Budget 2026: what it means for contractors, freelancers and small agencies

The short version: not much changed for you (and that's fine)

John Healey delivered his first Budget on 28 October 2026 and, if you're a contractor, freelancer or running a small service business, the honest summary is that very little in it lands on your desk. No change to income tax, National Insurance or VAT rates. Corporation tax stays where it is. Dividend tax, which went up in April, wasn't touched again.

The Budget was mostly about energy bills, the high street and a push to keep founders in the UK. That's good news in one sense (nothing new to plan around), but a few things in the small print are worth knowing about, particularly if you ever plan to close your company, drive a lot for work, or have savings or a rental property outside an ISA.

This is our rundown of what matters to you, what doesn't, and the handful of things we'd suggest you think about before April 2027. If you'd rather talk it through, just reply to our email or book a call.

The numbers that matter (and when they bite)

Most of what's below was already in place or already announced. The Budget confirmed it rather than changed it. The new bits are marked.

Sources: Budget 2026 overview of tax legislation and rates, Annex A rates and allowances, Budget 2026 document. Scottish income tax bands are set separately.

If you work through a limited company

Corporation tax, salary and dividends: as you were
The small profits rate stays at 19% and the main rate at 25%, and the government has now set those rates through to the year starting April 2028. Dividend tax went up by two points in April 2026 (10.75% basic, 35.75% higher, 39.35% additional) and the Budget left it there. The £500 dividend allowance also stays. So your salary and dividend mix for 2026/27 doesn't need revisiting because of anything announced today.

IR35 and off-payroll working: nothing
Any hopes of simplification or abolishment of IR35 didn't come to fruition as there were no announcements on IR35, off-payroll rules or umbrella companies. The umbrella company rules that came in from April 2026 carry on as they are.

Business Asset Disposal Relief is being halved
BADR gives you an 18% capital gains tax rate when you close or sell your company, rather than the full 24% for higher rate tax payers. The lifetime limit drops from £1m to £500,000 for disposals on or after 6 April 2027. For most small companies this won't matter: if the total gains you'd ever claim under BADR come in under £500,000, nothing changes for you, and that covers the vast majority of our clients. If you're one of the few with a larger balance built up over many years, we'll factor the new limit and the April 2027 date into any closure planning we do with you. There are transitional rules for contracts signed before 6 April 2027 but not completed, so talk to us before deciding anything.

Founders' Relief sounds generous. Read the small print
The headline is a 10% CGT rate on up to £10m of lifetime gains from 6 April 2027, which sounds like the old Entrepreneurs' Relief coming back. It isn't. The technical consultation sets conditions that almost no freelancer or small business will meet: you need to have held at least 25% of the shares from the day trading started, held them for five years, and the company needs at least £10m of turnover and 15 full time employees (directors, contractors and agency staff don't count) in the year before the sale, plus a track record of 25% a year growth or £1.5m of R&D spend. So the picture for small company owners is simple: the relief most of us actually use has been cut in half, and the shiny replacement is for a narrow group of scale ups. The consultation closes on 30 November 2026 and we'd expect some pushback on the thresholds, but don't plan around it changing.

Capital allowances shift slightly
From 1 April 2027 the main rate writing down allowance drops from 14% to 12%, but the first year allowance for new kit rises to 50% from 1 January 2027. For most small companies the Annual Investment Allowance already covers laptops, equipment and furniture in full, so this won't change much in practice. It mainly affects cars and anything that falls outside full expensing.

Benefits in kind go through payroll from April 2027
If your company gives you a car, van, fuel or private medical insurance, those will need to be reported and taxed through payroll each month from 6 April 2027 rather than on a P11D after the year end. Other benefits follow from April 2028. We'll handle this for payroll clients, but it does mean telling us about benefits during the year, not after it.

The line in the speech that made us sit up
About halfway through, the Chancellor said: "I'm changing outdated rules so that people taking profits out of their companies are taxed consistently." If you run a limited company, that's the sort of sentence that makes you reach for the remote. In the end nothing changed yesterday. What he was referring to is a longer term rewrite of the rules on company distributions and repayments of capital, which has been out for consultation since the summer and takes effect from April 2028, with draft legislation due next year. The stated aim is to stop profits being taken out as capital (taxed at CGT rates) when they'd otherwise be taxed as dividends, while protecting genuine sales and family successions. There's no detail yet on how it treats a straightforward company closure, which is the bit that matters to most of our clients, so we'll be following it closely. Put alongside the BADR cut, it's a fair signal of where the government wants to go on how company closures are taxed.

