The Autumn Budget 2026: key changes affecting individuals and trusts

Private Wealth | 30/10/2026

John Healey delivered his first Budget to Parliament as Chancellor of the Exchequer on 28 October 2026.

Whilst the usual speculation ran its course, no significant tax hikes or raids were announced, much to the relief of those affected by the rollercoaster of tax changes announced in the last few Budgets. Certain tax changes were of course announced, alongside the introduction of some new entrepreneur-focussed reliefs and a number of consultation papers and responses.

In this article we look at the key changes affecting individuals and trusts.

CAPITAL GAINS TAX

New Founders’ Relief

With much welcome attention given to business innovation and entrepreneurs in the Budget speech, the government announced a new capital gains tax (CGT) Founders’ Relief “for founders of and significant early investors in high-growth, innovative UK companies”.

Where the conditions are met, the relief will apply a 10% rate of CGT to gains arising on qualifying disposals of shares or securities in the company up to the lifetime limit of £10 million of gains per individual.

To qualify for the relief:

Individuals will need to:

have held at least 25% of the company’s ordinary share capital (together with corresponding rights as to voting, distributable profits and assets on a winding up), at the point when the trading activity for which the company was formed commenced, or the preparation for that trade commenced;
have held the shares or securities for at least five years before their disposal; and
have been UK tax resident for at least five continuous tax years before the disposal; and

The company will need to:

be in the scope of UK corporation tax (either by virtue of being UK-resident or carrying on business in the UK through a permanent establishment) and the business must have a substantial UK presence for the five accounting periods before disposal;
have generated turnover of at least £10 million in the accounting period prior to disposal; and
have employed at least 15 qualifying full-time employees in the accounting period prior to disposal.

The new relief bears some resemblance to the “Entrepreneurs' Relief” of old, but the issue at hand here is whether the relief will be available to as many of the targeted beneficiaries as hoped, given the many conditions for qualifying founders and businesses themselves.

The government is opening a technical consultation on this new relief, with legislation to be introduced in Finance Bill 2026/27. The relief will apply to qualifying disposals made on or after 6 April 2027.

Reduced Business Assets Disposal Relief (BADR)

BADR (formerly known as Entrepreneurs’ Relief) gives a reduced CGT rate of 18% on disposals of qualifying assets. There is currently a lifetime limit of £1 million of gains for the relief, and it was announced in the Budget that this will be reduced to £500,000 for disposals made from 6 April 2027.

As it is a lifetime limit, many entrepreneurs and business owners may well have already made disposals in excess of the reduced limit (historically, the lifetime limit had reached the £10 million level). Whilst there is no clawback of the relief previously given, they may not benefit from any relief on future disposals.

Entrepreneurs: Tax-advantaged employee share schemes improved

The Enterprise Management Incentives Scheme (EMI) can now work together with the artist formerly known as the Company Share Option Plan (CSOP), which has been rebranded as “EMI2”.

EMI and EMI2 enable certain corporate employers to reward selected employees and directors with tax favourable share options. Provided certain conditions are met, option holders may be able to receive significant gains when they come to exercise their options and sell their shares. This is because their gain should have CGT, instead of normal income tax, treatment.

As part of the rebrand, from 6 April 2027, the schemes will be expanded as follows:

The individual option limit under EMI2 is increasing from £60,000 to £120,000, up from just £30,000 a few years ago.
Employees can now hold up to £370,000 in tax-advantaged options across both EMI and EMI2, (£250,000 for EMI and £120,000 for EMI2) with the rule that options under one scheme count towards the limit under the other scheme being removed.

Cells in protected cell companies brought within attribution anti-avoidance rules

Currently, anti-avoidance rules provide that gains made by certain non-resident close companies are attributed to their UK resident individual, trust and/or company participators holding more than 25% of the shares, and so charged to CGT or corporation tax, as relevant.

A protected cell company (PCC) has separate cells, each with ringfenced assets. It is a single legal entity for company law purposes, but owning a cell is in certain ways akin to owning a separate company.

To date, there has been uncertainty as to whether the above attribution rules would apply to a cell that satisfies the close company definition, where the PCC as a whole does not.

Legislation will be published such that for gains accruing on or after 28 October 2026, the 25% participator test can apply by reference to an individual cell of a PCC, rather than the PCC as a whole. As such, gains of certain cells will indeed become attributable to qualifying “cell” owners.

Restrictions to CGT relief on gifts of business assets

Currently, certain gifts of “business assets” (including shares in trading companies) may be eligible for holdover relief, whereby the taxable gain is deferred by rolling over that capital gain against the base cost of the shares (i.e. reducing the deductible base cost) for the donee.

