Autumn Budget backs SMEs and founders as banks face tax rise

Chancellor John Healey has announced support for small businesses, new ventures and innovation in an Autumn Budget that combines relief from rising costs with higher bank taxation and a weaker growth outlook for next year.

Higher business rates relief, an extension of the fuel duty cut and new incentives for entrepreneurs formed part of a package intended to ease immediate financial pressures while encouraging investment. The Budget also included changes to capital allowances, additional funding for the British Business Bank and measures to simplify tax administration.

The Office for Budget Responsibility forecasts economic growth of 1.2% in 2026, followed by 1% in 2027. While this year’s forecast has improved, the weaker outlook for next year presents a challenging backdrop for business expansion.

“For small businesses up and down the country, this was a bare minimum Budget. Despite pockets of welcome news, much of what they need to thrive has not been delivered.”

Business rates relief and higher wages

Healey announced an increase in the Small Business Rate Relief threshold for retail, hospitality and leisure businesses from £12,000 to £18,000.

The Chancellor said the change would remove business rates bills for 70,000 businesses.

However, employers will also face higher wage costs following a 3.9% increase in the National Minimum Wage and National Living Wage. For labour-intensive businesses, the increase could absorb some of the savings from rates relief.

Tax simplification and reducing red tape

The Budget set out plans to simplify tax administration and reduce the regulatory burden on businesses. Measures aimed at smaller firms include making it simpler to bid for contracts, streamlining ONS business surveys and implementing a “Tell us Once” approach to reduce repeated requests for information.

The government will launch a targeted programme to simplify specific areas of Corporation Tax, alongside a call for evidence on modernising its administration.

Specific changes include removing the R&D tax relief Claim Notification Form from April 2027 and simplifying the Additional Information Form from autumn 2027.

From April 2029, taxpayers already making self-assessment Payments on Account will move to smaller, more regular payments, following consultation. The government also published a roadmap for mandatory VAT e-invoicing from April 2029, requiring VAT invoices to be issued in a specified electronic format.

The Treasury identified up to £640 million a year in estimated new gross administrative savings through regulatory reforms announced at the Budget, including changes to company reporting. A new Better Regulation Executive will oversee the wider drive to reduce administrative burdens.

Temporary bank surcharge increase

The Bank Corporation Tax Surcharge will rise from 3% to 6% for 15 months from January 2027, ending on 31 March 2028.

The proceeds will fund household energy support, including a £100 payment for eligible households and an extension of the temporary VAT cut on domestic electricity until 1 July 2027.

The consequences for borrowers will depend on how affected banks respond through their margins, pricing and lending strategies. The measure adds to the considerations facing institutions allocating capital to business lending.

Capital allowances changed

The Budget also changes the timing of tax relief on qualifying business investment.

The main-rate first-year allowance will increase to 50% for expenditure incurred from 1 January 2027. The main writing-down allowance will fall to 12% from 1 April 2027 for Corporation Tax and 6 April 2027 for Income Tax.

The combination increases upfront relief for qualifying expenditure while slowing subsequent deductions on remaining expenditure covered by the main writing-down allowance.

Support for founders and new ventures

The Budget included an increase in the tax-free trading allowance from £1,000 to £3,000 from April 2027 and a new young entrepreneurs allowance covering a year of living costs while founders develop their businesses.

Healey also announced a scale-up programme for female founders, alongside a doubling of the British Business Bank’s commitments to funds backing women-led businesses to £200 million.

The British Business Bank’s total financial capacity will increase by £5 billion, including £1.4 billion for equity funds backing high-growth businesses and £450 million for a new venture debt product. The package also includes additional support for community lenders and delivers the Growth Guarantee expansion previously announced at Mansion House.

“Today’s measures announced by the Chancellor are a significant boost to the Bank’s firepower, enabling us to unlock more finance for smaller businesses, innovative scale-ups and strategically important sectors across the UK. This increased capacity will help more ambitious businesses start, scale and stay in the UK, driving economic growth and creating jobs across the country.”

Access to finance will remain a key consideration for new companies, particularly those with limited trading histories seeking funding for equipment, technology and working capital.

Changes to business disposal relief

The Chancellor announced Founders’ Relief, offering a 10% capital gains tax rate on up to £10 million of qualifying lifetime gains from 6 April 2027. The relief is intended for qualifying founders of high-growth, innovative companies, with detailed design subject to technical consultation.

Alongside the new incentive, the Business Asset Disposal Relief lifetime limit will fall from £1 million to £500,000 from 6 April 2027. Healey said three in four claimants would be unaffected by that reduction.

Eligibility conditions for Founders’ Relief will be important in determining the impact on business owners planning an eventual sale.

Fuel duty cut extended and EV charging support announced

The 5p fuel duty cut will remain in place until July 2027, while maintaining the Heavy Goods Vehicle (HGV) road tax holiday.

Healey also announced an increase from 25p to 35p in the mileage allowance rate applying to higher business mileage, alongside making permanent the earlier increase in the standard mileage rate.

The Budget committed £100 million over two years to reduce costs at local, lower-powered public EV chargers in Great Britain from spring 2027. The government estimates this could save the average EV driver without home charging who charges on-street around £150 a year.

The Budget also confirmed that the Benefit-in-Kind rate for zero-emission company cars will rise to 10% in 2030–31, up from 9% in 2029–30.

The Budget 2026 policy paper also confirmed further implementation work on the previously announced mileage-based Electric Vehicle Excise Duty, due from April 2028. This includes a mileage estimation tool, an optional connected-vehicle reporting system and further guidance for fleet operators later this year.

Energy costs remain in focus

Energy costs remain a central concern for manufacturers and other businesses considering investment.

The existing British Industrial Competitiveness Scheme is intended to reduce electricity bills by up to 25% for more than 10,000 eligible businesses. The scheme provides targeted support rather than a blanket reduction for all SMEs.

AI, innovation and export finance

The Chancellor placed AI at the centre of plans to strengthen innovation and improve productivity.

The government’s pre-Budget package includes additional funding for the AI Security Institute, cyber defence and the Sovereign AI Fund, with support for physical and industrial AI encompassing robotics, autonomous systems and advanced manufacturing.

The Budget also set out new cross-economy powers through the proposed Regulation for Growth Bill, allowing existing rules to be temporarily adapted under safeguards so businesses can test new technologies and approaches.

Separately, UK Export Finance will pilot a new guarantee product offering more flexible terms to selected overseas buyers with significant potential to increase procurement from the UK.

The Budget’s combination of targeted support and additional costs leaves businesses facing different outcomes depending on their size, sector and eligibility for relief. With growth forecast to slow next year, confidence and access to funding will remain central to investment decisions.