UK Autumn Budget 2026: Top implications for businesses

The Chancellor, John Healey, delivered his first Budget, badged as a Budget to provide breathing space today whilst laying the foundations for the future.

Whilst there were no changes to the headline rate of Corporation Tax, the Budget included changes to capital allowances, tax-advantaged employee share schemes, the administration of the R&D scheme, and the VAT treatment of the land sold for social housing.

The lifetime limit for Business Asset Disposal Relief will be halved, alongside the introduction of a new Founders’ Relief for capital gains tax.

Taken together, the measures seek to encourage investment and growth while making a number of targeted changes to how businesses are taxed.

Below, we explore the key implications and what they mean for businesses.

EMI2 brings more flexibility for employee share schemes

The Company Share Option Plan (CSOP) will become EMI2 from Budget day, with the individual option limit doubling from £60,000 to £120,000 from 6 April 2027 and the exercise period extending to 15 years. The existing interaction with EMI will also be removed, meaning some employees may be able to hold options under both schemes.

Together with changes to EMI, the expanded regime will give businesses greater flexibility to use tax-advantaged share incentives to attract, retain and reward key employees.

Changes to capital allowances

The main first-year allowance will increase from 40% to 50% for qualifying expenditure from 1 January 2027, while the main writing-down allowance will reduce from 14% to 12% from April 2027.

The changes increase the upfront relief available on qualifying investment but slow the rate of relief for expenditure remaining within capital allowance pools. Businesses planning significant capital expenditure should consider how the changes interact with full expensing and the Annual Investment Allowance.

R&D tax relief

There are no substantive changes to the R&D tax relief regimes, but the government has announced measures intended to simplify the claims process.

The R&D Claim Notification Form will be removed from 1 April 2027 and the Additional Information Form simplified from autumn 2027, which should reduce some of the administrative burden for businesses making R&D claims.

Changes to company distribution rules

Following the government’s consultation on modernising the distributions and repayments of capital from companies, new rules will apply from 6 April 2028 to bring greater consistency to the taxation of amounts extracted from companies.

The reforms will affect areas including capital repayments following share reorganisations, share buybacks and demergers, while the Government has confirmed that genuine commercial transactions, including family successions, will be protected.

The changes could be particularly important for owner-managed and family businesses considering reorganisations, succession planning or extraction of value from a company.

New zero-rate of VAT for social housing land

From 1 April 2027, a new zero rate of VAT will apply to qualifying land sold to registered social housing providers.

The measure should simplify the VAT treatment of land used for social housing and reduce the need for arrangements such as “golden brick” structures, which are currently used to achieve VAT-efficient outcomes.  The change will be particularly relevant to landowners, developers and social housing providers involved in existing or planned social housing developments.

Business rates support for the high street

The Budget announced further business rates support for retail, hospitality and leisure businesses in England. From April 2027, the Small Business Rates Relief thresholds will increase, taking more qualifying businesses out of business rates altogether, while qualifying RHL businesses will benefit from a two-year real-terms freeze in bills.

Pubs, social clubs and most live music venues will also receive additional support.

Conclusion

Overall, the Budget contains a mixture of incentives for investment and growth alongside targeted changes to the tax system.

For businesses, the key will be understanding which of the changes create opportunities and where existing plans may need to be revisited.

If the Budget has raised any questions for you, submit your questions to our panel ahead of our post-budget briefing Friday at 9:30am and book your place.

Alternatively, if you would like any further information or guidance on this topic, please don’t hesitate to get in contact with Amanda Ollason or your usual AAB contact.