However, gift relief is restricted where (among others) the donor gives away shares in their personal holding company or where the company holds non-business assets, in proportion to the business assets divided by the chargeable assets of the company.

Under a new measure, for disposals on or after 6 April 2027, the relief will be proportionately restricted further, as the dividing figure will now include assets that would otherwise qualify for the substantial shareholding exemption or the intangible fixed assets regime.

INTERNATIONAL

Reforming the taxation of UK-resident members of LLCs and other reverse hybrids

On 10 June 2026, HMRC published a consultation on reforming how UK-resident individuals who are members of reverse hybrid entities, such as United States Limited Liability Companies (US LLCs), are taxed.

The response to the consultation was published on Budget Day and the government has confirmed that it:

“…will address this double taxation and provide investors with greater certainty by introducing a new domestic foreign tax credit mechanism. To support effective implementation, the government will launch a technical consultation on the policy detail shortly, before legislating in a future Finance Bill. It will be possible to make claims for the new credit immediately from early 2028.”

The residence-based tax regime under watchful eye

Readers of this note will be well aware of the new residence-based tax regime that came into effect from 6 April 2025. In the Red Book, published on Budget Day, it was stated that “the government will continue to assess whether the residence-based regime is striking the right balance between international competitiveness, fairness and support for the public finances – and has shown its willingness to take action to ensure that balance is best achieved.”

This comment was made in connection with the government noting that it is “committed to the UK being a leading destination for global talent and responding where issues emerge, which is why it has worked with the Global Talent Taskforce to identify and resolve barriers for those looking to move here.” We hope this means there could be positive changes to the regime in the future.

Temporarily migrated trusts and exit charges

If an individual trustee moves to the UK, this can in certain circumstances lead to trusts becoming UK tax resident. If the trust subsequently becomes non-UK resident, either because that trustee leaves the UK or an additional non-UK resident trustee is appointed, this may trigger an exit charge on the trust assets for CGT purposes.

For most professionally managed trusts this is unlikely to ever be an issue. However, where individuals are trustees of their own family trusts it is a potential trap. For many US citizens and residents, setting up grantor trusts is commonplace and usually they are trustees of their own trusts. Unless advice and suitable steps are taken in advance of a planned move to work or live in the UK this could result in a trust inadvertently becoming UK tax resident.

A new measure will purportedly assist by giving relief from the exit charge where the trust becomes resident as a result of an individual trustee moving to the UK provided that the trust ceases to be UK resident later in that year or the following year. The implementing legislation will be introduced in Finance Bill 2026/27 and will apply to exit charges arising on or after 28 October 2026.

Reforming the foreign permanent establishment (PE) exemption

As announced in May 2026, the current foreign PE elective regime allows companies to opt out of paying UK corporation tax on their foreign PE’s profits and provides tax relief on upfront costs of expanding overseas. To date, the government considers that the current rules “will not secure proportionate future tax revenue from the corresponding profits”.

The reforms give the meaning of PE its international meaning, and makes the elective exemption regime the default, rather than by election. The measure will have effect for accounting periods beginning on or after 1 January 2027.

INCOME TAX

New tax rates for unearned income

The main rates of income tax are unchanged, and allowance thresholds remain frozen until April 2031. Fiscal drag therefore continues.

It was announced at Budget 2025 that new rates of tax would be introduced for certain types of investment income with effect from 6 April 2027. This was to address perceived unfairness whereby those in receipt of such income pay less tax than those with income from employment or self-employment, as National Insurance Contributions (NICs) are not paid on such income.

The income tax rates on savings and property income are now set to rise by an additional 2% over and above the rate increases previously announced in 2025, meaning a 4% increase compared to current rates.

Tax rates on savings and property income will increase on 6 April 2027 as follows:

the basic rate from 20% to 24%
the higher rate from 40% to 44%
the additional rate from 45% to 49%

There are however no further changes to the tax rates on dividend income. These remain at:

the ordinary rate of 10.75%
the upper rate of 35.75%
the additional rate of 39.35%.

Overhaul of distribution rules incoming

The government previously opened a consultation on modernising and making coherent the taxation of company distributions and repayments of capital for individuals and trusts.

The proposals were as follows:

To reduce the scope for companies to use the existing rules to extract value from continuing businesses at capital rates.
Removing the capital reduction route used by corporate businesses to carry out non-statutory demergers.
Aligning income tax with corporation tax such that distributions from non-UK resident companies are clearly demarcated between income and capital.
Clarifying the taxation of unlawful profit extraction from corporates, participators and shareholders for loans and distributions.
Aligning the temporary tax charged on loans to participators in certain UK close companies with their equivalent non-UK counterparts.
Replacing the ‘trade benefit’ test used to provide CGT treatment on any excess paid for share buybacks with more “mechanical” requirements.
Replacing the transactions in securities legislation with a more “flexible and modern” framework that is easier to apply such that targeted extractions are taxed as income.

