What does the Budget mean for small businesses?

John Healey framed his first Budget as one for “British business – big and small”. But what do the measures he announced on 28 October mean for SMEs, business owners, founders, entrepreneurs, and those looking to sell their businesses? We’ve pulled together the Chancellor’s key announcements for business and explain what they mean for you.

Ahead of his first Budget, John Healey pledged to “back business in Britain making a profit”, recognise the “cost of business” and give firms the “breathing space they need to invest, innovate and create good jobs”. Did he deliver?

Employment costs

From 1 April 2027:

• The National Living Wage rises by 3.9% to £13.21 an hour.
• The minimum wage for 18 to 20-year-olds also rises by 3.9%, to £11.27 an hour.

The increase will boost consumer incomes but represents a direct payroll-cost increase for employers, particularly in retail, hospitality, care, leisure and other labour-intensive sectors.

There was no increase to the headline rates of employer National Insurance, income tax or VAT, and the government said it would maintain the commitments in the 2024 Corporate Tax Roadmap.

Business rates and high-street businesses

Higher Small Business Rate Relief thresholds

From April 2027, the rateable-value thresholds for qualifying retail, hospitality and leisure businesses in England will increase:

• The threshold for 100% relief rises from £12,000 to £18,000.
• The upper threshold for tapered relief rises from £15,000 to £21,000.

The government says this will remove around 70,000 additional high-street businesses from business rates completely. It estimates that the beneficiaries will include an additional 3,500 pubs, 3,900 restaurants, 2,200 cafés and 1,700 hairdressers and beauty salons.

Two-year real-terms rates freeze

Qualifying retail, hospitality and leisure properties in England will receive a real-terms freeze in their business rates bills for 2027–28 and 2028–29. The government estimates that more than 14,000 restaurants will avoid an average additional cost of £7,500 over the two years, while 120,000 shops will avoid an average additional £3,250.

Additional relief for pubs and venues

Pubs, social clubs and all but the largest live-music venues in England will receive an additional 20 percentage points of business-rates relief from April 2027, taking total relief to 35%. The Budget values this at an average of more than £3,000 per pub in 2027–28.

Transitional support extended

The Supporting Small Business scheme will be extended for a further year for eligible businesses previously receiving support. Around 37,000 small and independent ratepayers are expected to benefit, with support averaging £3,000.

Some businesses lose relief

From April 2027, vape shops and adult gaming centres will no longer qualify for the retail, hospitality and leisure multipliers. Vape shops will also lose eligibility for Small Business Rate Relief.

Transport costs

Fuel duty

The temporary 5p-per-litre reduction in fuel duty will remain in place until 1 July 2027, rather than ending in January. The planned RPI increase has also been deferred until that date.

The government estimates that its fuel-duty decisions across this Parliament will have saved:

• £472 for the average light-goods vehicle driver
• Nearly £4,000 for the average HGV driver

This is particularly relevant to businesses with vehicle fleets, mobile employees, delivery operations or fuel costs embedded in their supply chains.

Higher business mileage rates

The tax-free and tax-deductible mileage rate of 55p per mile for the first 10,000 business miles for cars and vans is being made permanent. From 6 April 2027, the rate above 10,000 miles will rise from 25p to 35p per mile. According to the Budget, someone driving 15,000 business miles annually could receive up to £300 more in tax-free mileage payments as a result of the two increases. This will benefit employees and self-employed people using their own vehicles, although businesses reimbursing at the approved rates may face a correspondingly higher expense.

Red diesel and HGV costs

The 3.7p-per-litre reduction in red diesel duty has been extended until 1 July 2027, benefiting eligible fuel-intensive operations. The existing VED holiday for most HGVs will also continue until 1 July 2027, saving an estimated £600 for a typical HGV, in addition to the fuel-duty benefit.

Investment, entrepreneurship and access to finance

New Founders’ Relief and Business Asset Disposal Relief

A new Capital Gains Tax Founders’ Relief will apply from 6 April 2027. Qualifying founders of high-growth, innovative companies will receive a 10% CGT rate on up to £10 million of lifetime gains. However, the wider Business Asset Disposal Relief lifetime limit will be halved to £500,000 from the same date. The benefit is therefore targeted specifically at qualifying founders rather than business owners generally.

Changes to employee share options

The Company Share Option Plan has been rebranded as Enterprise Management Incentive 2 (EMI2) and made more generous. From 6 April 2027, the maximum value of tax-advantaged options an employee can hold under the scheme will double from £60,000 to £120,000, while the maximum exercise period will increase from 10 to 15 years. The interaction between the EMI and EMI2 individual limits will also be removed, allowing the two schemes to operate independently. This is intended to help growing companies recruit, reward and retain employees.

Simpler R&D tax-relief administration

From 1 April 2027, the R&D Claim Notification Form will be removed. The Additional Information Form will then be simplified from autumn 2027. This should reduce the administrative burden associated with accessing R&D relief.

More public-backed investment and lending

The government is recapitalising the National Wealth Fund and British Business Bank by a combined £20.4 billion, which it expects to create or support 100,000 jobs. In particular, the Growth Guarantee Scheme will be expanded to support £6.5 billion of additional SME lending during this Parliament.

Trading allowance increased

The Income Tax Trading Allowance will increase from £1,000 to £3,000 from 6 April 2027. This will principally benefit people earning smaller amounts through self-employment or side businesses.

Capital investment and allowances

The capital-allowance regime is being rebalanced:

• The main-rate first-year allowance rises to 50% from 1 January 2027.
• The main writing-down allowance falls to 12% from April 2027.

This gives businesses a stronger upfront deduction when investing, but a slower rate of relief on expenditure left in the relevant capital-allowance pool. The impact will therefore depend on the timing and nature of a company’s investment.

Import tariffs

Tariffs will be suspended or remain suspended on a range of business inputs:

• Tariff suspensions covering 361 products will be extended during 2027–28
• Tariffs on a further 72 products have been suspended
• Tariffs on kerosene heating oil and more than 100 food products will be suspended until December 2028

The measures should lower input costs for affected importers, manufacturers and food businesses.

Reduced administrative and regulatory costs

The government says that tariff suspensions, reduced regulatory administration and new mechanisms allowing businesses to test technologies more quickly will save businesses almost £800 million a year.

Measures include simplifying government business surveys, making it easier for SMEs to bid for public contracts and pursuing a “Tell us Once” approach to information supplied to government. A new Better Regulation Executive will oversee the programme.

John Healey’s first Budget contains meaningful help for businesses, particularly through fuel duty, mileage rates, business-rates relief and government-backed investment. However, the strongest direct help is concentrated on retail, hospitality, leisure, transport-intensive businesses and qualifying high-growth companies. And all businesses will face further increased employment costs from next April, when the National Living Wage rises again.

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