Longer term admin changes
From April 2029 VAT and PAYE liabilities will need a Direct Debit in place (you can still pay another way before the cut-off, but the Direct Debit catches anything left). E-invoicing for VAT is coming from April 2029 too. Both are a while off and we'll remind you nearer the time.

If you have income outside your company

Most of what follows only matters if you earn money in your own name alongside your company: rent from a property, interest on savings, or a sideline. If everything goes through the company, you can skim this bit.

Your personal tax rates are unchanged
Income tax rates stay at 20%, 40% and 45%, and the personal allowance and higher rate threshold stay frozen at £12,570 and £50,270 until April 2031. National Insurance rates and thresholds are also frozen, so your salary and dividend mix doesn't need revisiting.

The freeze is the quiet story here. If your profits rise with inflation, more of them drift into the 40% band without any rate going up. It's worth keeping an eye on where you sit against £50,270, especially if you're close to it and have pension contributions or expenses you could time differently.

Mileage gets better from April 2027
The 55p rate for your first 10,000 business miles, introduced earlier this year, is now permanent. We updated Mighty's mileage claims to 55p when it came in, so you've been getting it already. From 6 April 2027 the rate above 10,000 miles goes from 25p to 35p, and that'll be ready in Mighty for the start of the tax year with nothing for you to do. If you drive a lot to client sites it's a decent uplift, but only if your mileage log is in good shape. HMRC won't accept a rough guess.

The trading allowance triples
If you earn a bit on the side in your own name, say some freelance work outside the company or selling things you've made, the trading allowance goes up from £1,000 to £3,000 on 6 April 2027. Under £3,000 of side income and you won't need to tell HMRC about it at all. Over it, and you can either deduct the £3,000 allowance or claim your actual expenses, whichever leaves you better off. Worth knowing too if someone in your family is starting something small.

Making Tax Digital: this is the income tax version, and it doesn't affect your company
MTD for Income Tax applies to individuals with sole trader or rental income over £50,000 (since April 2026) or over £30,000 (from April 2027). Limited companies aren't in scope, so for most of our clients there's nothing here. The only way it touches you is if you personally have rental or self employed income above those thresholds, in which case the Budget gave the April 2027 joiners a softer landing: no penalty points for late quarterly updates in 2027/28. You'd still need to send them before filing your return.

Paying personal tax more often, from 2029
If your dividends or other income mean you make payments on account, from April 2029 you'll be asked to make smaller, more regular payments through the year rather than two big ones. Payments will be automated and there'll be an option to pay through PAYE. The detail is still being worked out, and we'll tell you well before it starts.

Not VAT registered and buying software from overseas? 
From April 2027, overseas suppliers selling services to UK businesses that aren't VAT registered will have to charge UK VAT. If your company is under the £90,000 threshold and buys tools from US or EU providers that currently arrive without VAT, expect those prices to rise by 20%. If you're VAT registered, nothing changes.

If you live in Scotland
The Scottish Government sets its own income tax rates and bands for earned income, and will decide whether to match the property income rise. Its Budget is on Thursday 3 December 2026 and we'll update this post, and email you, if anything changes.

HMRC is getting more resources
The Budget funds 670 more compliance officers on top of the 5,500 already being recruited, and from 2029/30 HMRC will be able to take smaller tax debts directly from bank accounts where someone can pay but repeatedly doesn't engage. Neither should worry you if your records are tidy and you respond to letters. It's the ignoring that causes trouble.

If you run a small service business with staff or premises

Employer's NI and the Employment Allowance: no change. 
The 15% rate and £5,000 secondary threshold brought in last year stay, and the Employment Allowance wasn't mentioned, so it remains at £10,500. Nothing to action here.

Wages go up in April 2027. 
The National Living Wage and National Minimum Wage rise by 3.9% from April 2027. If you employ people at or near those rates, build it into your 2027 pricing and cashflow now rather than in March.

The business rates headline probably doesn't apply to you. 
The widely reported rise in the Small Business Rate Relief threshold from £12,000 to £18,000 is for retail, hospitality and leisure properties only. If you're a consultancy, agency, studio or practice renting an office, you're not in that group, so the existing SBRR rules still apply to you (full relief up to £12,000 rateable value, tapering to £15,000). The two year freeze on rates for other RHL properties is also sector specific. Worth knowing before you ring the council expecting a refund.

