Chancellor John Healey presented his first Budget on Wednesday, framing it as one that gives households breathing room while preparing for future growth, according to Edinburgh Chamber of Commerce. The government held to its promise not to lift headline rates of tax on earnings, and the main rate of capital gains tax was left unchanged.
Instead, the Chancellor raised the income tax rates that apply to savings and property income, adjusted capital gains tax reliefs for business owners, and set out changes to visa routes for skilled overseas workers.
Why it matters
The Budget leaves the tax paid on wages untouched but increases the burden on income from savings and rent. Edinburgh Chamber of Commerce notes that the changes will matter most to people with substantial savings income and to landlords who receive taxable rental income.
For business owners, the reforms draw a sharper line between company founders who qualify for a new relief and owners who do not. The chamber describes that gap as significant, and says the practical effect will depend on how the detailed rules are written.
Higher rates on savings and rental income
From 6 April 2027, the tax rates on savings and property income will each rise by two percentage points, on top of the increases announced a year earlier. The basic, higher and additional rates will reach 24%, 44% and 49% respectively.
The savings rates will apply across the whole of the UK. The property income rates will apply in England, Wales and Northern Ireland only.
Edinburgh Chamber of Commerce says the changes make it more important than ever for people to think about who owns income-generating assets, so that exposure to income tax can be reduced.
Reliefs for business owners and founders
The lifetime limit for Business Asset Disposal Relief will be cut in half, from £1 million to £500,000, with effect from 6 April 2027. On the same date, a new Founders' Relief will apply a 10% capital gains tax rate to as much as £10 million of lifetime gains for qualifying founders of high-growth, innovative companies.
The chamber welcomed the more generous treatment for founders but cautioned that the detail will decide how useful the relief proves in practice. It also advised owners weighing succession or a future sale to consider how the lower disposal relief limit and the new founders' relief interact as part of longer-term planning.
Separately, the government confirmed that its reforms to the taxation of company distributions will protect genuine commercial transactions, including family successions. Edinburgh Chamber of Commerce says the specifics will matter to family-owned firms deciding how and when ownership should pass to the next generation.
Payments on account and the trading allowance
From April 2029, taxpayers who currently make self assessment payments on account will move to smaller, more frequent payments spread across the year, bringing tax payments closer to the point at which income is earned. The change will not raise anyone's overall tax bill, but the chamber warns it could have notable cash-flow consequences for self-employed people, landlords and others in the payments on account system.
From 6 April 2027, the Income Tax Trading Allowance will rise from £1,000 to £3,000, cutting both the tax and the paperwork for people who earn relatively small sums from trading and miscellaneous activities. The limit applies to qualifying income before expenses and across all qualifying activities together, rather than to each activity separately.
ISAs and international recruitment
The proposed cut to the cash ISA allowance will not go ahead, and the £20,000 limit will stay. The Budget also announced a new First Time Buyer ISA from April 2029, along with changes to the rules for the Lifetime ISA.
On migration, the Budget set out measures intended to make it easier for highly skilled international workers to come to the UK and stay, including an expansion of the High Potential Individual visa and changes to the Graduate visa. Edinburgh Chamber of Commerce says these changes, taken together with the Foreign Income and Gains regime open to qualifying new UK residents, strengthen the UK's offer to internationally mobile individuals and entrepreneurs.
What was left alone
The Budget made no further significant changes to inheritance tax or to the pensions regime. Edinburgh Chamber of Commerce points out that the inheritance tax changes announced in 2024, which bring most unused pension funds into scope, have still not taken effect.
The chamber also flagged that the reduction in the thresholds for Making Tax Digital from April 2027 should not be overlooked, and that further detail on the accelerated self assessment payments is still to come.
Edinburgh Chamber of Commerce is inviting questions ahead of a post-Budget briefing on Friday at 9:30am.
Attention now turns to the consultation and technical detail behind Founders' Relief and the revised payments on account timetable, which will determine how much the announced measures change in practice.
