Budget 2026 tax changes: What could John Healey announce?

First published: 28 August 2026

Last updated: 9 October 2026

With the Autumn Budget now just weeks away, John Endacott, tax expert and head of wealth and succession at PKF Francis Clark, revisits his thoughts from a month ago.

There have been conflicting hints about what we might expect from the Autumn Budget on 28 October 2026, and it is hard to call what might happen. Andy Burnham has talked boldly but acted modestly so far. John Healey remains an unknown quantity as Chancellor but has been talked about as a safe pair of hands.

My feeling is that we should expect a Budget focused on perceived tax avoidance and tax fairness, with spending cuts indicated but kicked forward to a delayed spending review next year. Whether such a Budget is credible to the bond markets remains to be seen.

My sense is that Labour MPs will follow Andy Burnham’s lead for now and Labour’s electoral fortunes have improved since Keir Starmer’s departure. That suggests the Budget needs to send the desired political messages, raise more tax revenue and avoid public upheaval. The economic background is difficult, with weak growth, higher borrowing costs and little room for manoeuvre.

I’ve closely followed UK government Budgets for well over 40 years. My earliest recollection is having to reprice the beer and cigarettes in my parents’ hotel bar by 6pm on Budget Day. Those were different times and they highlight how the focus has changed over the years, but what hasn’t changed is that forecasting Budgets is a mug’s game – but here goes.

Budget 2026: Will wealth be taxed more?

I don’t think that Andy Burnham’s government will introduce a wealth tax. It is unlikely to raise much reliable money quickly and would be a distraction from other things that he wants to achieve. However, his aim will be to control the political narrative and to satisfy those members of the Labour Party, Reform and the Green Party who are keen on the idea of a wealth tax.

How could that be achieved? A number of tax changes could be introduced which are presented as a better way of taxing wealth than currently without the need to go through a complex process of trying to design and implement a dedicated wealth tax. These could be badged as reducing the scope to avoid inheritance and capital gains taxes.

These changes could comprise:

More capital transactions could be subject to income tax

Taxing more capital transactions as income tax rather than to capital gains tax. This could increase tax revenue without increasing the capital gains tax rate. In particular, we are concerned about changes to a number of transactions involving business owners and I’ll return to that below.

Capital gains tax on death

Imposing capital gains tax on death to encourage wealth transfers in lifetime and so increase the take from that tax. This would make capital gains tax harder to avoid and might satisfy some of the critics. Effectively it amounts to getting rid of the probate cost uplift on death but with hold-over relief available where business assets are concerned.

Higher taxes on savings and dividend income

Taxing investment income more by pushing up the tax rates on savings and dividends marginally, perhaps by tidying up some of the current complicated tax rates and presenting this as tax simplification.

Potential changes to inheritance tax, pensions and ISAs

Other measures might include putting a cap on the amount that can be treated as gifts out of income for inheritance tax in any given financial year, limiting double-dip planning to maximise inheritance tax reliefs on death, reducing the cap on tax-free cash from pension schemes, capping the amount of money that can be held in ISAs and further taxes on higher value homes.

Those measures probably don’t raise much hard cash and what they do raise will probably take some time to come through. They might be accompanied by an increase in capital gains tax, perhaps taking the main rate to 28%, a rate used in the past. One possibility would be to announce the increase for 6 April 2027. That could encourage disposals before then and bring forward tax revenue.

The Office for Budget Responsibility may not attribute much additional tax revenue to a capital gains tax rate increase. A higher capital gains tax rate could also produce negative headlines when Andy Burnham is trying to present a more business friendly approach.

That suggests a modest increase in capital gains tax is most likely and probably wouldn’t exceed the dividend tax rates (currently announced as 35.75% for higher rate taxpayers and 39.35% for additional rate taxpayers). One would expect a material discount to these rates to deal with the impact of inflation and the scope to delay transactions so reducing revenue. In the last 60 years, capital gains tax has only ever exceeded a rate of 30% from 1988 to 2008, when it was 40% but with taper relief from 1998.

What could raise more money in the Autumn Budget?

The government could look to increase the rate of national insurance paid by the self-employed and this appears to fit with this government’s priorities. The justification would be to discourage perceived unfair exploitation of workers by encouraging self-employed status over employed status.

More pertinently, a focus might be on partners in LLPs where it is perceived that employment is disguised as self-employment to secure tax advantages. Whilst there have been some anti-avoidance rules on this for over a decade, they are not very restrictive. In the last few months, the courts have given their verdict on the operation of these tax rules, and the government may decide to revisit them.

Tax Policy Associates suggested in July that applying something closer to employer’s national insurance to professional partnerships could raise £1bn to £2bn. This tax change would get pushback, and it is understood that Rachel Reeves looked at this last year and decided against it. It does look like a potentially significant source of tax revenue although behavioural changes would follow including likely restructuring of a number of firms. It would also be close to home for many of us.

Other tax raising possibilities might include increasing the levy on banks, perhaps by reversing earlier reductions in the bank surcharge, and possibly increasing taxes on oil and gas extraction, although how much higher can those taxes go?

I can imagine that Andy Burnham would like to show a symbolic increase in the personal allowance, but this might only be £100 or £200. The Centre for Economic and Business Research has estimated that even a £500 increase in the personal allowance could cost about £5bn a year. That probably explains why the idea may be attractive politically but hard to afford.

Overall, I think it is likely to be a quieter and less showy Budget than some might expect, with a number of technical changes, consultations and roadmaps. I also anticipate John Healey trying to show at least some reduction in government spending, although this may well be modest.

A month ago, I was suggesting that tax revenues are likely to need to be increased by at least £5bn a year, with perhaps £2bn in tax giveaways and some bearing down on government expenditure in the forecasts. My view now is that the tax increase number might need to be higher than £5bn.

Budget 2026: What could change for family businesses?

HMRC is concerned that, based on their figures, too many small and medium-sized companies are not paying as much tax as HMRC expect. Making tax digital (MTD) is part of a programme to gain more information on smaller businesses. For companies, there seems to be an HMRC perception that loans are taken from companies instead of taxable income and that compliance with company law is poor.

There are a number of consultations in place by HMRC and other government departments that focus on this, including what is taxed as dividends and how money can be extracted from companies. This is likely to involve tightening a number of existing tax anti-avoidance rules to make them harder to escape from. That also sits alongside a desire to accelerate tax payments.

HMRC is particularly focusing on the following transactions:

• Capital distributions on a members’ voluntary liquidation
• Share buy-backs
• Preference share redemptions

The impact of changing these would be to make succession planning harder for businesses and to mean that money taken out of a close company is always likely to be taxed as income. It will make passing on family businesses harder and encourage more private equity and debt backed exits.

I look at these issues in more detail in my 5 October blog, Budget 2026: Will family businesses get help to grow or just another tax squeeze?

What can business owners do to prepare for Budget 2026?

Our message to business owners is not to panic, but not to ignore what’s coming either. I expect the Budget to be more about direction of travel than immediate upheaval. The real risk is that a series of technical changes make it harder to take money from companies, pass ownership on and plan succession in a sensible way. That will mean that it is more important than ever to plan ahead.

Recap on the headlines

Will capital gains tax increase in 2026? – An increase remains possible maybe to 28%, More significantly for entrepreneurs, the government may prefer targeted changes that tax more capital transactions as income and other changes to the tax could include limiting the rebasing uplift on death.

What could the Budget mean for family businesses? – Changes could make it harder to extract value, reorganise ownership and plan succession.

Could pensions be affected? – Pensions seem unlikely to be a major target this time, although targeted restrictions cannot be ruled out.