TLDR (too long didn’t read): What you need to know
The Spring Statement 2026 on 3 March was not designed to introduce major tax changes, but it still included several updates that matter for SME business owners.
Key takeaways include:
• The economic outlook remains cautious, with modest growth expected.
• Income tax thresholds remain frozen until April 2031
• Dividend tax rates increase from April 2026
• Corporation Tax rates remain unchanged
• National Living Wage increases from April 2026
• Several capital allowance changes affect business investment decisions
• New rules around inheritance tax relief for business and agricultural property could affect succession planning
For SME owners, the main message is that the tax burden is unlikely to ease soon. Planning, forecasting and proactive financial decisions remain important over the next few years.
Why the Spring Statement matters for business owners
On 3 March 2026, the Chancellor delivered the government’s Spring Statement. Unlike the Autumn Budget, the Spring Statement is intended to provide an update on the economy and public finances rather than introduce major tax policy changes. The government has committed to having only one main fiscal event each year. Even so, the update offers important signals for SME business owners. It provides insight into the economic outlook, confirms several tax thresholds and rates, and introduces some policy changes that may affect business finances, investment and long-term planning.
The Office for Budget Responsibility (OBR) forecasts continue to suggest a slow growth environment, which means businesses may need to remain cautious and plan carefully for the years ahead.
Economic outlook: Modest growth expected
The government highlighted several positive indicators in the economic forecast, including falling inflation, lower borrowing projections and increased investment. However, the wider outlook remains relatively subdued.
According to the OBR forecasts:
- GDP growth is expected to slow to around 1.1% in 2026.
- Growth is projected to average around 1.6% over the remainder of the five-year forecast period.
- Inflation is expected to reach the Bank of England’s 2% target in late 2026.
- Unemployment is forecast to rise to around 5.33% during 2026.
The OBR also noted that the UK tax-to-GDP ratio is expected to rise to around 38% by 2030/31, which would represent a post-war high. For SME owners, this combination of modest growth and relatively high tax levels means the operating environment may remain challenging for some time.
Income tax thresholds remain frozen
One of the most significant ongoing policies affecting business owners is the continued freeze on income tax thresholds.
For the 2026/27 tax year:
- The basic rate band remains £37,700.
- The higher rate threshold remains £50,270.
- The additional rate threshold remains £125,140.
- The personal allowance remains £12,570.
These thresholds are now scheduled to remain frozen until April 2031.
While rates themselves have not increased, frozen thresholds can gradually pull more income into higher tax bands as earnings rise over time. This effect is sometimes referred to as fiscal drag. For business owners paying themselves through a mix of salary and dividends, reviewing remuneration strategies each year may be worthwhile.
Dividend tax increases from April 2026
From 6 April 2026, dividend tax rates increase by 2 percentage points for basic and higher rate taxpayers.
For the 2026/27 tax year:
- Basic rate dividend tax: 10.75%
- Higher rate dividend tax: 35.75%
- Additional rate dividend tax: 39.35% (unchanged)
The dividend allowance remains at £500.
For many SME directors who receive dividends as part of their income strategy, this change may slightly increase personal tax liabilities. It is another example of how the government is raising revenue through adjustments to existing taxes rather than introducing entirely new ones.
Corporation tax remains unchanged
The government confirmed that Corporation Tax rates remain unchanged.
From 1 April 2026:
- 25% main rate for companies with profits over £250,000
- 19% small profits rate for companies with profits of £50,000 or less
- Marginal relief applies for profits between £50,001 and £250,000
The government has committed to capping the main Corporation Tax rate at 25% for the duration of the current Parliament. However, penalties for late Corporation Tax returns will double for returns with filing dates on or after 1 April 2026. This makes compliance and timely submissions even more important.
National Living Wage increases in April 2026
For businesses with larger workforces, especially in retail, hospitality or service sectors, wage increases may require careful budgeting and pricing decisions.
From 1 April 2026:
• National Living Wage (age 21+): £12.71 per hour
• Age 18–20 rate: £10.85 per hour
• Age 16–17 rate: £8.00 per hour
• Apprentice rate: £8.00 per hour
For businesses with larger workforces, especially in retail, hospitality or service sectors, wage increases may require careful budgeting and pricing decisions.
Changes to capital allowances and investment incentives
Several updates affect how businesses can claim tax relief on capital expenditure.
Key points include:
- The Annual Investment Allowance remains at £1 million.
- Full expensing continues, allowing 100% relief on qualifying new plant and machinery.
- The main rate Writing Down Allowance will reduce from 18% to 14% from April 2026.
- A new 40% first-year allowance will apply to certain main rate assets purchased from January 2026.
- 100% first-year allowances for zero-emission cars and EV charging equipment have been extended to 2027.
These changes mean that timing investment decisions could have a meaningful impact on tax relief.
Changes affecting business owners and succession planning
Several capital tax changes may also affect SME owners thinking about long-term succession planning.
Business and agricultural property relief
From 6 April 2026:
- 100% Inheritance Tax relief continues to apply to qualifying business and agricultural property up to a combined limit of £2.5 million.
- Assets above this threshold will receive 50% relief.
The £2.5 million limit applies per person and can be transferred between spouses or civil partners. These rules could affect the future inheritance tax position of some business owners, particularly those with larger businesses or valuable property assets.
Business Asset Disposal Relief
The rate for Business Asset Disposal Relief increases to 18% for disposals made on or after 6 April 2026. For entrepreneurs planning to sell or restructure their business in the coming years, this may influence the timing and structure of transactions.
Practical considerations for SME business owners
While the Spring Statement did not introduce dramatic tax reforms, several themes are clear.
Business owners may want to consider:
- Reviewing dividend and salary strategies in light of rising dividend tax rates
- Budgeting for higher employment costs from April 2026
- Planning investment carefully to maximise capital allowance relief
- Reviewing long-term exit or succession planning where inheritance tax rules may apply
- Ensuring compliance processes are robust to avoid increased penalties
In a relatively slow-growth economic environment, maintaining good financial visibility and making well-timed decisions becomes even more valuable.
Spring Statement FAQs
Was the Spring Statement 2026 a major tax event?
No. The government has committed to holding only one main fiscal event each year, the Autumn Budget. The Spring Statement mainly provides an economic update and confirms existing policies.
Are Corporation Tax rates changing in 2026?
No. Corporation Tax remains at 25% for companies with profits above £250,000 and 19% for those with profits of £50,000 or less.
Are income tax thresholds increasing?
No. The personal allowance and tax bands remain frozen until April 2031.
When do the dividend tax changes take effect?
The increased dividend tax rates apply from 6 April 2026.
Does the Spring Statement affect business investment decisions?
Potentially. Changes to capital allowances and writing down allowances may influence the timing of asset purchases.
Need support navigating the Spring Statement 2026?
If you’re reviewing how the Spring Statement fits into your wider business plans, we can help you understand the financial, compliance and practical implications, and how this supports your broader business strategy.
If you’re already a Harland client, get in touch with your Client Manager to talk things through in a practical, no-pressure way.
If you’re new to Harland, book a free discovery call to explore how we can support you with strategic financial and business guidance that aligns with your goals and values.
