Budget 2026: what was in the small print?

On 28th October, the Chancellor announced a number of changes to tax and household support measures. This included giving households a one-off £100 payment for energy bills, scrapping the planned cash ISA reduction and introducing a new personal allowance for state pensioners. But many of the smaller key measures flew under the radar. So today, having now scrutinised the minutiae of the infamous ‘red book’, I’ve found a number of changes that might not have made headlines, but could still impact your wallet.

Making Tax Digital

The expansion of the much-heralded Making Tax Digital for Income Tax regime, is to be suspended once it has dragged in taxpayers earning over £30,000 in April 2027. The small print revealed that HMRC are ‘deferring the roll-out of MTD for Income Tax to several taxpayer groups until further notice. Reading between the lines, this strongly suggests that the over £20,000 group will not have to join the club in 2028 as planned.

Also, for those individuals still scheduled to join the scheme in April 2027, penalty points will be waived for late submissions across their first four quarterly updates during the 2027-28 tax year

Other Tax Changes

1. Payments on Account: From April 2029, the self-employed, business partners and landlords who make ‘Payments on Account’ will switch from two annual instalments in January and July to smaller, more frequent payments spread throughout the year. The total amount of tax you owe will not change, but instead taxpayers will in future pay their tax closer to when they earn the money.
   
   This, HMRC says, will make it easier to budget and avoid a large tax bill at the end of the year, but I strongly suspect that HMRC are stealthily trying to achieve their Holy Grail of making all taxpayers, not in PAYE, paying their tax monthly. Expect some kick-back on this!
   
   
2. Expense Claims For Workers: From April 2028, claiming tax relief on job-related expenses will become much simpler. The government is removing the £2,500 threshold that previously meant anyone claiming above that amount for out-of-pocket work costs – such as tools, uniforms, or travel – had to file a complex annual self-assessment tax return. Instead, you will be able to claim that relief directly through your regular payroll (PAYE).
   
   

3. Tax allowances: Whilst the tax-free allowances for Income Tax remain frozen, several of the smaller tax allowances will rise by 3.5% from April 2027 in line with September’s CPI figure: The married couple’s allowance will rise by £400 and the blind person’s allowance will rise by £120.
   
   

4. Child benefit overpayments: HMRC will now automatically deduct child benefit overpayments from any high-income child benefit charge (HICBC) a taxpayer owes. This replaces the previous system, which required individuals to pay a tax bill while waiting for a separate refund to be processed. The good news is that this measure is backdated to January 2013.
   
   

5. Inheritance tax: HMRC is closing an inheritance tax loophole that allowed people to use debts tied to trusts to reduce their tax bills. Under the new rules, taking effect for deaths after 28th October 2026, debts on trust property will face the same strict limits as personal debts to clamp down on tax avoidance.
   
   

6. Business asset disposal: Starting in April 2027, HMRC is cutting the lifetime limit for Business Asset Disposal Relief (formerly known as Entrepreneurs’ Relief) – from £1m to £500,000 – which halves the amount of gain that qualifies for a discounted capital gains tax rate when selling a business. Any gain above £500,000 will be taxed at standard and higher rates. However, HMRC says that 75% of business sellers make a gain of £500,000 or less, meaning 75% still receive full tax relief on their entire gain.
   
   

Other matters

1. Help to Save scheme reformed: Starting in spring 2028, the government’s Help to Save scheme, which offers eligible low-income savers a 50% bonus on their deposits, will expand so accounts can be opened directly through major high-street banks and building societies, not just a single government provider.
   
   

2. Pensions: Lump sum death rule reform The government will abolish the two-year rule, meaning beneficiaries will no longer be taxed solely because tax-free pension and lump sum death benefits are paid more than two years after the member’s death. The change will apply to payments made on or after 28th October 2026.
   
   

3. Gas Tax: A new green levy on gas bills in Great Britain will no longer be introduced as planned in 2027. The gas shipper obligation (GSO) would have been whacked on top of household energy bills to help subsidise clean hydrogen projects. It’s estimated it would have added at least £7.00 to average gas and electricity bills.
   
   

4. Landlords: The Red book confirms the introduction of a new mandatory landlord registration fee for England’s new “Register your rental property” service has been confirmed at £65 per property, charged annually.
   
   

5. Tax on booze: Alcohol duty will rise by 3.9% in line with RPI inflation from 1 February 2027. The increase is set to add around 2p to the duty on an average pint; between 10p and 12p to a bottle of wine; and roughly 35p to a 70cl bottle of spirits. To support independent makers, HMG is expanding the ‘Small Producer Relief’. Also, from February 2027, the discount taper will become more generous for drinks under 3.5% ABV, while the discount for products between 3.5% and 8.4% ABV will rise by RPI plus an additional 10%.
   
   

6. Transport: The government will increase all rates of Air Passenger Duty in line with RPI inflation from 1 April 2028. These rates will be rounded to the nearest penny. APD is a tax paid by customers when they book a flight and is calculated based on the distance travelled. And finally, Single bus fares will be capped at £2 in England and outside of London w.e.f. 1st January 2027.
   
   

Accountant’s view

As far as I’m concerned, as well as most other accountants, the plan to increase the frequency of tax payments for the self-employed is the hidden measure of most concern. Whilst I can understand HMG’s wish to get tax payments in quicker, the impact of this measure will be grossly unfair on many businesses.

Cashflow is of critical concern to most small entities and this is being made worse because of bigger firms taking extended credit before paying their smaller suppliers, whether it be for goods or labour. Also, no account seems to have been taken of the seasonal peaks and troughs in income experienced by many smaller entities. So, please think again Mr Healey.