Budget 2026 for sole traders and freelancers: what changes in April 2027
By Oakridge Accounting · Updated 5 min readFigures for 2027/28
Announced in the Budget on 28 October 2026. Most of these measures still have to pass in the Finance Bill, so details could change. We'll update this guide when they do.
The short answer
- There are no increases to the rates of income tax or National Insurance on what you earn, and no change to the headline rate of VAT.
- From 6 April 2027 the trading allowance rises from £1,000 to £3,000 a year.
- The mileage rate for cars and vans stays at 55p for the first 10,000 business miles, and rises from 25p to 35p above that, from 6 April 2027.
- Tax on savings and property income goes up by 2 percentage points from 6 April 2027, on top of the 2 points announced last year.
- Nothing needs doing today. Your fixed monthly fee already covers your tax return, and your quarterly updates if you're in Making Tax Digital.
What was announced
| When | What changes | Status |
|---|---|---|
| 6 April 2026 | 55p a mile for the first 10,000 business miles in your own car or van, now made permanent | In force |
| 1 April 2027 | Overseas suppliers must charge UK VAT on services sold to businesses that aren't VAT registered | Announced |
| 6 April 2027 | Trading allowance rises from £1,000 to £3,000 | Announced |
| 6 April 2027 | Mileage rate above 10,000 miles rises from 25p to 35p | Announced |
| 6 April 2027 | Tax on savings and property income: 24% basic, 44% higher, 49% additional | Announced |
| 6 April 2027 | Making Tax Digital: no late-submission penalty points on your first four quarterly updates if you join this April | Announced |
| 6 April 2027 | Business Asset Disposal Relief: lifetime limit falls from £1 million to £500,000 | Announced |
The trading allowance
From 6 April 2027 you can receive up to £3,000 of trading and miscellaneous income tax-free each year, up from £1,000. It matters most if you have a small side income alongside a job or another business.
If your gross trading income is within the allowance, it is normally tax-free and there's nothing to report. If it's higher, you can usually choose between deducting the allowance in place of your actual expenses, or deducting your actual expenses as now. Which is better depends on your costs, and we'd work it out for you. HMRC will publish detailed guidance before April.
Mileage rates
If you use your own car or van for business, the approved rate is 55p a mile for the first 10,000 business miles in the tax year. That rate has applied since 6 April 2026 and the Budget made it permanent. Above 10,000 miles the rate is 25p now and rises to 35p for miles driven from 6 April 2027.
For example, if you drive 12,000 business miles in 2027/28, the first 10,000 are paid at 55p (£5,500) and the other 2,000 at 35p (£700), £6,200 in all. At the old 25p rate the total would have been £6,000.
If you use our mileage claims service, the rate in force on each journey's date is applied for you.
Savings and property income
Tax rates on savings income and on property income both rise by 2 percentage points from 6 April 2027. Last year's Budget had already announced a 2-point rise from the same date, so the 2027/28 rates for each are 24% (basic), 44% (higher) and 49% (additional).
The rates of tax on your trading profit and salary are unchanged.
Making Tax Digital
If you join Making Tax Digital for Income Tax in April 2027, you won't get penalty points for late submission of your first four quarterly updates for 2027/28. The final declaration deadline and payment dates still apply.
The Budget also says the roll-out to several groups of taxpayers is deferred until further notice. HMRC hasn't yet said which groups, so check the dates in our Making Tax Digital guide, which we keep up to date.
Overseas software and VAT
From 1 April 2027 the reverse charge on services bought from overseas applies only to VAT-registered businesses. If you aren't VAT registered, the overseas supplier will have to charge you UK VAT in the normal way, so some subscriptions, software and online services may cost more.
Selling your business
If you plan to sell your business, the lifetime limit on gains that qualify for Business Asset Disposal Relief, which gives an 18% rate of Capital Gains Tax, halves from £1 million to £500,000 for sales from 6 April 2027. Talk to us before you sell.
What to do before 6 April 2027
- Nothing urgent. We'll tell you if any of this changes what you need to do.
- If you drive for work, keep a record of your business miles. The 35p rate applies to miles above 10,000 driven from 6 April 2027.
- If you buy software or online services from overseas suppliers and aren't VAT registered, expect UK VAT to appear on those invoices from April.
- If you're thinking of selling your business, speak to us before 6 April 2027.
Questions people ask
Do the tax rates on my profit change?
No. The Budget keeps the rates of tax on earnings unchanged, and doesn't raise the headline rates of income tax, National Insurance or VAT.
When do these changes become law?
Most are due to be written into law in Finance Bill 2026-27, which normally passes in the spring. Until then they're announced rather than confirmed, and we'll update this guide if the details change.
I earn under £3,000 on the side. Do I need to do anything?
From 6 April 2027, up to £3,000 of trading and miscellaneous income is tax-free each year. Tell us about it when you join so we can check how it applies to you alongside your other income.
Does the mileage rate apply to me as a sole trader?
If you use your own car or van for business you can usually claim the approved rate instead of your actual running costs. The Budget confirms the 55p rate for the first 10,000 miles is now permanent.
This guide is general information, not advice for your situation. Tax rules change and the right answer depends on your circumstances, so speak to us (or another qualified adviser) before acting on it.