Following completion of the consultation, the government has announced that it intends to proceed with all seven of the proposals effective from April 2028, subject to a technical consultation on draft legislation in 2027.

These are potentially significant changes to the distribution rules. The government has confirmed that they will work with stakeholders closely, including in respect of any corporation tax consequences the changes may have.

INHERITANCE TAX

IHT deductions restricted further for liabilities in trust arrangements

When calculating the inheritance tax (IHT) due on death or lifetime transfers by individuals, liabilities are usually deductible when ascertaining the taxable value, although there are anti-avoidance provisions in place that prevent certain deductions being made.

Legislation (that will be effective from 28 October 2026) is being introduced to ensure that these anti-avoidance rules operate consistently, and that arrangements involving liabilities and trusts are not used to get around the rules.

Extension of IHT to pensions from April 2027 – technical changes

Most unused pension funds and pension death benefits will be brought within the value of a person's estate for IHT purposes from 6 April 2027.

The government has announced some ‘minor’ but very welcome technical amendments to the new regime. Prospective personal representatives will be able to direct pension scheme administrators to pay the IHT due to HMRC when certain conditions are met, which will ease the administration of estates.

OTHER TAXES

High Value Council Tax Surcharge (HVCTS) incoming

The HVCTS (often referred to as the “Mansion Tax”) is a new charge on owners of residential property in England worth £2 million or more in 2026 that will take effect in April 2028. A public consultation on the surcharge was held over summer, and the government’s response was published on Budget Day.

The surcharge will go ahead as planned, but the government will introduce a deferral scheme for those who would face challenges in paying the charge upfront. There will also be a series of discounts and exemptions, and a 100% premium charged on properties left empty and unoccupied for 12 months or more.

Clarifications on the tax treatment of certain cryptoassets

Taxation of stablecoins

Stablecoins are a specific type of cryptoassets used as a form of payment and designed to maintain a stable value through backing by fiat currency or certain other assets, much like a currency.

In a welcome clarification, from April 2027, for individuals and trustees, disposals of “eligible” widely held stablecoins will be exempt from CGT, and savings-equivalent income from such stablecoins will be taxed as savings income. For companies, the tax treatment will depend on how they are recognised in the accounts.

Draft legislation has been produced, and transitional provisions apply to companies holding eligible stablecoins or related debts as at 1 April 2027.

Cryptoasset loans

As announced in July 2026, from 6 April 2027, CGT on certain disposals involving cryptoasset loans and liquidity pools will be deferred via a “no gain no loss” disposal until the cryptoasset itself is disposed of.

The loans affected by this CGT deferral include individuals or trustees borrowing “qualifying” cryptoassets themselves (and also later repaying in kind), acquiring an interest in an arrangement with the right to receive cryptoassets and a return, or an interest in a “smart contract” with rights to two or more qualifying cryptoassets. The draft legislation has been published.

Welcome change for Skilled Worker immigration charges

The Finance Bill 2027 will introduce a specific income tax exemption for employees where employers pay the “immigration skills charge” and/or “certificate of sponsorship fee” for those immigrating to the UK under the Skilled Worker visa.

Clarification on the taxation of image rights still pending

The government has announced that its plan to clarify the tax treatment of image rights in 2027 has been delayed to 2028. Draft legislation is not yet available.

SDLT: Group relief clawback on a winding up of the vendor extended

Currently, transfers of UK property between group companies can be relieved from SDLT where certain conditions are met. The relief will however be clawed back if the purchaser and vendor cease to be members of the same group within three years from the effective date of the transaction. However, the legislation provides that group relief will not be withdrawn where (among others) the “degrouping” is by reason of the winding-up of the vendor.

For land transactions with an effective date on or after 29 October 2026, group relief will be clawed back if there is a change of control of the purchaser after the vendor leaves the group. The Budget announcement confirms that this is tested for the same three-year period from the effective date.

Essentially the change denies SDLT savings where the winding-up exception is a pre-step to moving the property outside of the group. Given the restrictions already imposed by the anti-avoidance provisions in section 75A and HMRC’s recent appetite for court decisions on the subject, this serves as a further warning sign for property restructurings.

Information contained in this note is current as at the date of first publication and is for general information only. It is not intended as legal or tax advice.