VAT threshold stays at £90,000. 
No change, and no change to the VAT rate. If you sell through online marketplaces and do more than £90,000 of sales through a single platform, the platform will start collecting VAT on your behalf from October 2027, but that's unlikely to affect service businesses.

Travel and subsistence gets simpler from April 2028. 
The benchmark scale rates employers can pay staff for meals on business trips without receipts are being modernised: £20 for trips over 5 hours, £60 for over 10 hours and £75 for over 24 hours. The 200 plus overseas destination rates are being replaced with a simpler tiered system linked to those figures.

Staff expense claims move out of Self Assessment. 
From April 2028 the £2,500 limit that forces employees into Self Assessment just to claim unreimbursed expenses is removed, so more of your staff can claim through PAYE. Minor, but tidy.

Benefits in kind through payroll. 
As above: company cars, vans, fuel and medical benefits go through payroll from April 2027, everything else from April 2028. If you offer private medical cover to staff, this affects you.

Energy and fuel. 
The 0% VAT on domestic electricity is for households, not business premises, so no help there. The 5p fuel duty cut now runs to 1 July 2027, which matters if your team drives, and the higher mileage rate (35p above 10,000 miles) applies to employees using their own cars too from April 2027.

The personal finance bits worth knowing

Savings interest and rental income are taxed harder from April 2027
Last year's Budget added 2 points to the tax rates on savings and property income. This one adds another 2, so from 6 April 2027 interest and rental profits are taxed at 24%, 44% and 49% depending on your band. The personal savings allowance (£1,000 basic rate, £500 higher rate) still applies first, and anything inside an ISA is untouched. If you hold a chunk of company reserves personally in a savings account, or you've got a buy to let on the side, this is the one change that will actually show up on your tax bill.

Cash ISA stays at £20,000
The planned cut to the cash ISA limit has been dropped. Given the point above, filling your ISA before 5 April is more worthwhile than it was, not less. The government is also working on an incentive for first time stocks and shares ISA investors, with details to come.

Pensions
No new changes to the annual allowance or tax relief. The cap on pension salary sacrifice announced last year (from April 2029) still stands. One technical change: from 28 October 2026 pension death benefits no longer become taxable just because they're paid out more than two years after the scheme learns of a death. And unused pension funds come into the inheritance tax net from 6 April 2027, as previously legislated.

Capital gains tax
Headline rates unchanged (18% and 24%). The BADR cut and Founders' Relief are covered above.

Lifetime ISA
From 29 October 2026 the withdrawal penalty for buying a home above the £450,000 cap drops from 25% to 20%. A new First Time Buyer ISA replaces the Lifetime ISA for new savers from April 2029, with a 25% bonus on balances up to £20,000.

Household energy 
0% VAT on domestic electricity runs to 30 June 2027, and households in council tax bands A to D in England get a £100 payment from January 2027. Gas standing charges are due to go by the end of 2027.

What we'd suggest doing now

For most of you, nothing urgent. But a few things are worth a conversation before April 2027:

1. Thinking of closing your company in the next few years? For most of you the BADR change makes no difference. If your retained profits are heading anywhere near £500,000, we'll build the new limit and the 6 April 2027 date into your closure planning. Just let us know it's on your mind.
    
2. Have cash or a rental property outside an ISA? Savings and property income tax goes up again in April 2027. Use your £20,000 ISA allowance before 5 April, and we can look at whether surplus company cash is better left in the company or moved somewhere more tax efficient.
    
3. Drive a lot for work? Keep your mileage log accurate. The 55p rate is already live in Mighty and the 35p rate above 10,000 miles will be there from 6 April 2027. The one thing we can't do for you is the record.
    
4. Not VAT registered and buying tools from abroad? Check your software subscriptions. From April 2027 overseas suppliers will add UK VAT, so some costs will rise by 20%.
    
5. Employ people? Build the 3.9% minimum wage rise into your 2027 pricing, and if you offer company cars, vans or medical cover, we'll need those details during the year from April 2027 for payrolling.
    
6. Making Tax Digital? Not for your company. Only relevant if you personally have rental or sole trader income over £30,000, and if so we'll be in touch early in the new year.

And a few things you can safely stop worrying about: your income tax and NI rates, your corporation tax rate, your dividend tax rate, IR35, Making Tax Digital for your company, the VAT threshold and the Employment Allowance. None of them moved.
 

As ever, Budget headlines are general and your tax position is specific. If anything here has made you wonder about your own numbers, get in touch and we'll go through it.