Budget 2026: what changes for builders, trades and the self-employed

If you also let property, rental profit is set to be taxed at 24%, 44% and 49% from 6 April 2027 (needs Parliament). Our guide to tax on rental income explains what that means for you.

What changed in the Budget for builders and subcontractors?

The first-year allowance on new plant and vans rises from 40% to 50% from 1 January 2027, van road tax rises to £375 from 1 April 2027, and diesel duty rises on 1 July 2027. Nothing changes in CIS: deductions, monthly returns and payment statements carry on as now.

The changes that do reach a building firm are about kit, fuel and vans:

• Plant and vans. The first-year allowance on new plant and machinery rises from 40% to 50% for spending from 1 January 2027. The yearly writing-down allowance on the main pool is set to fall from 14% to 12% for accounting periods that start on or after 1 April 2027 for companies, or 6 April 2027 for sole traders and partnerships. If your accounting period runs across that date, you get a blended rate for that period. (needs Parliament)
• Diesel. The duty on road diesel goes from 52.95p to 60.59p a litre on 1 July 2027, when the temporary cut ends and the rate rises with inflation. (a plan, could change)
• Van tax. Road tax on most vans goes from £360 to £375 a year from 1 April 2027. (needs Parliament)

The Annual Investment Allowance stays at £1,000,000. Which allowance suits your next van is a question for whoever does your tax return. If you use the cash basis, the default for sole traders since 6 April 2024, you usually claim a van or tools straight away instead, so these allowance changes barely touch you.

What changes for sole traders and the self-employed?

From 6 April 2027 the trading allowance rises to £3,000 and mileage above 10,000 business miles rises to 35p a mile, while 55p for the first 10,000 is now permanent. If you must start Making Tax Digital from 6 April 2027, you get no penalty points for late quarterly updates in your first year.

• Trading allowance. It rises from £1,000 to £3,000 from 6 April 2027, and so does the trading income you can have before you must report it on Self Assessment. (needs Parliament)
• Mileage. 55p a mile for the first 10,000 business miles is now permanent. Above 10,000 miles the rate rises from 25p to 35p from 6 April 2027. (set by regulations)
• Class 2 National Insurance. The small profits threshold rises from £7,105 to £7,355 a year from 6 April 2027. Below it, paying Class 2 is voluntary. (set by regulations)
• Making Tax Digital. If you have to start from 6 April 2027, you get no penalty points for late quarterly updates in the 2027-28 tax year. It does not cover people who had to start from 6 April 2026, and late tax returns still get points. (a plan, could change)
• Payments on account. From April 2029, the two payments on account are set to be replaced by more regular payments during the year. How often has not been decided. (a plan, could change)

What changes if you employ people or are VAT registered?

Employers pay higher minimum wage rates from 1 April 2027 and must report company vans, cars and fuel that are taxable benefits through payroll from 6 April 2027. The VAT threshold stays at £90,000, VAT on fitting insulation, solar panels and heat pumps goes back to 5% on 1 April 2027, and e-invoicing and a Direct Debit for VAT are planned from April 2029.

If you employ people

• National Living Wage. From 1 April 2027: £13.21 an hour for workers aged 21 and over, £11.27 an hour for 18 to 20 year olds and £8.31 an hour for 16 and 17 year olds and eligible apprentices. (set by regulations)
• Company vans and cars. From 6 April 2027, company vans, cars, fuel and medical cover that are taxable benefits must be reported through payroll as you go, not after the tax year ends. For the first year, HMRC says it will not charge penalties for some mistakes that were not deliberate. (needs Parliament)

If you are VAT registered

• Thresholds. Registration stays at £90,000 and deregistration at £88,000 from April 2027. (law already)
• Energy-saving installs. Fitting insulation, solar panels or heat pumps in homes goes from 0% VAT back to 5% from 1 April 2027. New-build homes stay zero-rated. (law already) VAT on solar panels, heat pumps and insulation covers what qualifies and jobs that cross the date.
• E-invoicing. From 1 April 2029, VAT invoices between businesses will have to be sent as e-invoices, so bills to homeowners are not affected. The Finance Bill only gives HMRC the power; who is covered and any exemptions will be set in regulations later. (needs Parliament)

Paying VAT and PAYE

• Direct Debit. From April 2029, whether you pay VAT, PAYE or both, you will need a Direct Debit set up for them, unless you are exempt (the exceptions are still to be set). You can still pay another way, as long as you pay before a cut-off date HMRC will set. (a plan, could change)

When does each change start?

The first change starts on 1 January 2027, when the first-year allowance on new plant and vans rises from 40% to 50%. Most start on 1 April 2027 or 6 April 2027, diesel duty rises on 1 July 2027, and the e-invoicing, Direct Debit and payments on account changes are planned for April 2029.

What stays the same

• CIS, including the deduction rates and the monthly return.
• The VAT domestic reverse charge for construction.
• Making Tax Digital still starts from 6 April 2027 if your qualifying income is over £30,000, and from 6 April 2028 if it is over £20,000.
• Class 4 National Insurance limits of £12,570 and £50,270.
• The Annual Investment Allowance of £1,000,000.

What should I do now?

• Keep a mileage log. From 6 April 2027, miles over 10,000 count for 35p each, and the log is what proves them. Our mileage guide covers which journeys count.
• Keep the dated invoice for any plant or van you buy. The date decides which allowance it can get. Ask whoever does your tax return which one to use.
• Send every quarterly update. Even with no penalty points in the first year, your tax return cannot go in until they are all sent.
• Check pay rates and quotes. Update wages for 1 April 2027, and if you fit insulation, solar panels or heat pumps, price work that runs past 1 April 2027 with the VAT change in mind.

Other questions about Budget 2026