Last checked 28 October 2026
Quick answer
The Budget on 28 October 2026 increases the Trading Allowance from £1,000 to £3,000 from 6 April 2027. People joining Making Tax Digital for Income Tax (MTD) in April 2027 won’t get late submission penalty points on their quarterly updates for the 2027 to 2028 tax year. Income tax on property income rises to 24%, 44% and 49% from 6 April 2027. The Personal Allowance, Income Tax bands, Class 4 National Insurance thresholds and the £90,000 VAT registration threshold stay the same for 2027 to 2028. Everything below comes from the Budget documents on GOV.UK.
This is general information, not tax advice. Check GOV.UK or speak to an accountant about your situation. Why we say this.
HM Treasury published the Budget 2026 documents on GOV.UK on 28 October 2026. We’ve read the Budget 2026 document and the Overview of tax legislation and rates (often called OOTLAR) and pulled out the parts aimed at sole traders and landlords. This is a summary of what was announced, not a forecast of what it means for you. Before the day, we set out what was already decided.
Making Tax Digital for Income Tax
Two MTD measures were announced.
No late submission penalty points in the first year. OOTLAR says the government “will not apply late submission penalty points to quarterly updates for the 2027-28 tax year” for people required to join MTD in April 2027 (OOTLAR, measure 2.36). The Budget document describes this as no points for late submission of the first four quarterly updates. OOTLAR also says you will still need to send your quarterly updates before you can submit your tax return. So the updates are still required; it’s the penalty points for sending them late that won’t apply in 2027 to 2028.
New exemptions. OOTLAR says the government will exempt these groups from MTD for Income Tax until further notice: people eligible for qualifying care relief, non-UK resident foreign entertainers and sportspeople, and expected non-resident customers (OOTLAR, measure 2.37). Secondary legislation will be introduced before April 2027. Our MTD exemptions guide covers the existing routes.
The Budget documents we read don’t list any change to the MTD start dates. GOV.UK’s MTD guidance still says you’ll need to use MTD from 6 April 2027 if your qualifying income for 2025 to 2026 is over £30,000, and from 6 April 2028 if it’s over £20,000 for 2026 to 2027. Our penalties explainer will be updated to reflect the easement.
Trading Allowance triples to £3,000
The Trading Allowance will rise from £1,000 to £3,000, and the trading income reporting threshold for Self Assessment will also rise to £3,000 (OOTLAR, measure 1.5). OOTLAR says people who use the allowance, where it covers all their relevant income before expenses, will no longer have to declare or pay tax on that income. The Budget document says this applies to trading and miscellaneous income.
When: from 6 April 2027, through Finance Bill 2026-27.
Income tax rates and thresholds
The Budget keeps the main rates and bands on earnings the same for 2027 to 2028 (OOTLAR Annex A). These apply in England, Wales and Northern Ireland; Scotland sets its own rates and bands.
| 2026 to 2027 | 2027 to 2028 | |
|---|---|---|
| Personal Allowance | £12,570 | £12,570 |
| Basic rate (20%) | £1 to £37,700 of taxable income | £1 to £37,700 |
| Higher rate (40%) | £37,701 to £125,140 | £37,701 to £125,140 |
| Additional rate (45%) | Over £125,140 | Over £125,140 |
The Personal Allowance still reduces by £1 for every £2 of income over £100,000 (OOTLAR Annex A). The Budget document says “the government is keeping the rates of tax paid on earnings unchanged” (Budget document, section 3.9).
Landlords: higher tax on property income
From 6 April 2027 property income gets its own income tax rates: 24% (basic), 44% (higher) and 49% (additional) (OOTLAR, measure 1.2). For 2026 to 2027, property income is still taxed at the main rates of 20%, 40% and 45% (OOTLAR Annex A).
The Budget document explains that Budget 2025 had already raised property and savings rates by two percentage points from April 2027, and this Budget adds a further two points from the same date (Budget document, section 3.9). The new property rates apply in England, Wales and Northern Ireland; Scotland and Wales can set their own property rates. Savings income rates rise to the same 24%, 44% and 49% from the same date (OOTLAR, measure 1.1).
The government will also consult on expanding third-party reporting of property income data (HMRC consultation).
