October 2026 Newsletter

The Autumn Budget takes place on 28 October 2026. After months of speculation about capital gains tax, inheritance tax, pensions, and social care funding, Chancellor Healey will set out his plans this month. October is therefore unlike any other month in recent memory: the decisions clients make in the first four weeks could look very different from those available after the 28th.

This month’s newsletter sets out what is expected, what is already confirmed, and what practical steps are worth taking before Budget day. Where measures are announced on 28 October, we will update clients promptly.

If anything here applies to you, get in touch, and we will talk it through.

The Autumn Budget: What to Expect on 28 October

Chancellor John Healey delivers the Autumn Budget at around 12:30 pm on Wednesday 28 October 2026, shortly after Prime Minister’s Questions. It is the first Budget under Prime Minister Andy Burnham and the earliest Autumn Budget since October 2021.

The Government has maintained its manifesto pledge not to raise the headline rates of income tax, National Insurance, or VAT for working people. That leaves capital gains tax, inheritance tax, pension tax relief, and social care funding as the areas most likely to see change.

Several measures are already confirmed for April 2027 and beyond regardless of what is announced on 28 October. These include:

• The Cash ISA subscription limit falling to £12,000 for under-65s, with a 22% charge on uninvested cash in Stocks and Shares ISAs
• Most unused pension funds coming within the scope of inheritance tax from 6 April 2027
• The £30,000 MTD income threshold taking effect from April 2027

What remains uncertain is the rate and scope of changes to CGT, IHT, and pension relief that may be announced on the day. The sections below set out the current state of speculation and what action is worth considering before 12:30 pm on the 28th.

Capital Gains Tax: Last Chance to Act

CGT equalisation with income tax rates has been the most widely anticipated measure throughout the pre-Budget period. If announced, higher-rate taxpayers could face 40% CGT on gains from share disposals and investment properties, and 45% for additional-rate taxpayers, compared with 24% today for anyone paying tax above the basic rate, and 18% on gains falling within the basic rate band.

The £3,000 annual exempt amount and the £500 dividend allowance are also under pressure. Business Asset Disposal Relief currently stands at 18% on qualifying gains up to a £1 million lifetime limit. Whether that rate rises further is unconfirmed, but it has already increased twice since 2024.

If you have a disposal in progress and have not yet taken advice, time is extremely short. Changes announced in the Budget typically take effect immediately or from the start of the following tax year. A transaction that completes before 28 October at rates in force today is measurably lower risk than one that completes after.

Please get in touch urgently if this is relevant to your position.

Inheritance Tax: What Could Change

IHT is another area widely expected to feature on 28 October. The current nil-rate band stands at £325,000, with an additional £175,000 residence nil-rate band where a property passes to direct descendants. The seven-year gifting rule, under which gifts made more than seven years before death fall outside the estate, has been under active review.

Speculated changes include:

• Reform or reduction of the seven-year rule, with taper relief adjusted or removed
• Changes to the annual gifting exemption, currently £3,000 per year
• A broader restructuring of IHT thresholds to help fund social care

The Government has said it has “no plans” to introduce a 10% social care levy on estates, but this does not rule out other IHT changes. Already confirmed and legislated: from 6 April 2027, most unused pension funds and death benefits will fall within the scope of IHT. That change stands regardless of what is announced on 28 October.

If you have IHT planning under consideration, including gifts, trusts, or estate restructuring, the window to act under the current rules is closing.

Pensions: Tax-Free Lump Sum and IHT in the Frame

Two pension-related issues are in focus ahead of the Budget.

The tax-free pension lump sum is currently capped at £268,275 (25% of the Lump Sum Allowance). Speculation ahead of the Budget has included reducing this cap, with some previews suggesting a figure as low as £100,000. No change has been confirmed, but this has been a recurring rumour since the Autumn 2025 Budget, and pressure on pension tax relief has not diminished.

The salary sacrifice change is already legislated: from April 2029, National Insurance relief on salary sacrifice pension contributions above £2,000 will be removed. Both employers and employees will pay NI on amounts above that threshold. This is not an October announcement, but it is worth factoring into remuneration planning now.

The already-confirmed change bringing most unused pension funds into IHT from April 2027 is the single most significant pension reform in a generation for estate planning purposes. If you have a substantial pension pot and have not reviewed your estate planning in light of this change, please get in touch.

National Minimum Wage: April 2027 Rate Expected at Budget

The Low Pay Commission published its projection in June 2026 for the April 2027 National Living Wage, with a best estimate of £13.18 per hour for workers aged 21 and over, up 3.7% from the current rate of £12.71. The Commission will submit its final recommendation to government in October, with the rate typically confirmed at or around the Autumn Budget and legislated before it takes effect on 1 April 2027.

For employers, particularly those in hospitality, retail, care, and other labour-intensive sectors, a further increase above the already-significant April 2026 rise requires early payroll planning. If you would like to model the cost impact for your business, please get in touch.

Self Assessment: Paper Deadline 31 October, Online 31 January

The paper Self Assessment deadline for 2025-26 is 31 October 2026. If you intend to file on paper and have not yet done so, please do so urgently.

For most filers, the online return deadline remains 31 January 2027, with payment due on the same date. Filing online rather than on paper gives you an additional three months and is the method HMRC recommends for most taxpayers.

