Budget 2026 document · first published 28 October 2026
The October 2026 Budget is the UK government's main annual fiscal statement, setting out tax, spending and economic plans amid rising energy costs driven by the Middle East conflict. For small businesses, the headline relief comes through business rates changes: a further 20% reduction for pubs, music venues and social clubs; a raised Small Business Rate Relief threshold removing a further 70,000 retail, hospitality and leisure (RHL) businesses from rates entirely; and a two-year real-terms freeze on rates for all other RHL properties. Energy cost relief includes extending the VAT cut on electricity to July 2027 and a £2.6 billion Household Energy Payment scheme. The Budget also signals that strategic public procurement will be used to back British firms, though no new procurement-specific rules or weightings are set out in detail here. The next Spending Review in 2027 and a '10 Year Plan' will flesh out longer-term priorities.
WHO THIS APPLIES TO
THE ENKII VIEW
The most immediate wins for SMEs are the business rates changes — particularly the expanded Small Business Rate Relief threshold, which could eliminate rates bills for eligible RHL businesses from April 2026 onward, directly reducing overheads. The commitment to use "strategic public procurement and promotion to back British firms" is a meaningful signal but lacks specific criteria, weightings or thresholds in this document; SMEs should watch the 10 Year Plan and 2027 Spending Review for concrete procurement rule changes. The British Business Bank and National Wealth Fund receiving up to £5 billion for defence, dual-use and resilience sectors opens a potential new market for security-adjacent SMEs.
1. Check immediately whether your rateable value now falls below the new Small Business Rate Relief threshold — contact your local authority or a rates specialist to confirm whether you qualify for zero business rates from April.
SMEs in retail, hospitality and leisure (England) — The Budget raises the SBRR threshold to remove a further 70,000 RHL businesses from rates entirely; qualifying businesses will have no rates bill, a direct cash saving.
2. Confirm with your local authority or rates adviser that the extra 20% business rates reduction is applied to your next bill from April.
Pub, music venue and social club operators (England) — The Budget explicitly funds an extra 20% reduction for pubs, music venues and social clubs on top of existing relief; this requires no application but should be verified on your rates notice.
3. Review your energy contracts now: no new policy costs will be added to bills before the 2027 Spending Review Cost Control Framework, and VAT on electricity is cut to July 2027 — factor these savings into cashflow forecasts and renegotiate fixed contracts where possible.
All SMEs with significant energy costs — The Budget freezes new policy bill costs and extends the electricity VAT cut to July 2027, giving a window of cost certainty for businesses to lock in favourable terms.
4. Investigate eligibility for the British Industrial Competitiveness Scheme — register your interest with DESNZ (Department for Energy Security and Net Zero) ahead of the April 2027 start, and note that a back payment for 2026–27 is included.
Energy-intensive manufacturing SMEs — The Budget commits to a 20–25% electricity discount for 10,000 energy-intensive manufacturing firms from April 2027 with a retrospective back payment, representing a material cost reduction.
5. Check whether your production volumes qualify for the enhanced Small Producer Relief under the Alcohol Duty system and update your duty calculations accordingly.
Small alcohol producers (UK-wide) — The Budget makes Small Producer Relief more generous, providing £10 million per year to over 2,000 small producers — a direct duty saving for qualifying businesses.
6. Monitor the 10 Year Plan and 2027 Spending Review publications closely — the Budget commits to using 'strategic public procurement' to back British firms but does not yet specify criteria, weightings or thresholds; these details will define actual bidding requirements.
SMEs supplying or seeking to supply public contracts — The Budget explicitly states procurement will be used to back British businesses, but the operational rules are deferred; early awareness will allow SMEs to position their bids ahead of competitors.
7. Explore funding and investment opportunities through the British Business Bank and National Wealth Fund, which are committing up to £5 billion over four years to defence, dual-use and resilience sectors.
SMEs in defence, security, dual-use or resilience sectors — The Budget confirms a new £5 billion deployment commitment specifically for these sectors, creating a pipeline of accessible finance for qualifying SMEs.
8. Update payroll and employment cost models to reflect the 3.9% increase in the National Living Wage and National Minimum Wage, and factor in expanded parental pay eligibility when planning workforce costs.
All employers — The Budget confirms a 3.9% NLW/NMW rise and expanded parental pay (including self-employed fathers and partners for the first time), both of which affect employer costs and HR planning.
9. Update expense policies and tax claims to use the permanently increased tax-free mileage rates for business vehicle use.
Self-employed individuals and SMEs with mobile workforces — The Budget permanently raises tax-free mileage rates, meaning employees and self-employed individuals can now claim more per mile without a tax liability — a small but permanent cash benefit.
10. Track outputs from the new Better Regulation Executive, which will drive implementation of a 'streamlined and proportionate regulatory system' — savings of almost £800 million per year across businesses are projected.
SMEs engaged in or considering regulatory compliance investment — The Budget establishes the Better Regulation Executive to reduce administrative burdens; SMEs disproportionately bear compliance costs, so engaging with consultations this body runs could shape rules in their favour.
