As the details of the budget announcements become available we have picked some highlights for you.
Income Tax Increases
The headline announcement in the budget speech was the increase in Income tax rates on Dividends, Property, and Savings Income.
The specific changes to dividend tax rates, effective from 6 April 2026, make remuneration planning more important than ever as there is no longer a one size fits all solution.
These tax changes make incorporation a less appealing option for businesses from April 2026, and they should therefore carefully assess their available alternatives.
The new rates from April 2026 are shown below but note there is no change to the additional rate of tax on Dividend income:
Dividend Tax Rate Changes
Basic Rate
Old rate (up to 5 April 2026): 8.75%
New rate (from 6 April 2026): 10.75%
Higher Rate
Old rate (up to 5 April 2026): 33.75%
New rate (from 6 April 2026): 35.75%
Additional Rate
Old rate (up to 5 April 2026): 39.35%
New rate (from 6 April 2026): 39.35% (no change)
The Property and Savings Income tax rates are confirmed to be rising from 6 April 2027:
Property & Savings Income Tax Rate Changes
Basic Rate
Old rate (up to 5 April 2027): 20%
New rate (from 6 April 2027): 22%
Higher Rate
Old rate (up to 5 April 2027): 40%
New rate (from 6 April 2027): 42%
Additional Rate
Old rate (up to 5 April 2027): 45%
New rate (from 6 April 2027): 47%
With the escalating tax burden on landlords, incorporating a property portfolio may be a more appealing option. However, this decision involves other tax considerations, such as Capital Gains Tax and Stamp Duty Land Tax (SDLT). Professional advice tailored to your specific circumstances is essential before proceeding.
Electric Cars
The 100% allowance for the purchase of an electric car was due to end in April 2026, this has been extended for a further 12 months to April 2027.
It was also announced that VED (Vehicle Excise Duty or Car Tax) will be charged on electric vehicles (EV) and plug-in hybrids on a mileage basis from April 2028. The charge for an EV will be 3p per mile and 1.5p per mile for a plug-in hybrid. The rates are expected to rise each year in line with the consumer price index (CPI).
This charge will be administered by DVLA and more details on how this will be implemented will follow.
Start-Up’s & Scale-Ups
The Chancellor spoke about supporting start-up and scale-up businesses and encouraging these businesses to stay and do business in the UK. A detailed paper setting out the government’s commitment to supporting entrepreneurship has been published which you can read here.
In addition to this the government has asked for feedback on the current tax support for entrepreneurs and how this could be improved. More details are on this link including access to the survey.
EIS (Enterprise Investment Scheme) and VCT (Venture Capital Trusts)
These schemes are available to encourage investment in start-up and scale-up businesses. The tests which are applied to establish whether a business qualifies for the scheme have been updated to include larger business and opening up tax efficient investment to more companies.
The rate of income tax relief for the investor on a qualifying VCT investment has been reduced from 30% to 20% but for EIS investors the rate of Income tax relief remains unchanged.
EMI (Enterprise Management Incentives) Scheme
EMI options allow qualifying companies to offer employees share options with certain tax advantages. The qualifying conditions have been expanded to allow larger businesses to offer these incentives to employees. Previously the maximum time limit these options could be held was 10 years, this has been extended to 15 years.
VAT
There were no major changes to the VAT rate or thresholds. The registration limit remains at £90,000 with the de-registration limit at £88,000.
Low Value Imports
The government is removing the customs duty relief on goods imported into the UK valued at £135 or less, making them subject to customs duty from March 2029 at the latest, and consulting on implementing a new set of customs arrangements for these goods.