After all the speculation, this budget was somewhat less controversial than the previous one. We have highlighted some of the changes that will have the greatest effects on our clients in the rural sector:

Income Tax Rates

Self employment and employed income has been left unchanged.

However, from April 2026 Dividend tax rates will increase by 2% for basic and higher rate tax payers.

The additional rate remains unchanged. This increase has also been reciprocated in an increase in the charge for an overdrawn directors loan accounts. This may mean that for the 26/27 tax year it is worth reviewing how shareholders take remuneration from their limited company and adjusting the split between salary and dividends.

From April 2027 income from property will face an increase of 2% across all tax bandings.

Alongside this, income from savings will share the same fate, as from April 2027 tax rates on interest will increase by 2% across all tax bandings.

Income tax rate bands will be frozen until 2031, meaning that more tax payers will be pushed into higher rates of tax as their income levels rise.

Inheritance Tax

The £1 million APR/BPR nil rate band is now transferable between spouses, meaning that an individuals allowance is now no longer lost on death if unused.

We caution clients to be aware that if their estate is valued at above £2million on their demise then they will incur a tapering of their residence nil rate band. This could be caused by inheriting their spouse’s estate on the first death in the relationship.

We would recommend that clients seek advice if this could impact them.

Inheritance tax nil rate bands will be frozen at their current levels until April 2031.

Capital Allowances

A new first year allowance has been brought in allowing 40% of expenditure on more items.

The £1 million annual investment allowance which allows for 100% tax relief on most business capital purchases remains.

From January 2026 unincorporated businesses that have already used up their £1million annual investment allowance (AIA) will now be able to claim a 40% capital allowance on new assets rather than claim relief through the writing down allowance that will now be at 14%.

Incorporated business that have used up their annual investment allowance already have access to a full expensing allowance on new equipment, however full expensing allowance does not allow assets purchased to be leased out which this 40% allowance will.

For any clients that have tax pools brought forward or are unable to claim full AIAs on capital items the writing-down allowance is reduced from 18% to 14% from April 2026.

Salary Sacrifice

From April 2029 any clients that provide a salary sacrifice scheme for staff members will be limited to £2,000 before it is exposed to national insurance, it’s still income tax exempt though.

At the moment a standard directors pension contribution does not fall inside the salary sacrifice criteria, however with the delay in implementation the government may reconsider their stance on this.

High Value Council Tax Surcharge (Mansion Tax)

Confusingly this is not actually council tax as the revenue will be received by central government. The properties will be valued in 2026 with the tax taking affect in April 2028.

The tax will be charged on properties worth £2million and more with higher value properties receiving higher charges. The tax will be borne by the property owners.

Minimum Wage

From April 2026 minimum wage has increased across the board. Over 21s will now receive £12.71 per hour, 18 to 20 year olds £10.85 an hour and under 18s/apprentices £8 an hour.

ISAs

The amount individuals can pay into an ISA remains the same, however if you are under the age of 65 then only £12,000 can be put into a cash ISA with the remaining £8,000 having to be placed into an investment ISA.

Over 65s can place all £20,000 into a cash ISA still.

Making Tax Digital

Sole traders that have need of farmers averaging will now not be required to register for making tax digital for 2026/27.

Clarification is required on when averaging needs to have been used to fall within this criteria. Penalties will not be imposed on MTD for the 12 months of implementation.

Other changes/factors to be aware of but with minimal consequences expected for our clients:

– Electric car drivers to pay a pence per mile tax

– Workers will no longer be eligible to claim the £6 a week working from home allowance if it is not reimbursed by their employer

– Eye tests, flu jabs & working from home equipment paid for initially by the employee and then expensed is now acceptable, previously it needed to be purchased directly by the employer

– Compensation is now necessary for individuals on zero hour contracts that have had their shifts cancelled or moved. This is taxable income still.

– From April 2026 individuals will no longer be able to pay class 2 national insurance for their home abroad, with the intentions that less non UK residents will gain access to a full state pension

– Gambling duties increased

– Penalties for late corporation tax return submissions will double from 1st April 2026

– VCT investment relief is down from 30% to 20% from 6th April 2026

– Incorporation relief will have to be actively applied for from 6th April 2026

– E-invoicing for VAT invoice to be produced in a set format from April 2029

We hope you have found this information useful, if you have any queries please call our team on 01270 335 030 or contact us.