UK Autumn Budget 2026: Reaction

After a summer of upheaval at the top of government, Chancellor John Healey has today delivered his first Budget one tipped to be ‘boring’. After several years of fiscal firecrackers, greater stability is welcome. But with growth remaining weak and the overall tax burden remaining high, Britain needs more than caution: it needs targeted tax relief and a credible plan to unlock private investment. No country has ever taxed itself into prosperity, we are not the exception.

The Chancellor framed the statement as a Budget for “working people,” combining fiscal discipline with measures on energy bills, wages, business investment and enterprise. Whilst the package offers some small practical support, the central question remains whether it does enough to restore confidence, encourage risk-taking and lift the UK’s persistently poor growth performance.

Stability, but at what cost?

The Government’s stated priority is stability.  With the Budget setting the direction for the next Spending Review in 2027 and a ten-year plan for the public finances and public services. The Chancellor’s promise to return the public finances “back to black” within three years will be tested against weak growth, higher debt-interest costs and limited fiscal headroom. Meanwhile, inflation was expected to fall to 2%, but has instead increased thus leaving households and businesses still exposed to elevated costs and further constraining the Chancellor’s room for manoeuvre.

Support for working people

For households and employees, the Budget includes a commitment not to raise taxes on working people, alongside maintaining the temporary VAT reduction on household electricity costs from 5% to zero until next Spring. The tax-free mileage allowance will become permanent at 55p per mile for the first 10,000 business miles, while the rate above that threshold will increase from 25p to 35p per mile.

The National Minimum Wage and National Living Wage will rise by 3.09%, and self-employed fathers and partners will gain access to new paternity leave entitlements. For those starting out in business, the Chancellor has introduced a new £3,000 trading allowance and an entrepreneurs’ allowance to help cover costs in the first year of trading. There will be a new pension tax allowance which means those only receiving State pension will not be liable to tax over the normal personal allowance.

Business investment: welcome, but insufficient?

For business, the most significant announcements concern capital allowances and enterprise incentives. Full expensing remains in place, preserving 100% relief for qualifying plant and machinery investment. A new 40% first-year allowance will provide upfront relief for certain main-rate assets, particularly where full expensing is unavailable, including some leasing and unincorporated-business expenditure. At the same time, the main rate of writing-down allowance will fall from 18% to 14%, with the new first-year allowance intended to accelerate relief and encourage investment.

On capital gains which has been always widely tipped to be raided, Business Asset Disposal Relief will be reduced to £500,000, while Founders’ Relief will apply at 10% on gains up to £10 million.

Tax rises still loom

Despite the emphasis on stability, several tax increases remain in the pipeline. Tax on savings interest and rental income will rise by an additional two percent, taking the basic rate to 24%, the higher rate to 44% and the additional rate to 49%. Self-assessment is also expected to move towards more regular payments from 2029, aligning with the wider Making Tax Digital programme.
These measures risk discouraging saving, investment and entrepreneurship at precisely the moment the economy needs more of all three. A Budget that claims to support growth cannot simultaneously keep increasing the tax cost of income, capital and enterprise without consequence.

This was clearly a Budget designed to avoid headlines rather than make them, which in the short term should reassure the market and provide certainty. But growth issues will not be solved by stability alone, if the Government is serious about long-term prosperity, it must go further. There needs to be a reduction on the tax burden on work, investment and business and allow entrepreneurs generate jobs, productivity and higher wages.