Self-employed National Insurance
Class 4 National Insurance stays the same for 2027 to 2028 (OOTLAR Annex A):
| Class 4 | 2026 to 2027 | 2027 to 2028 |
|---|---|---|
| Lower Profits Limit | £12,570 | £12,570 |
| Upper Profits Limit | £50,270 | £50,270 |
| Rate between the limits | 6% | 6% |
| Rate above the Upper Profits Limit | 2% | 2% |
Class 2 is £0 above the Small Profits Threshold. The Small Profits Threshold rises from £7,105 to £7,355, and the voluntary Class 2 rate rises from £3.65 to £3.80 a week (OOTLAR Annex A). OOTLAR says these follow September’s 3.5% CPI figure, and the remaining National Insurance limits and thresholds stay at 2026 to 2027 levels until the 2030 to 2031 tax year (OOTLAR, measure 2.1).
VAT registration threshold
The VAT registration threshold stays at £90,000 and the deregistration threshold at £88,000 for 2027 to 2028 (OOTLAR Annex A).
Separately, from October 2027 online marketplaces will be responsible for collecting VAT on sales by UK VAT-registered businesses and any other UK business with sales of at least £90,000 a year on that platform. OOTLAR says this won’t apply to personal sales, second-hand goods or business-to-business sales, and the threshold and start date will be set in secondary legislation in 2027 (OOTLAR, measure 1.55).
Mileage rates confirmed from 6 April 2027
The simplified mileage rate for business miles above 10,000 rises from 25p to 35p, and this takes effect from 6 April 2027 (OOTLAR, measure 2.7). The Budget document says the 55p rate for the first 10,000 miles is being made permanent (Budget document, section 4.4). More in our mileage rates explainer.
Other measures sole traders may notice
- Capital allowances: the main rate first-year allowance rises to 50% for spending on or after 1 January 2027, and the main rate writing-down allowance falls to 12% from 6 April 2027 for Income Tax (OOTLAR, measure 1.42).
- Payments on account: from April 2029, Self Assessment taxpayers who make payments on account will make more regular in-year payments, which will be automated (OOTLAR, measure 2.31).
- Direct Debit for VAT: from April 2029, taxpayers will need a Direct Debit instruction in place for VAT and PAYE return liabilities, subject to exceptions (OOTLAR, measure 2.32).
- E-invoicing: HMRC will be able to require VAT invoices in a set electronic format from April 2029 (OOTLAR, measure 1.58).
- Till software: the government will introduce mandatory software standards for till systems to tackle till fraud, with the start date still to be set (OOTLAR, measure 2.33).
- Business Asset Disposal Relief: the lifetime limit falls from £1,000,000 to £500,000 for disposals on or after 6 April 2027 (OOTLAR, measure 1.33).
- Parental pay: from April 2029, eligible self-employed fathers, partners and adopters in Great Britain will be able to get parental pay (Budget document, section 4.5).
What to do now
- Nothing in this summary needs action today. Most changes start on 6 April 2027 or later.
- If you’re joining MTD in April 2027, keep preparing: the quarterly updates are still required, even though late submission points won’t apply in the first year.
- Read the Budget 2026 documents for the full detail, or ask HMRC or an accountant how the changes affect you.
We’ll update our guides as HMRC publishes detailed guidance.
Frequently asked questions
Has the MTD start date changed?
Not in the Budget documents we read. GOV.UK still says 6 April 2027 for qualifying income over £30,000 (in 2025 to 2026) and 6 April 2028 for over £20,000 (in 2026 to 2027). What changed is that late submission penalty points won’t apply to quarterly updates in 2027 to 2028 for people joining in April 2027.
When does the £3,000 Trading Allowance start?
From 6 April 2027, according to OOTLAR. Until then the allowance is £1,000.
Did income tax thresholds change?
No. The Personal Allowance stays at £12,570 and the basic rate band at £37,700 for 2027 to 2028, according to OOTLAR Annex A.
Did the VAT registration threshold change?
No. It stays at £90,000 for 2027 to 2028, according to OOTLAR Annex A.
Sources
All checked on 28 October 2026.
- Budget 2026 in full (HM Treasury, 28 October 2026)
- Budget 2026 document (HM Treasury, 28 October 2026)
- Budget 2026: Overview of tax legislation and rates (OOTLAR) (HM Treasury and HMRC, 28 October 2026)
- OOTLAR Annex A: rates and allowances (HM Treasury and HMRC, 28 October 2026)
- Find out if and when you need to use Making Tax Digital for Income Tax (HMRC)
- Improving property income data reporting (consultation, 28 October 2026)
Where to check
What changed. : . 28 October 2026: First published.
