Spring Statement 2026

No tax surprises, but pressures and tax increases from 6 April 2026 remain

There will be a sense of relief for many that today’s Spring Statement from the Chancellor of the Exchequer contained no new tax changes. In that respect, it did exactly what was expected.

Whatever views people may hold, this fiscal event was not used to introduce further tax tinkering. Instead, the focus was largely economic, with updated forecasts delivered against a backdrop of considerable global uncertainty, including the recent escalation involving Iran.

We are not economists and rather than speculate outside our area of expertise, we have invited Patrick Campbell to speak to our clients and contacts on 19 March 2026 at The Moat, Wrotham. Patrick will share insight from the bank’s perspective on what the economists are seeing and what that could mean in practice for all of us in business.

Book your free tickets here for this event.

Mixed signals for small businesses

The overall economic picture is mixed. There is modest growth, but that does not mean all sectors will benefit equally. Some industries are likely to expand, while others may continue to struggle.

At the same time, rising unemployment presents both a challenge and an opportunity. The largest increase in unemployment has been among school leavers and university graduates.

On one level, that suggests a growing pool of available labour and potentially an employer’s market. This should, however, be balanced against increases in the National Minimum Wage and higher employer National Insurance contributions.

For many small businesses, particularly in retail and hospitality, the cost of employing staff is now significant. The narrowing pay differential between inexperienced younger workers and more experienced employees appears to be contributing to higher youth unemployment. A school leaver with no experience may be paid close to the same rate as someone older with years of experience. This can distort hiring decisions and make businesses more cautious about taking on less experienced staff.

This is just one of the three key pressures we are seeing across our client base.

Three key pressures on SMEs

Across our client base, three themes continue to dominate for small and medium sized enterprises.

1. Access to and cost of lending – The lending environment remains challenging. Many banks appear cautious, which makes it harder for businesses to fund growth. There are signs this may be easing, but progress feels gradual.
2. The tax and administrative burden – While there were no new tax changes announced today, the overall compliance burden continues to increase. Administrative requirements are expanding and professional and software costs remain high.
3. The affordability of employment – With higher employer National Insurance costs and increases in the National Minimum Wage, employing staff is materially more expensive than it was a few years ago. Yet for most growing businesses, people are essential to delivering expansion.

In short, while there are indications of growth on the horizon, small businesses will still need to drive that growth themselves. We are not ships on a rising tide. Growth will require deliberate decisions and action.

Many of our clients are already picking our collective brains to refine plans and stress test ideas. February has been particularly busy, which we take as a positive sign that business owners are thinking ahead and planning proactively.

Key tax changes from 6 April 2026

Although the Spring Statement itself contained no tax measures, several previously announced changes which are sizeable in their impact take effect from 6 April 2026.

Making Tax Digital for Income Tax

The most significant change for many individuals is the introduction of Making Tax Digital for Income Tax Self Assessment.

From 6 April 2026, if your combined turnover from self employment and rental property exceeds £50,000, you will fall within the regime. Many affected taxpayers have already received letters from HMRC.

Those within scope will need to submit quarterly updates through compatible software, followed by a final end of year submission. In practical terms, this represents one of the largest operational changes we are currently helping clients prepare for.

There is still limited real world experience of the system, with only a relatively small number of participants involved in pilot testing so far. As close to one million taxpayers move into the regime, it is reasonable to expect refinements from both HMRC and software providers.

We have separate resources covering the practical implications and will continue to provide updates as the position develops.

Business Asset Disposal Relief

Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, is becoming less generous.

For those who have not previously used their allowance, the rate on the first £1 million of qualifying gains is increasing from 14% to 18% from 6 April 2026. This represents a material increase in the tax cost of selling a business and reinforces the importance of forward planning.

Inheritance Tax, farms and trading businesses

Changes to Inheritance Tax (IHT) relief for farms and trading businesses will also take effect.

Each individual will be eligible for up to £2.5 million of qualifying business and agricultural assets free from Inheritance Tax. Unused allowances can be transferred to a spouse on death, providing combined relief of up to £5 million. Value beyond this threshold will be subject to Inheritance Tax at 20%.

This measure was announced in the previous Budget and subsequently refined before Christmas. It remains a significant consideration for business owners and farmers with larger estates, particularly where succession planning has not yet been formalised.

Dividend tax rates

Dividend tax rates for the basic and higher rate bands are increasing:

• Basic rate, from 8.75% to 10.75%
• Higher rate, from 33.75% to 35.75%
• Additional rate remains at 39.35%

For many owner managed companies operating on a small salary plus dividends model, this will result in a modest increase in personal tax.

However, our analysis indicates that this does not make a full salary strategy more attractive in most cases. While higher salaries reduce Corporation Tax, they also trigger employer National Insurance, Income Tax and employee National Insurance. In most situations, pound for pound, salary produces lower net take home pay than a modest salary topped up with dividends.

For most limited company business owners, taking a salary of £1,041 per month and the remainder as dividends remains the most tax efficient drawing method. It is important to put aside tax from dividends as you go.

A monthly dividend of £3,141 on top of that salary will keep you within the basic rate band, requiring approximately £337.73 per month to be set aside for personal tax. If drawing more than this, you should put aside at least £35.75 for every additional £100 of dividends. Once dividends approach £7,000 per month, bespoke tax forecasting becomes advisable.

Each situation should, however, be reviewed individually.

Looking ahead

The Spring Statement was calm from a tax perspective, but the operational and structural pressures on businesses remain real.

Over the coming months, much of the practical focus will be on Making Tax Digital and ensuring systems are compliant and efficient. We will continue to publish guidance and practical commentary as the position evolves.

If you would like to discuss how any of these changes affect you personally, please speak to your usual A4G adviser. Early planning makes a material difference.

We also look forward to welcoming many of you to our event on 19 March 2026 to hear a broader economic perspective and to discuss what these changes may mean in practice.

Book your free tickets to Spring Statement & Beyond with Bank of England here.