UK Budget 2026: Key Changes and What They Mean for You

The triple lock (the highest of earnings growth, inflation or 2.5%) continues each April up to and including April 2029. From April 2030, the State Pension will rise each year by the highest of 2.5%, inflation, or the amount needed to keep its value relative to earnings at the level reached in April 2029. It is not yet law, and the detailed rules are still to come.

From 6 April 2027 to 5 April 2030, the Pension Tax Allowance (first announced last year and now being legislated) means that pensioners whose total income is no more than the full new State Pension will not be brought into paying small amounts of Income Tax because the State Pension rises. The allowance tapers away for incomes above that level.

From 28 October 2026, beneficiaries will no longer become taxable on pension death benefits solely because otherwise tax-free pension or lump sum death benefits are paid more than two years after the pension scheme administrator knew, or should have known, of the member's death. This will be legislated in the Finance Bill 2026-27. Most unused pension funds and death benefits will also come into the estate for Inheritance Tax from 6 April 2027 (see our Inheritance Tax planning advice).

The government also plans a National Care Service in England, providing older people with personal care free at the point of use, to be built in the next Parliament. The detail is still to come: the independent commission on adult social care will now report in 2027. If you are planning ahead for care costs, this is one to watch rather than act on yet. Our elderly legal services team can help with planning for later life, including Lasting Powers of Attorney.

From 1 April 2027, the National Living Wage for workers aged 21 and over rises by 3.9% to £13.21 an hour, worth £910 a year more in gross pay for a full-time worker on the National Living Wage. The National Minimum Wage rises to £11.27 an hour for 18 to 20-year-olds, and to £8.31 an hour for 16 and 17-year-olds and eligible apprentices.

The Budget document announces no change to employer National Insurance or the Employment Allowance. Our Employment team explains what this means in Budget 2026: no change to employer National Insurance.

Other changes for employers and workers:

• Mileage: the tax-free rate of 55p a mile for cars and vans, for the first 10,000 business miles, is now permanent. The rate above 10,000 miles rises from 25p to 35p from 6 April 2027. Around 3 million people who use their own vehicle for work will benefit.
• Non-compete clauses: the government will legislate so that non-compete clauses in employment contracts cannot stop startups and scaling firms from hiring, or workers in the everyday economy from moving jobs. The reforms will apply across the whole economy. The government will consult shortly on wider restrictive practices and set out a detailed position in early 2027. If you rely on restrictive covenants in your contracts, now is a good time to review them.
• Benefits in kind: employers will have to report and payroll company cars and vans, fuel and medical benefits from 6 April 2027, so employees' tax on them is collected through PAYE. Most other benefits in kind follow from 6 April 2028. This will be legislated in the Finance Bill 2026-27.
• Parental pay: from April 2029, eligible self-employed fathers, partners and adopters in Great Britain, who are currently excluded, will be able to get parental pay. The government expects this to help over 150,000 parents a year.
• Trading Allowance: the amount of side income you can earn tax-free rises from £1,000 to £3,000 a year from 6 April 2027.

These changes come on top of the Employment Rights Act 2025 reforms. Our employment solicitors and Myerson HR can help you plan for them.

The main Capital Gains Tax rates are unchanged, but there are big changes for people selling a business.

• Business Asset Disposal Relief: the lifetime limit on gains that qualify for the reduced 18% rate halves from £1 million to £500,000 for disposals from 6 April 2027. If you are planning a sale, the date of disposal matters. For Capital Gains Tax, this is usually when contracts are exchanged unconditionally, not completion. Special rules apply to contracts entered into before 6 April 2027 that complete afterwards, so take advice before relying on timing. Our mergers and acquisitions team can help you plan a sale.
• New Founders' Relief: a 10% Capital Gains Tax rate on up to £10 million of lifetime gains for qualifying founders of high-growth, innovative companies, from 6 April 2027. The detailed rules are out for technical consultation, which closes on 30 November 2026.
• Company distributions: from April 2028, the tax treatment of distributions will be reformed. The aim is to tax similar ways of taking profits out of a company consistently, which will close some planning routes, while protecting capital treatment for genuine changes of ownership, including families passing down a business. Draft legislation will follow in 2027.

For employee share schemes, the Company Share Option Plan becomes "EMI2", with the individual limit doubling from £60,000 to £120,000 and a 15-year exercise period. Companies moving to an Employee Ownership Trust will keep access to EMI options. Both changes apply from 6 April 2027.

For businesses investing in plant and machinery, the main rate first-year allowance rises to 50% from 1 January 2027, and the main rate writing-down allowance falls to 12% from April 2027.

If you are thinking about passing on or selling a business, our tax and succession planning team can help.

The Budget's biggest single spending measure is a £100 Household Energy Payment for households in council tax bands A to D in England. It is worth £2.6 billion in total, will reach up to 20 million households and will be paid through the council tax system from January 2027. Scotland, Wales and Northern Ireland receive a share of the funding through the Barnett formula, so they can provide similar support.

The 0% rate of VAT on household electricity in Great Britain, which started on 1 October 2026, is extended to July 2027. The government expects this to take around £50 off the annual Ofgem price cap in April 2027. Northern Ireland is being funded to provide comparable support, with the extended VAT relief expected to apply there from April 2027.

The government has also asked Ofgem to abolish gas standing charges on household bills in Great Britain, aiming for delivery by the end of 2027 or as soon as possible after. The typical standing charge is £108 a year. The cost will instead be recovered through the price per unit of gas, so households that use more gas may pay more. HM Treasury estimates that around 60% of households will save about £45 a year on average, and the government will set out targeted help for those less able to benefit. Electricity standing charges will also be reformed, with details due next year.

For drivers, the 5p cut in fuel duty and the freeze on the planned inflation rise are extended to 1 July 2027. Single bus fares in England outside London will be capped at £2 for a year from 1 January 2027.

Part of the cost is being met by a temporary rise in the Bank Corporation Tax Surcharge from 3% to 6%, from 1 January 2027 to 31 March 2028.