Budget 2026: what it means for small businesses in Scotland
What the 28 October 2026 Budget changes for sole traders, company directors, employers and landlords in Scotland, with the dates, the figures and what stays the same.
01 / Guide
The Budget at a glance
The UK Budget was delivered on 28 October 2026. For most small businesses in Scotland, the main news is what stayed the same: the rates of VAT, Corporation Tax, National Insurance and dividend tax are unchanged. Most of the changes start in April 2027, so there is time to plan.
| Change | What happens | From | Applies in Scotland? |
|---|---|---|---|
| Trading Allowance | Rises from £1,000 to £3,000 | 6 April 2027 | Yes |
| Business mileage | The rate above 10,000 miles a year rises from 25p to 35p. The 55p rate for the first 10,000 miles stays. | 6 April 2027 | Yes |
| Capital allowances | Main-rate first-year allowance rises from 40% to 50%. Main-rate writing-down allowance falls from 14% to 12%. | 1 January 2027 and April 2027 | Yes |
| National Living Wage | Rises to £13.21 an hour. The 18 to 20 rate rises to £11.27, and the 16 to 17 and apprentice rate to £8.31. | 1 April 2027 | Yes |
| Making Tax Digital for Income Tax | No late-submission penalty points on the first four quarterly updates for people who join in April 2027 | 6 April 2027 | Yes |
| Benefits in kind | Company cars, vans, fuel and medical benefits must go through payroll. Most other benefits follow a year later. | 6 April 2027 | Yes |
| Business Asset Disposal Relief | Lifetime limit falls from £1 million to £500,000. The 18% rate stays. | Disposals from 6 April 2027 | Yes |
| Tax on savings income | Rates rise to 24%, 44% and 49% | 6 April 2027 | Yes |
| Tax on property income | Rates rise to 24%, 44% and 49% in England, Wales and Northern Ireland | 6 April 2027 | Not decided. The Scottish Government can set its own rates. |
| VAT on services from overseas | The reverse charge will only apply to VAT-registered UK businesses, so unregistered businesses will be charged UK VAT by overseas suppliers | 1 April 2027 | Yes |
| Online marketplaces | Platforms collect the VAT on sales by UK sellers who are VAT registered, or who sell £90,000 or more a year on that platform | 1 October 2027 | Yes |
| Payments on account | Smaller, automated payments spread through the year | April 2029 | Yes |
| VAT and PAYE payments | Direct Debit required for VAT and PAYE return payments, with some exceptions. VAT e-invoicing becomes mandatory on 1 April 2029. | April 2029 | Yes |
02 / Guide
Sole traders and the self-employed
The Trading Allowance rises from £1,000 to £3,000 from 6 April 2027. If your gross trading income is within the allowance, you may not need to report it. If it’s higher, you can deduct the allowance instead of your actual costs, which only helps if your real costs are lower than £3,000. Our sole trader accounting page explains how we help you choose.
If you use simplified mileage rates, the rate for business miles above 10,000 a year rises from 25p to 35p from 6 April 2027. The 55p rate for the first 10,000 miles has applied since 6 April 2026. To see what you’ll owe this year, try our self-employed tax calculator.
Making Tax Digital for Income Tax reaches more people next year. HMRC’s current guidance says you need it from 6 April 2027 if your qualifying income from self-employment and property was over £30,000 in 2025 to 2026, and from 6 April 2028 if it was over £20,000 in 2026 to 2027. The Budget adds that people who join in April 2027 won’t get late-submission penalty points for their first four quarterly updates, although the updates still have to be sent before you can file your tax return.
From April 2029, people who make payments on account will pay smaller, automated amounts through the year instead of two large payments. Until then nothing changes, and the 2025 to 2026 return is still due online by 31 January 2027. Our Self Assessment service and Self Assessment checklist will help you prepare.
03 / Guide
Limited company directors
Corporation Tax stays at 25%, with the 19% small profits rate. Dividend tax rates stay at 10.75%, 35.75% and 39.35%, and the dividend allowance stays at £500. If you pay yourself through a mix of salary and dividends, the Budget doesn’t change that calculation for 2027 to 2028.
