Budget 2026 for a five-person shop: 50p on every wage hour, no rates under £18,000, and half the exit relief gone

Here is the Budget in one line for a cafe, salon, gym or clinic in England. Your wage bill goes up on 1 April 2027: the National Living Wage rises 50p to £13.21, which is about £1,074 a year per full-timer once employer National Insurance and pension go on top. Your business rates may go to zero on the same day: if your rateable value is under £18,000 and you qualify for the retail, hospitality and leisure reliefs, you stop paying. And if you planned to sell in the next few years, the tax relief on the sale has been halved: from 6 April 2027 Business Asset Disposal Relief covers the first £500,000 of lifetime gains instead of £1 million. Nothing changed on employer National Insurance, income tax or VAT. Below, the same Budget worked through for three real-sized businesses, because it lands very differently depending on your rateable value.

Three owners, three different Budgets

Most Budget write-ups list the measures. That is no use to you, because the only question is what the combination does to your own profit. So take three businesses and run the two big lines, wages and rates, on each.

The cafe with a rateable value of £16,000 and four full-time staff on the minimum. Wages: four times £1,074 is about £4,295 more a year from April 2027. Rates: today a £16,000 property is above the £15,000 ceiling for Small Business Rates Relief, so it pays the full retail, hospitality and leisure multiplier, 38.2p in the pound, or £6,112 a year. From 1 April 2027 the 100% relief threshold rises to £18,000, so that bill goes to zero. Net effect of the Budget: roughly £1,800 better off, before the owner does anything.

The salon with a rateable value of £9,000 and four full-time stylists on the minimum. It already pays no rates, because £9,000 is under the current £12,000 threshold. The Budget gives it nothing on rates and the same £4,295 on wages. Net effect: about £4,300 worse off. Every penny has to come from price, hours or retail.

The gym with a rateable value of £30,000 and the same four staff. Too big for the new relief. Its rates bill is instead frozen in real terms: for 2027-28 and 2028-29 the increase in the bill is capped at CPI inflation. That is protection against a jump, not a cut. Wages up £4,295, rates up by inflation. Net effect: worse off by the wage rise plus whatever CPI does to a £11,460 bill.

Same Budget, three answers. The thing that decides which one you got is a number most owners have never looked up: the rateable value on your bill.

Wages: the number is £13.21, and it is now fixed

The government accepted the Low Pay Commission's recommendations in full on 28 October. From 1 April 2027:

• National Living Wage, age 21 and over: £13.21 an hour, up 50p or 3.9% from £12.71.
• 18 to 20 rate: £11.27, up 42p.
• 16 to 17 and apprentice rate: £8.31, up 31p.
• Accommodation offset: £11.53 a day.

The Treasury's own figure for a full-time worker on the Living Wage is £910 a year more in gross pay. That is the employee's number. Yours is bigger. Employer National Insurance at 15% adds £136.50, and the 3% minimum pension contribution adds £27.30, because the whole rise sits above both thresholds for anyone already on full-time hours. So one full-timer on the minimum costs you about £1,074 more a year, and a 20-hour part-timer about £614.

Two things the headline hides. First, the 18 to 20 rate is going up by the same 3.9%, so the gap between a 19-year-old and a 21-year-old only widens from £1.86 to £1.94 an hour; younger staff stay cheaper per head, but this Budget does not make them any more of a bargain than they were. Second, nobody paying £13.50 today to stay "above the minimum" will accept £13.50 in April when the floor is £13.21. The real cost is the rise across the whole rota, not just the people on the legal rate. The September briefing on the 2027 wage walks through that drift on a salon rota; the Low Pay Commission's central estimate then was £13.18, and the final number came in 3p above it.

Rates: who goes to zero, who gets frozen, who gets nothing

This is England only. Scotland, Wales and Northern Ireland run their own rates systems and none of this applies there.

New Small Business Rates Relief thresholds for retail, hospitality and leisure. From 1 April 2027, a qualifying shop, cafe, restaurant, pub, salon, gym or similar property gets 100% relief up to a rateable value of £18,000 (today £12,000) and tapered relief up to £21,000 (today £15,000). The Treasury says this takes about 70,000 more properties out of rates altogether, naming 2,200 cafes, 3,900 restaurants, 3,500 pubs and 1,700 hairdressers and beauty salons among them, and that half of all retail, hospitality and leisure properties in England will then pay nothing. The costing is £315 million in 2027-28.

How the taper will work between £18,000 and £21,000 has not been published yet. Today's taper is simple: relief falls in a straight line from 100% at £12,000 to nothing at £15,000, so £13,500 gets 50% off. If the new band works the same way, a £20,000 property would get about a third off, which on today's multiplier is a bill of roughly £5,093 instead of £7,640. Treat that as an estimate until the regulations are out.

Two existing rules still bite. You normally need to use only one property, with limited allowances for a second one, and the relief is for properties that qualify as retail, hospitality or leisure. An aesthetic clinic coded as a medical use rather than a beauty use may not qualify; check with your council before you plan on it.

