Autumn Budget: Tax administration and income changes

Chancellor John Healey announced his first budget, stating he wants to support working people and businesses. Bina Gayadien highlights the contrast between unchanged headline tax rates and the impact of targeted increases.

Tax increases

Alongside some relief for households, he confirmed tax increases for banks and investors. Despite the increases, Banks have reacted with relief to the modest, temporary 3% tax increase on bank profits over £100 million. The new rate of 6% will apply from 1 January 2027 for 15 months, helping to fund the energy support cuts announced.

In line with Labour’s manifesto promise, there are no changes to main income tax or social security rates, and the tax free and ISA allowances will remain unchanged. A new personal allowance was announced for pensioners receiving only a State Pension, increasing the amount they can received tax free up the full value of the new State Pension. By keeping the tax-free allowance unchanged, this will effectively bring more taxpayers into the higher and additional tax bands of 40% and 45%, increasing the administrative burden on taxpayers.

Landlord and taxpayers with interest income from savings will face higher taxes. From 6 April 2027, tax on property income and income from savings will increase by a further 2% making the addition tax 4%. The additional tax rate (the top rate) for income from savings or property will be 49% compared with 47% (including social security) for income from employment.

Administrative changes

The government has announced a 12-month easement to late-submission penalty points for taxpayers joining Making Tax Digital (MTD) for Income Tax from April 2027. No penalty points will apply to quarterly updates for the 2027/28 tax year. Certain groups, including non-resident entertainer and sportspeople, will also be exempt from MTD until further notice.

Another administrative easement involves amending the late-filing penalty rules for UK residential property disposal returns. From 28 October 2026, penalties will stop accruing where the disposal is subsequently reported on the taxpayer’s Self-Assessment tax return.

From 6 April 2028 the threshold of £2,500 for claiming employment expenses will be removed allowing more taxpayers to claim tax relief on non-reimbursed employment expenses through the payroll. This change will simplify the process for taxpayers by removing the need to enter Self-Assessment solely to claim employment expenses.

From April 2029, taxpayers with a self-assessment liability making payments on account will be required to make more regular in year payments towards their self-assessment liability. This group will include landlords and self-employment individuals.

Travelling for work nationally and internationally

The tax-free rates which employer can pay to employees travelling for work will be increased to account for the current costs of meals. These rates can be paid to employees travelling for work in the UK without the need for employers to check every receipt. The new rates will be £20 for periods of UK travel over 5-hours, £60 for over 10-hours and £75 for over 24-hours..

The rates for travel overseas which differ by destination will be simplified with the new rates to be announced. These changes due to come from 6 April 2028 are well overdue since the previous rates had been in place for years and were completely disconnected from actual costs.

From 28 October 2026, employer-paid Immigration Skills Charges and Certificates of Sponsorship fees will be exempt from benefit-in-kind tax. This announcement confirms that employees will not incur an Income Tax charge on these costs when paid by their employer.

And finally

HMRC will be taking on 670 additional compliance officers by 2029/30, alongside the 5,500 previously announced which should reduce the waiting time and improve service levels. This will give tax advisers more free time to perhaps start a small business. The trading allowance for small business will go up from £1,000-£3,000, allowing more people to earn money from a side business without the need to pay taxes on these earnings.