Banks pay, founders gain: Healey’s Budget for CFOs
Healey’s first Budget hands CFOs a richer first-year allowance, then claws it back through wage floors, bank tax and a halved BADR cap. Here’s what to model, and when.
Healey’s first Budget hands CFOs a richer first-year allowance, then claws it back through wage floors, bank tax and a halved BADR cap. Here’s what to model, and when.
On 28 October, Chancellor John Healey delivered his first Autumn Budget, a package of targeted business tax changes rather than headline rate rises.
For finance leaders managing UK operations or US multinationals with UK subsidiaries, the primary task is modelling the implementation timelines and cash-flow impacts across labour, capital assets, and corporate structure.
The main-rate First-Year Allowance (FYA) will increase from 40% to 50%, applicable to qualifying expenditure incurred on or after 1 January 2027.
The Catch for CFOs: Full expensing remains intact for primary eligible assets. The 50% FYA change primarily impacts main-rate assets that fall outside full expensing rules. Furthermore, the main writing-down allowance (WDA) for plant and machinery will drop from 14% to 12% starting April 2027.
P&L Impact: While upfront relief improves for non-full-expensing capital investments, tax relief on remaining main-pool asset balances will slow down over subsequent financial years.
Worked example:
A business investing £500,000 in qualifying main-rate plant that falls under the FYA regime rather than full expensing will claim an initial £250,000 first-year deduction (up from £200,000). At the headline 25% corporation tax rate, this yields an additional £12,500 upfront cash tax saving (£62,500 total upfront saving).
Financial institutions face a temporary 3 percentage point increase in the Bank Corporation Tax Surcharge, moving it from 3% to 6%.
Duration & Revenue: The increase applies from 1 January 2027 through 31 March 2028 and is projected to raise £1.5bn. The Treasury has stated the time-limited period will not be extended.
Headline Rate: With the £100m statutory group allowance remaining unchanged, qualifying profits above the threshold face a combined headline tax rate of 31% (25% base + 6% surcharge) during this 15-month window before reverting to 28% on 1 April 2028.
The government accepted the Low Pay Commission’s recommendations in full. Effective 1 April 2027, minimum pay rates increase by 3.9% across age brackets:
National Living Wage (21+): Rises from £12.71 to £13.21/hr (up 50p/hr).
18–20 Age Band: Rises from £10.85 to £11.27/hr.
Rather than aggressively compressing the 18–20 pay band into the main living wage rate as in prior cycles, the equalised 3.9% growth rate appears to reflect employer feedback regarding youth hiring stability.
“Previous year’s increases have seen large jumps for the lower band to close the gap to the National Living Wage before the rate is removed. However, this year, the rate has seen the same percentage increase as the higher band (3.9%), likely a response to employer feedback about the employability and economic impacts of employing younger, less experienced workers.”
– Mathew Akrigg, Policy and Research Leader, Chartered Institute of Payroll Professionals (CIPP)
The Approved Mileage Allowance Payment (AMAP) rate for the first 10,000 business miles is being made permanent at 55p per mile. The Budget also raises the rate for business mileage above 10,000 miles from 25p to 35p per mile from 6 April 2027. The Treasury estimates someone driving 15,000 business miles a year could receive up to £300 in additional tax savings from the two increases combined. Expense management systems should be updated accordingly.
To encourage high-growth scaling within the UK, HM Treasury has proposed a new Founders’ Relief (currently out for consultation until 30 November).
Founders’ Relief: Proposes a 10% Capital Gains Tax (CGT) rate on up to £10m of lifetime gains for founders holding qualifying shares for at least five years prior to disposal, expected from 6 April 2027.
Business Asset Disposal Relief (BADR) Cut: Conversely, standard BADR lifetime gain caps will be halved from £1m to £500,000 starting 6 April 2027 (maintaining the 18% rate). CFOs preparing M&A exit strategies must re-evaluate net proceeds models for shareholder payouts.
Share Option Schemes (EMI2): CSOP is set to be rebranded as EMI2 from April 2027, doubling individual employee option limits from £60,000 to £120,000 and expanding exercise windows to 15 years.
“With the payments sector touching every aspect of the economy and evolving faster than governing legislation, the Chancellor’s announcement of measures like founders’ relief and increased support for entrepreneurs is welcome… Providing innovative fintechs and payment providers with proportionate, forward-looking regulation will be key to inspiring commercial confidence.”
– Emma Banymandhub, CEO, The Payments Association
Self-Assessment via PAYE: From April 2029, taxpayers subject to Payments on Account will be required to make more regular in-year tax payments. Using the PAYE collection mechanism will be offered as an opt-in pathway to manage liabilities.
EPOS & MPOS Compliance Standards: The Budget announced upcoming mandatory software standards for Electronic and Mobile Point-of-Sale systems to tackle Electronic Sales Suppression (ESS) fraud. This initiative targets small retail, takeaway, and hospitality sectors rather than enterprise software architectures.
Business Rates Relief (SBRR): The Small Business Rate Relief threshold for retail, hospitality and leisure (RHL) properties rises from £12,000 to £18,000 rateable value, taking a further 70,000 businesses out of business rates entirely. Rates for all other RHL properties will be frozen for two years. Adult gaming centres and vape shops are excluded from qualifying.
Property & Savings Tax Increase: Building on previous adjustments, income tax rates applying to savings and property income will rise by a further two percentage points starting 6 April 2027, reaching 24% (basic), 44% (higher), and 49% (additional). The Treasury says 84% of income taxpayers will be unaffected.
Devolution & Visitor Levies: Mayoral authorities will receive 20% of local business rates revenue starting next year, moving to 100% full local retention by 2030, alongside powers to introduce local overnight visitor levies starting in 2028.
| Area | Policy measure | Effective date | Operational action |
|---|---|---|---|
| Capital allowances | 50% main-rate FYA; WDA reduced to 12% | Jan 2027 / Apr 2027 | Adjust capex tax-depreciation models and plant procurement schedules. |
| Financial services | Bank Surcharge increase to 6% (31% combined headline) | 1 Jan 2027 – 31 Mar 2028 | Factor temporary rate hike into FY27/28 UK banking earnings. |
| Payroll and HR | NLW rises to £13.21/hr (+3.9%); 18–20 rate rises to £11.27/hr | 1 April 2027 | Recalculate baseline payroll overheads for lower-wage roles. |
| Expenses | Business mileage (over 10,000 miles) rises from 25p to 35p per mile | 6 April 2027 | Reconfigure expense systems for updated AMAP thresholds. |
| M&A and equity | BADR halved to £500k; 10% Founders’ Relief introduced (£10m cap) | 6 April 2027 | Re-evaluate shareholder tax positioning for planned liquidity events. |
| Equity incentives | EMI2 individual limit increases to £120k | April 2027 | Audit management option structures ahead of limit expansions. |