Capital allowances are changing. From 1 January 2027, the main-rate first-year allowance rises from 40% to 50%. From April 2027, the main-rate writing-down allowance falls from 14% to 12%, which slows tax relief on equipment that doesn’t get a first-year allowance or the Annual Investment Allowance. The Annual Investment Allowance stays at £1 million, so most small companies can still deduct the full cost of qualifying equipment in the year they buy it. Read more on our Corporation Tax page.
If you’re thinking about selling your business, the Business Asset Disposal Relief lifetime limit halves from £1 million to £500,000 for disposals from 6 April 2027. The 18% rate stays the same. If a sale is planned for 2027, it’s worth getting advice on timing before April.
04 / Guide
Employers and payroll
From 1 April 2027, the National Living Wage rises by 3.9% to £13.21 an hour. The rate for 18 to 20 year olds rises to £11.27, and the rate for 16 to 17 year olds and eligible apprentices rises to £8.31. These rates apply across the UK, including Scotland.
Employer National Insurance stays at 15%, and the Employment Allowance stays at £10,500 a year. If you provide company cars, vans, fuel or private medical cover, these benefits must be reported and taxed through payroll from 6 April 2027, instead of on a P11D after the year ends. Most other benefits follow from 6 April 2028. Our payroll service can set this up before the first pay run of the new tax year.
05 / Guide
Landlords and savers
Tax rates on property income rise by 2 percentage points from 6 April 2027, to 24%, 44% and 49%. Those rates apply in England, Wales and Northern Ireland. The UK Government has given the Scottish Government the power to set its own property income rates, and it hasn’t announced them yet. If you pay Scottish income tax and have rental income, your rates will depend on the Scottish Budget.
Tax rates on savings income also rise to 24%, 44% and 49% from 6 April 2027. Savings income is taxed at UK rates, so this change applies to Scottish taxpayers too. It affects interest above your personal savings allowance and outside an ISA.
06 / Guide
What works differently in Scotland
Income tax on wages, self-employed profits and pensions in Scotland is set by the Scottish Parliament, so the UK Budget doesn’t change the Scottish bands and rates. The Scottish Government announces those in the Scottish Budget, and our guide to Scottish income tax rates for 2026/27 sets out the current bands. The £12,570 Personal Allowance is set by the UK and stays the same for 2027 to 2028.
Some Budget announcements apply to England only, including the High Value Council Tax Surcharge, business rates relief changes and Stamp Duty Land Tax changes. In Scotland, council tax, non-domestic rates and Land and Buildings Transaction Tax are set by the Scottish Government.
National Insurance, VAT, Corporation Tax, dividend tax and the minimum wage are UK-wide, so those decisions apply in Glasgow in the same way as anywhere else in the UK.
07 / Guide
What stays the same
- VAT stays at 20%, and the VAT registration threshold stays at £90,000.
- Corporation Tax stays at 25%, with the 19% small profits rate.
- National Insurance stays at 8% and 2% for employees, 15% for employers, and 6% and 2% for the self-employed (Class 4).
- Dividend tax rates and the £500 dividend allowance stay the same.
- The Employment Allowance stays at £10,500.
- The Personal Allowance stays at £12,570.
If you’re close to the VAT threshold, our VAT returns service covers registration, and the VAT calculator helps with day-to-day pricing.
08 / Guide
Key dates to plan for
| Date | What happens |
|---|---|
| 1 January 2027 | 50% main-rate first-year allowance for new spending |
| 31 January 2027 | Online Self Assessment deadline for 2025 to 2026 |
| 1 April 2027 | New minimum wage rates. VAT reverse charge change for services from overseas. |
| 6 April 2027 | Trading Allowance £3,000, 35p higher mileage rate, payrolled car, van, fuel and medical benefits, new savings and property income rates, £500,000 Business Asset Disposal Relief limit, and Making Tax Digital for income over £30,000 |
| 1 October 2027 | Online marketplaces start collecting VAT for UK sellers |
| April 2029 | Automated payments on account, Direct Debit for VAT and PAYE, and VAT e-invoicing |
If you’re not sure which of these affect you, send us a short note about your business through the form on this page. We’ll tell you what applies and what to sort out before April 2027.