Every rule below quotes the official document verbatim.
The government will use strategic public procurement and promotion to back British firms and develop a skilled domestic workforce. (All public procurement; no specific value threshold or buyer scope defined in this document.)
“The Budget will use strategic public procurement and promotion to back British firms and develop a skilled domestic workforce.”
The Small Business Rate Relief threshold is being increased so that a further 70,000 retail, hospitality and leisure businesses pay no business rates at all. (Retail, hospitality and leisure businesses in England; funded by requiring online marketplaces to collect VAT on behalf of online sellers.)
“increasing the Small Business Rate Relief threshold so that a further 70,000 retail, hospitality and leisure (RHL) businesses pay no business rates at all”
Pubs, music venues and social clubs receive an extra 20% reduction in business rates. (Pubs, music venues and social clubs in England.)
“funding an extra 20% reduction for pubs, music venues and social clubs”
All other retail, hospitality and leisure properties have their business rates frozen in real terms for two years so no property faces an above-inflation increase. (Retail, hospitality and leisure properties in England not qualifying for full relief.)
“For all other retail, hospitality, and leisure properties, rates will be frozen for two years so that no property in those sectors faces an above inflation increase.”
Small Producer Relief in the Alcohol Duty system is made more generous, providing £10 million per year of support to over 2,000 small alcohol producers across the UK. (Small alcohol producers across the UK.)
“Making Small Producer Relief in the Alcohol Duty system more generous by providing £10 million per year of support to over 2,000 small alcohol producers across the UK.”
The VAT cut on electricity is extended to July 2027, expected to take around £50 off the annual Ofgem price cap in April 2027. (All electricity consumers including businesses.)
“extending the VAT cut to electricity to July 2027, which is expected to take around £50 off the annual Ofgem price cap in April 2027”
The 5p fuel duty cut and freeze is extended to 1 July 2027, maintaining the HGV road tax holiday to the same date. (All fuel duty payers and HGV operators.)
“Extend the 5p fuel duty cut and freeze, while maintaining the Heavy Goods Vehicle (HGV) road tax holiday, to 1 July 2027”
10,000 energy-intensive manufacturing firms will receive a 20–25% electricity discount from April 2027 under the British Industrial Competitiveness Scheme, including a back payment for 2026–27. (Energy-intensive manufacturing firms; from April 2027.)
“Deliver the British Industrial Competitiveness Scheme, meaning 10,000 energy intensive manufacturing firms will get a 20-25% electricity discount, starting in April 2027, including a back payment for 2026-27.”
No new policy costs will be added to energy bills until a comprehensive Cost Control Framework is in place at the spending review in 2027. (All energy bill payers including businesses.)
“no new policy costs will be put on bills until a comprehensive Cost Control Framework is in place at the spending review in 2027”
The National Wealth Fund and British Business Bank will deploy up to £5 billion over the next four years into defence, dual-use and other sectors supporting national security, sovereign capability and resilience. (Businesses in defence, dual-use and resilience sectors seeking investment.)
“confirms a new commitment for the National Wealth Fund and British Business Bank to deploy up to £5 billion over the next four years into defence, dual-use and other sectors that support our national security, sovereign capability and resilience”
The government will cut administrative burdens of regulation saving businesses almost £800 million per year, and is establishing a Better Regulation Executive. (All businesses.)
“saving businesses almost £800 million per year through further cuts to the administrative burdens of regulation, extending suspensions on tariffs, and introducing new cross-economy powers so firms can safely test new technologies faster”
The National Living Wage and National Minimum Wage rates are increasing by 3.9%. (All employers.)
“increasing the National Living Wage and the National Minimum Wage rates by 3.9%”
Parental pay is being expanded, including to self-employed fathers and partners for the first time. (Self-employed individuals and all employers.)
“expanding parental pay, (including to self-employed fathers and partners for the first time)”
Tax-free mileage rates are permanently increased for those who use their own vehicle for work. (Workers and self-employed individuals using their own vehicles for work.)
“permanently increasing the tax-free mileage rates for those who rely on their own vehicle for work”
The government is introducing a roadmap to fiscal devolution described as the biggest transfer of power and resources out of Whitehall in a generation, with mayors receiving a share of income tax and business rates, and local authorities retaining more of their business rates. (Mayoral combined authorities, strategic authorities and local authorities across England.)
“this Budget sets out a roadmap to fiscal devolution, the biggest transfer of power and resources out of Whitehall in a generation, empowering local leaders to partner with businesses and universities to drive growth and reindustrialisation”
Tariffs on over 100 food and drink products are being temporarily reduced. (Food and drink importers and producers.)
“Temporarily reducing tariffs on over 100 food and drink products.”
This briefing is enkii's interpretation of the official document — the official text always governs.
Source document © Crown copyright, reused under the Open Government Licence v3.0 via the GOV.UK Content API. enkii tracks every Procurement Policy Note and briefs changes the day they land — see all briefings.