Everyone else in the sector: a real-terms freeze. For qualifying retail, hospitality and leisure properties above the thresholds, bill increases in 2027-28 and 2028-29 are capped at CPI inflation. The small print excludes increases that come from improvements you make to the property, and from losing other reliefs. It is paid for partly by extending the 1p Transitional Relief Supplement for two more years, which falls on properties whose bills went down or rose only a little at the 2026 revaluation, so some owners will fund the freeze for others.

Pubs, social clubs and live music venues get their existing 15% relief raised to 35% from 1 April 2027, unless the venue has a rateable value of £1 million or more. Cafes, salons and gyms do not get this line; if you are a cafe sharing a street with a pub, the pub's fixed costs just fell further than yours.

Supporting Small Business. About 37,000 ratepayers who were on the 2023 scheme keep their transitional protection for one more year from April 2027, worth an average £3,000 each.

One admin change worth money. The Valuation Tribunal's £150 and £300 fees for rating appeals are being abolished, and fees already paid on the 2026 list will be refunded. If you think your rateable value is wrong, and a wrong value either side of £18,000 is now worth up to a full year's bill, the cost of arguing just went to zero.

Selling up: the relief is halved from 6 April 2027

Business Asset Disposal Relief gives you a lower Capital Gains Tax rate when you sell your business or your shares in it. The rate is 18% for disposals from 6 April 2026. The relief covers a lifetime total of qualifying gains, and that total is being cut from £1 million to £500,000 for disposals made on or after 6 April 2027.

Above the limit you pay the normal rate, which for a higher-rate taxpayer is 24%. So the change costs up to six percentage points on the slice between £500,000 and £1 million: a maximum of £30,000 extra tax on a £1 million gain, and nothing at all on a gain of £500,000 or less. The Treasury's line is that three-quarters of claimants will still get relief on their whole gain. For most owner-run businesses of the size we write about that is true, which is why this page does not tell you to rush a sale. It does tell you two things.

If your business is worth more than about £500,000 to a buyer and you were already in a process, the completion date matters: 5 April 2027 is the last day under the old limit. Five months is enough to finish a deal that has already started and not enough to start one well, and a buyer who knows your deadline will use it. If you are not in a process, the limit change is an argument for getting the business into a state where a buyer pays for the earnings, not for racing a tax date.

There is also a new Founders' Relief, a 10% rate on up to £10 million of lifetime gains, but it is for "founders of high-growth, innovative companies" and goes to consultation first. Nothing in the Budget suggests a cafe or a salon qualifies, so do not plan on it.

The lines that did not move, and three small ones that did

No change to employer National Insurance (still 15% above £96 a week), to income tax or VAT rates, or to tax on dividends. The temporary zero rate of VAT on electricity, which the September briefing showed reaches some small premises, is extended to 1 July 2027. The 5p fuel duty cut runs to 1 July 2027 too.

Trading allowance tripled. From 6 April 2027 the first £3,000 of trading or miscellaneous income is tax-free, up from £1,000, and the self assessment reporting threshold rises to match. It is aimed at side businesses. If a member of staff does a bit of freelance work, or you sell something small on the side, that is now theirs tax-free; it does not change anything for the main business.

Online marketplaces collect VAT from October 2027. If you sell product through a marketplace and your sales on that platform pass £90,000 a year, the platform will collect and pay the VAT on those sales. Business-to-business sales and second-hand goods are excluded. For a salon selling a few hundred pounds of product a month online it changes nothing.

Equipment. The first-year allowance rises from 40% to 50% for spending from 1 January 2027 and the main writing-down allowance falls from 14% to 12% from April 2027. Most owner-run businesses never reach these because the Annual Investment Allowance covers their equipment in full, so only ask your accountant if you are planning a very large fit-out.

Also: alcohol duty goes up in line with RPI from 1 February 2027; tax on savings and rental income rises by a further two percentage points from April 2027 on top of the two points already announced last year, which matters if you own a flat you let out; and vape shops lose both the retail multiplier and Small Business Rates Relief from April 2027.

What a buyer sees in all this

A buyer values your business on the profit a new owner gets to keep, the seller's discretionary earnings, times a multiple. The Budget moved both inputs.

On the profit, a permanent step-up in the biggest cost line and, for some, a permanent step-down in the second biggest fixed cost. A cafe that goes to zero rates has had roughly £6,000 of annual fixed cost removed by law, and a buyer will treat that as durable because it is tied to the property, not to the owner. A salon that got the wage rise and no rates relief has a smaller profit from April and will be valued on it unless prices move first.

On the tax at exit, the relief limit fell. The valuation calculator gives you the gross figure; the net figure for a sale completing after 5 April 2027 is lower for anyone whose lifetime qualifying gains pass £500,000. For most readers of this page that line will never bite. For the ones it does, the question is not "sell before April" but "is the business sellable at all", which is a question about documented, transferable earnings and not about a date.