A late filing penalty of £100 applies automatically if you miss the deadline, even if no tax is owed. Additional penalties stack up at three months, six months, and twelve months. If you have not yet filed or are unsure whether you need to, please get in touch and we will confirm your position.

MTD for Income Tax: Second Quarterly Deadline 7 November

The second Making Tax Digital quarterly update covers the period 6 July to 5 October 2026 and is due on 7 November 2026.

This is a data submission, not a tax payment. It summarises business income and expenses for the quarter and is submitted through HMRC-compatible software. The Final Declaration at the end of the year calculates and confirms liability.

If records for the quarter are not yet complete, address them this week. October is also the month to begin gathering records for the third quarterly period (6 October to 5 January), with that submission due on 7 February 2027.

High-Profile Tax Case: When “Getting One Over” HMRC Goes Wrong

A trial at Southwark Crown Court this autumn has drawn significant attention to the line between lawful tax avoidance and criminal evasion. Senior barrister Robert Venables KC is facing prosecution over allegedly evading nearly £2 million in tax by routing income through a partnership structure over nearly a decade. Prosecutors told the jury he was driven by a “sense of intellectual superiority” and a desire to “get one over” HMRC.

The case, which centres on whether the underpayment was dishonest conduct or a legitimate use of tax law, is a reminder that HMRC draws a sharp distinction between tax planning and evasion, and that it is a distinction with serious consequences when contested in court.

The case does not change the law, but it is a useful prompt. If you use complex structures to manage your tax affairs and have not had those arrangements reviewed recently, it is worth doing so proactively rather than waiting to be asked. Please get in touch if you would like us to review your position.

What Businesses Should Be Doing Now

Anyone with a disposal, transaction, or restructure under consideration

• Act before 12:30 pm on 28 October: CGT changes announced at the Budget may take effect immediately
• If in any doubt, call Mercian this week

Anyone with IHT or estate planning under consideration

• Review gifting, trust, and estate structures before 28 October
• Pensions already confirmed to come within IHT from April 2027: ensure this is factored into your estate plan

Pension holders with substantial funds

• Review your position in light of the April 2027 pension IHT change regardless of Budget announcements
• Seek advice if you have not already done so

MTD-registered sole traders and landlords

• Complete and submit your second quarterly update by 7 November
• Begin gathering records for the third quarterly period (6 October to 5 January)

Self Assessment filers

• Paper deadline: 31 October. If filing on paper, act now
• Online deadline: 31 January 2027

Employers

• Model the payroll cost of a National Living Wage of £13.18 from April 2027
• Ensure agent accounts are ready for MFA activation if you use Government Gateway directly

Hospitality and leisure businesses

• Watch for Budget confirmation of the 20% business rates reduction from April 2027

Did You Know? Budget Edition

The Budget That Buried a Tax Cut

In his final Budget as Chancellor in 2007, Gordon Brown announced a crowd-pleasing cut in the basic rate of income tax from 22p to 20p. Buried in the same speech was the abolition of the 10p starting rate, which had protected lower earners since 1999. Few noticed at the time. When the change took effect in 2008, over five million households found themselves worse off. More than 70 Labour MPs signed motions demanding a reversal, and Brown was forced into a U-turn before the year was out. It remains a textbook example of how Budget small print can matter more than the headline.

The Chancellor Who Resigned Before Bedtime

Hugh Dalton was Chancellor when he delivered his Budget in November 1947. On his way into the Commons chamber, he mentioned a few of the measures to a journalist. The story ran before Dalton had finished speaking. He resigned the same evening, making him the only Chancellor in modern history to be brought down by his own Budget before it had even passed.

Chancellors Are Allowed to Drink

By ancient parliamentary convention, the Chancellor of the Exchequer is the only Minister permitted to drink alcohol at the despatch box during a Budget speech. Kenneth Clarke opted for whisky, Nigel Lawson for a spritzer, and Geoffrey Howe for gin and tonic. Gordon Brown chose water. Whether that tells you anything about their respective Budgets is a matter of personal interpretation.

Diary of Main Tax Events – October and November 2026

ATED Returns: Key Submission Deadlines

If you own UK residential property through a company and it falls within the scope of the Annual Tax on Enveloped Dwellings (ATED), it is important to be aware of the deadlines for submitting your return.

Normally, an ATED return must be submitted:

• By 30 April, if the property is within the scope of ATED on 1 April at the start of the chargeable period
• Within 30 days of acquisition, if the property comes within the scope of ATED after 1 April

For newly built properties, the deadline is extended – the return must be submitted within 90 days of the earliest date on which the property either becomes a dwelling for Council Tax purposes or is first occupied.

ATED returns should only be submitted on or after 1 April for the relevant chargeable period. Submitting too early can cause processing issues, while missing deadlines may result in penalties.

If you are unsure whether your property is within the scope of ATED or which deadline applies, get in touch, and we can help you assess your position.

Beyond Budget Day

The Budget on 28 October will define the tax landscape for the year ahead and quite possibly for several years beyond it. We will publish a Budget summary as soon as the Chancellor sits down, setting out what has been announced and what it means in practical terms.

For clients with outstanding decisions on assets, estates, pensions, or transactions, the message for October is simple: act before the 28th, or act with full knowledge of what has changed. Either way, we are here to help.

Please contact the Mercian team if you would like to talk through your position before Budget day.

This newsletter is for general guidance only and does not constitute professional advice. Please contact us to discuss your specific circumstances.

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