Autumn 2026 Budget Review - Chancellor puts UK business in his sights in Budget debut

In a style suiting his former role as defence secretary, Chancellor John Healey’s debut budget was prepared under tight security, with few clues until the speech itself.

Involving a close team of economic and business advisers, the Chancellor delivered a budget that took as its starting point Prime Minister Andy Burnham’s economic vision of greater devolved power, combined with greater support for households struggling with the cost of living, and incentives to encourage businesses to set up and stay in the UK. 

Healey, who unexpectedly stepped into the role of chancellor in July, referenced the economic storms from the ongoing invasion of Ukraine, together with the war in the Middle East.  He emphasised the need for fiscal discipline, against a backdrop of the Office for Budget Responsibility (OBR) confirming weaker than expected economic growth forecasts at 1.2% this year, 1.1% next year and 1.6% in 2028. 

And with inflation at 3.5%, government borrowing at a record £3trn, combined with the cost of borrowing at levels not seen for decades, the Chancellor had little wiggle room for big gestures, and instead offered a raft of small measures, creating winners and losers across the economy.  

The biggest announcements were aimed at business, with the Budget focused on investment, backing a new generation of wealth creators, boosting the construction sector, and new initiatives to expand AI and national defence industries. 

Tackling energy costs for both households and business was high priority, together with support for renewable energy.  From April next year, more than 10,000 eligible manufacturers will receive support to cut their electricity bills and bring costs closer to their competitors in other European economies.

A £2bn Energy Wealth Fund will invest in renewable and low-carbon energy infrastructure across the UK, to support the low-carbon economy.  And the spending review in 2027 will set targets designed to drive energy bills down over the next 10 years.

To stimulate business growth, a new Founders’ Relief has been designed to incentivise high growth start-ups, with a reduced 10% CGT rate on up to £10 million of lifetime gains from 6 April 2027, as well as targeted support for women-owned scale-up businesses.

In a major step towards the prime minister’s devolution ambitions, the Chancellor set out a roadmap to future fiscal devolution, describing it as ‘the biggest transfer of power and resources out of Whitehall in a generation’, which will include regional funding to prioritise investment in local growth and regeneration projects. 

High street pubs, social clubs and live music venues will benefit from an easing of business rates with a 20% reduction to 35% from 1 April 2027, and an extension of the small business rates relief threshold to £18,000, with gambling and vape shops funding the reduction.  

Also generating income for the chancellor will be new powers for HMRC to collect unpaid taxes, and a requirement for online retailers to collect VAT from UK sellers whose businesses are making more than £90,000 of sales through their marketplace. 

And the banking sector will help to support the wider economy with a temporary increase on the Bank Corporation Tax surcharge to 6% from 1 January 2027 to 31 March 2028, returning to 3% from 1 April 2028.

The chancellor will also benefit from changes to writing down allowances for business, reducing the main rate by 2% to 12% from April 2027, although first year allowances for new investment will rise from 40% to 50% from January 2027.  Business will also have to find extra cash to manage a 3.9% increase in the National Minimum Wage and the National Living Wage from next April.   

Importantly, the government is reducing the lifetime limit for capital gains eligible for Business Asset Disposal Relief (BADR) from £1million to £500,000 from April 2027.

The quieter run-up to this Budget was welcome, avoiding the disruption of last year, but while the Chancellor focused on the benefits in his speech, the small print shows some tough implications for business.

The Chancellor says 75% of claimants of Business Asset Disposal Relief will still receive relief on their entire gain, but this cut in the lifetime relief is another important shift in the potential transition and succession cycle of business.

And for landlords, the rates of income tax applied to property income will increase by 2%, making the property basic rate 24% and the higher rate 44% in 2027/28.  The property additional rate will be 49%.

Opportunities may lie ahead for business with the announcement that the government will use strategic public procurement to back British firms. There will shortly be a new definition of what it means to be a UK supplier, to overcome broad definitions that have allowed companies with no real base to be classed as a UK firm.

And movement of skilled labour will be encouraged through additional visas and through a restriction on non-compete clauses when employees move on.  

The government’s ambition to make the UK a global leader in artificial intelligence (AI) was further reinforced.  An additional £80 million will support Sovereign AI’s R&D Procurement Scheme to create more opportunities for innovative companies to work directly on AI solutions to tackle challenges across the health and care system, and AI security and safe adoption.

And elsewhere in defence, at the spending review next year, the government will set out the details of how it will achieve its NATO commitment of spending 3.5% of GDP on defence by 2035, with a target date for 3% in 2030.

Businesses operating in the AI and defence sectors should be assessing their readiness to pitch for government contracts or forming industry partnerships, as aligning with these strategic areas could unlock future growth and resilience.

Looking at corporate governance, sustainability targets and supply chain scrutiny are all aspects that can help prepare companies for the rigours of public procurement.

In other news, Advance Corporation Tax will be repealed from 1 April 2031. The 5p cut on fuel duty has been extended to July 2027 and there are new mileage rates for employees and self-employed people who use their own vehicles for work with a permanent increase on the tax-free mileage rates to 55p per mile for the first 10,000 business miles for cars and vans.

The full Budget speech delivered by Chancellor John Healey is available here.

This is not legal advice; it is intended to provide information of general interest about current legal issues.