Autumn Budget 2026: Impact on Small Businesses

There was a mixed reaction to the Autumn Budget from the Retail and Small Business sectors, with little positive sentiment overall.

Michelle Ovens, Founder and CEO of Small Business Britain gave her assessment of the Chancellor’s Autumn Statement, saying the Budget was intended to create small pockets of “breathing space” across the whole economy, rather than making any major changes or tax increases.

For small businesses on the High Street, the Chancellor announced an increase in business rates relief from £12,000 to £18,000, meaning that more bricks-and-mortar businesses will be exempt from business rates. There was also some tapered relief announced between £18,000 and £21,000.

The government also seems keen to encourage business start-ups, entrepreneurs and side-hustles, as it announced an increase in the Trading Allowance from £1,000 to £3,000. It is estimated that 40% of small businesses in the UK started as side hustles, so this change to the Trading Allowance is intended to encourage more people into entrepreneurship.

Additionally, a Young Entrepreneurs Allowance will be introduced (initially as a pilot programme) to help young people with their living expenses during their first year in self-employment.

Access to finance for small businesses is being improved through two schemes from the British Business Bank, in the form of lending or funding guaranteed by the government:

1.      £165million of CDFI funding will be available via community lending. CDFI stands for Community Development Finance Institution.

2.      £100million of funding will be made available for female business founders.

More details to come from the government on both of these initiatives.

As expected, the National Living Wage (for those 21 and over) will rise from £12.71 to £13.21 an hour (an increase of 50p per hour, or roughly £975 more a year for a full-time worker). For 18 to 20-year-olds, the rate will rise from £10.85 to £11.27 an hour (an increase of 42p per hour). For 16 to 17-year-olds the rate will rise from £8.00 to £8.31 an hour. All effective from April 2027.

The government also announced a desire to cut down on regulation and red tape for small businesses, to reduce costs associated with this compliance. Their ambition is to move towards a “tell us once” principle, but nothing concrete was announced.

£30million is to be made available for local training around AI to upskill small businesses as the technology becomes ever more prevalent.

For those small businesses incurring mileage costs, the Approved Mileage Allowance Payments have increased:

• the first 10,000 business miles increase from 45p to 55p per mile (backdated and effective from 6 April 2026), and now made permanent following the Autumn Budget 2026.

• over 10,000 business miles stays at 25p per mile for the 2026/27 tax year, then increases to 35p per mile starting 6 April 2027.

As reported by The Retail Bulletin, the British Retail Consortium (BRC) said there was no breathing room for UK retailers, with costs set to climb. It described the announcement on business rates as “smoke and mirrors”. It said the Chancellor’s headline announcement that he will “freeze rates in real terms” in fact means a 3.5% increase, which will add around £250 million to bills next April, even though 70,000 small high street businesses will no longer pay rates.

It also warned that a rise in the National Living Wage and no cut to employer National Insurance will add another £2 billion to employment costs, on top of the £6.5 billion of extra costs retailers have faced over the past two years. More than 120,000 retail jobs have already been lost since 2024.

The BRC said the Budget did too little on energy, with the industry’s electricity costs set to rise by £440 million this year. Helen Dickinson, chief executive of the British Retail Consortium, said: “The Budget will see retail costs keep climbing as the Chancellor failed to provide the breathing space he promised. Retail faces £41 billion in business taxes this year, over 120,000 jobs have been lost in just two years, and one in seven shops lies empty. Yet employment costs continue to rise. Business rates continue to rise. The Government cannot keep talking about reviving high streets while failing to address the rising tide of costs that holds them back.”

Meanwhile, the Federation of Independent Retailers has welcomed the announcement that the government will increase eligibility for Small Business Rates Relief (SBRR), but said the cost of doing business for small shops remains too high.

The Federation’s national president Hemanshu Patel said: “We are looking closely at changes that look likely to be made to Small Business Rates Relief that could benefit some of our members. However, the cost of business remains too high. Our shops are crucial employers and also a familiar face in the communities they serve. It is important that the government continues to engage with the Federation to ensure that small retail businesses can survive.”

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