Budget 2026: what it means for landlords and sole traders

acrenvo.com/guides/budget-2026-landlords-and-sole-traders, last reviewed 31 October 2026

Megan is fictional, but her week after the Budget will be familiar to a lot of people. She lets a flat she used to live in, and she also does some freelance illustration on the side, so she fills in a Self Assessment return each year. She is due to start using Making Tax Digital for Income Tax in April 2027. On Budget day she saw a stream of headlines and wanted one calm answer to a simple question: what, if anything, changes for me?

This page is that answer, written only from the government’s own documents. The Budget was delivered on 28 October 2026, and we read the documents on GOV.UK on 31 October 2026. Almost everything below is an announcement rather than law: the documents say the government “will” legislate, usually in the next Finance Bill. Until Parliament passes it, today’s rules still apply, and we say what those are beside each change.

Property income rates

For landlords, the change that reaches the tax bill most directly is to the rates on rental profit. At last year’s Budget the government announced separate Income Tax rates for rental profit from 6 April 2027, and those rates are now law. The Budget overview says: “From 2027 to 2028, the property basic rate will be 24%, the property higher rate will be 44%, and the property additional rate will be 49%.” The Budget document puts it as a second step on top of the first: “The government will increase these rates by a further two percentage points from that date.”

These new rates are announced for Finance Bill 2026-27, so they are not law yet. HMRC’s impact note records where the law stands today: “Section 7 of the Finance Act 2026 set the rates for 2027 to 2028.” That section sets 22%, 42% and 47% for the 2027 to 2028 tax year. The overview adds: “These rates will apply across England, Wales and Northern Ireland.”

For Megan, whose flat is in England and whose income keeps her in the basic rate band, the rate on her rental profit from 6 April 2027 would be 24% rather than 22%, if the Bill passes as announced. Her profit from illustration is trading income, taxed at the main rates, which the Budget did not raise.

The trading allowance

The trading allowance lets you earn a small amount from trading, such as occasional freelance work, without paying tax on it. HMRC’s impact note says: “From the tax year 2027 to 2028, this measure will increase the trading allowance from £1,000 to £3,000.” It goes on: “This will also increase the Income Tax self-assessment reporting threshold to £3,000.”

Like the property rates, this is announced for Finance Bill 2026-27, to take effect from 6 April 2027. Today the allowance is £1,000. None of the documents we read mentions the separate property allowance, which is also £1,000 today, so we have not assumed it moves with the trading allowance.

Making Tax Digital for Income Tax

The Budget did not move the start dates or the qualifying income thresholds, but it did announce two changes to how the April 2027 step will work. The first is about penalty points. The Budget overview on GOV.UK says: “As announced at Budget 2026, the government will not apply late submission penalty points to quarterly updates for the 2027-28 tax year for Income Tax Self-Assessment taxpayers required to join MTD in April 2027.” The Budget document describes the same easing in plainer terms: “Taxpayers joining MTD for income tax in April 2027 will not receive penalty points for late submission of their first four quarterly updates for the tax year 2027-28.”

That is good news for Megan, who joins in April 2027, but it is an announcement, not yet a rule HMRC has written into its guidance. The overview lists it among the measures that are not in the Finance Bill, so the detail will follow separately. The easing is for quarterly updates; the overview does not extend it to the tax return, and it does not mention late payment penalties.

The second change is about who has to take part at all. The overview says: “As announced at Budget 2026, the government will exempt the following groups from MTD for Income Tax until further notice: those eligible for qualifying care relief, non-UK resident foreign entertainers and sportspeople and expected non-resident customers.” It adds: “Secondary legislation will be introduced before April 2027.” Our guide to MTD exemptions covers the exemptions that apply today.

Paying tax and VAT from April 2029

Two announcements look further ahead, to April 2029. For people who make payments on account, the overview says: “As announced at Budget 2026, the government will require Income Tax Self Assessment taxpayers who make Payments on Account to make more regular in year payments towards their final tax bill from April 2029.” For VAT-registered businesses and employers, it says: “As announced at Budget 2026, the government will require taxpayers to set up a Direct Debit instruction for VAT and PAYE return liabilities from April 2029, subject to defined exceptions.” In both cases the detailed design is still to come, and nothing changes about how you pay this tax year or next.

E-invoicing for VAT-registered businesses

If you are registered for VAT, the government’s e-invoicing roadmap sets out a date to plan around: “From 1 April 2029, VAT-registered persons (including public sector bodies) will need to be able to issue and receive VAT invoices as e-invoices, unless a specific exemption applies.” The detail is not settled yet. The roadmap says: “E-invoicing requirements will be confirmed between October 2027 and April 2028.” Megan is not registered for VAT, so this does not reach her.

One email a month lists the MTD software price changes we have checked and any changes to HMRC’s list of software. If that would be useful, you can sign up for the monthly price-changes email at the end of this page.

A consultation on rental income data

Landlords who use a letting agent may want to know about one consultation published on Budget day. In HMRC’s words: “This consultation seeks views on proposals to reform the reporting of property income data to HMRC by letting agents and tenancy deposit scheme providers.” It is a set of proposals, not a decision. “The consultation runs from 28 October 2026 to 20 January 2027.”

What did not change

The Budget document says: “The government is keeping to its commitments on tax, with no increase to the headline rates of income tax, National Insurance contributions or VAT.” The rates table published with the Budget gives the same VAT registration threshold, £90,000, for April 2027 as for April 2026.

Nothing in the documents we read changes the Making Tax Digital for Income Tax timetable. It still reaches qualifying income over £50,000 from 6 April 2026, £30,000 from 6 April 2027 and £20,000 from 6 April 2028. The documents do not mention the £200 penalty for reaching the points threshold, the late payment penalty percentages or HMRC’s late payment interest, so those stay as our other guides describe them.

What happens next

Most of these measures now need Parliament. The property rates and the trading allowance are due in Finance Bill 2026-27; the Making Tax Digital exemptions need secondary legislation; the April 2029 payment changes and e-invoicing will follow after more design work. We will update this page, and the guides it links to, when that happens. Until then, if a decision about your own tax depends on one of these changes, an accountant or HMRC can help you work through it.

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