading allowance, against their taxable income. While expenses require keeping certain records in order to be claimed, no records are needed for the trading allowance.
Increasing the threshold to £3,000 could help simplify tax admin and support sole trader cashflow. Plus, if you’re just getting started and you’re under the threshold, you won’t be required to report or pay taxes on this income at all.
Cost of living measures
Support for higher energy bills
The government announced plans to overhaul energy costs in the United Kingdom long term, including cheaper, faster grid connections through the recently created Great British Grid. But since these cost savings won’t come into effect any time soon, they’re supporting households through a range of immediate measures:
1. £100 energy payments for households within council tax bands A-D
All households in England within council tax bands A-D will receive a one-off payment of £100 directly into their bank account. This is to help with energy costs over winter. The devolved governments will get funding for similar measures.
Shortly after it was announced, the gov.uk council tax band checker crashed.
2. Household gas standing charges to be removed
Standing charges for household gas bills will soon be removed. Instead, these charges will be rolled into the unit rate, meaning the less gas you use, the less you pay. Similar reforms will follow for electricity standing charges.
The government estimates that 60% of households are set to save an average of £45 a year.
3. VAT removed from electricity bills (from 1 October)
Prior to the budget release, the Burnham government temporarily removed VAT from electricity bills, effective from 1 October. This temporary measure will continue until 30 June 2027.
##Other important measures
Mileage rates locked in
The government plans to make the 55p per mile tax-free mileage rate permanent. This applies to those who drive up to 10,000 miles for work each tax year. For every mile over 10k, the rate becomes 35p per mile.
Fuel duty cut extended
The 2022 temporary 5p-per-litre fuel duty cut will be extended for a further six months, to 1 July 2027.
Parental pay for self-employed fathers and partners
In a huge win for sole-trader families, self-employed fathers and partners will soon be eligible for two weeks worth of parental pay.
Payments will be worth up to £194 a week. The starting date for this policy will be in April 2029.
Zero VAT rating for social housing land sales
For sole traders in the construction sector, the government has indicated that they plan to boost social housing construction significantly. This includes implementing a new zero VAT rating for land sales specifically for social housing.
Decreasing costs could lead to increased activity in this sector – watch this space!
Relief for sole traders operating business premises
For sole traders who run a retail hospitality or leisure business, the threshold for the Small Business Rate Relief will be raised from £12,000 to £18,000.
The threshold applies to the estimated annual rental value of a commercial property. Similarly, business rates for pubs, clubs, and live music venues are set to be lowered by 20%.
Carer’s Allowance to taper off over threshold
For sole traders who receive the Carer’s Allowance, you’ll soon be allowed to earn more without hitting the earnings “cliff edge”.
Instead of losing the full allowance as soon as you earn over the weekly threshold (currently £204), your benefit will reduce by £1 for every £1 you earn over the limit.
Business Asset Disposal Relief (BADR) lifetime limit reduced
For qualifying disposals made on or after 6 April 2027, the lifetime limit on gains eligible for BADR drops from £1,000,000 to £500,000.
ISA savings limit scrapped
In budget 2025, then-Chancellor Rachel Reeves announced that the threshold for tax-free ISA contributions would be lowered to £12,000, from £20,000.
The 2026 budget has reversed that decision by scrapping the new threshold before it came into effect.
Your First Home scheme announced
To help first-home buyers get on the property ladder, the government have announced a new government-backed loan scheme called Your First Home.
It allows eligible buyers to purchase a home with a 2.5% deposit, a repayment mortgage from a participating lender, and a government-equity loan worth 20% of the purchase price that will be interest free for five years.
From April 2029, the lifetime ISA will be replaced by a new First Time Buyer ISA. If the cost of a property is above the price cap, investors will get the money they’ve invested back, at the very least.
Revenue-raising tax measures
Every budget needs to answer the same burning question: How are we going to pay for all of the above? Here are a few revenue-raising policies that have been announced:
Tax rates to increase on property and savings income
Tax rates for property and savings income are set to rise by 4% from April 2027.
💡 Property income rates in Scotland may differ due to devolution.
Budget 2025 initially increased these rates by 2% for April 2027, and they’ve now been raised by an additional 2%, for a 4% increase in total:
Property income
| Previous rate | New rate | Date of change | |
|---|---|---|---|
| Basic rate | 20% | 24% | 6 April 2027 |
| Higher rate | 40% | 44% | 6 April 2027 |
| Additional rate | 45% | 49% | 6 April 2027 |
Savings income
| Previous rate | New rate | Date of change | |
|---|---|---|---|
| Basic rate | 20% | 24% | 6 April 2027 |
| Higher rate | 40% | 44% | 6 April 2027 |
| Additional rate | 45% | 49% | 6 April 2027 |
Unlike in budget 2025, dividends tax rates have not been further increased.
###Online marketplaces to become responsible for collecting and paying VAT In an anti tax-avoidance measure, online marketplaces will soon be responsible for collecting and paying VAT on behalf of UK-based sellers.
It’s a way to increase compliance, while also supporting the competitiveness of sole traders and small businesses who already comply with VAT rules.
Higher taxes on banks
Leading up to the release of the budget, financial leaders were confident that an increase in the Bank Surcharge was very much on the table.
Today, this suspicion was confirmed: The surcharge on bank profits will increase from 3% to 6%. Revenue raised from this measure will help pay for the increased support for energy costs, said Healey. It’s set to be temporary, lasting 15 months from 1 January 2027 to 31 March 2028.
Interestingly, this 3% raise was smaller than market expectations, leading bank share prices to rise immediately after the budget was released.
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We also complete and file your MTD submissions or Self Assessment tax return for you, including claiming any tax relief you might be entitled to. It’s all part of the service!
More importantly, we free up thousands of hours for sole traders to focus more on what they do best – their jobs. Hnry is on a mission to make self-employment simple, affordable, and accessible for anyone.
