Chancellor John Healey’s first Budget, delivered on 28 October 2026, was billed by the Treasury as offering “breathing space” to households and firms squeezed by the energy shock from the Middle East conflict. For small and medium-sized businesses in London, the result is a mixed package: meaningful help on business rates and energy for some sectors, offset by higher costs elsewhere and a tougher backdrop of rising interest rates.
Here is what owners and finance directors need to know.
Business rates: a bigger shield for retail, hospitality and leisure
The headline measure for high-street businesses is an expansion of small business rates relief. From 1 April 2027, qualifying retail, hospitality and leisure properties will receive full Small Business Rates Relief up to a rateable value of £18,000, up from £12,000, tapering to £21,000, according to a summary by Propertymark. ITV reported that the change will take around 70,000 more businesses out of business rates altogether.
Other measures for the sector include:
- Bill increases for qualifying retail, hospitality and leisure properties capped at CPI inflation in 2027–28 and 2028–29, with some exceptions.
- Relief for pubs, social clubs and most live music venues rising from 15% to 35%.
- Abolition of the £150 and £300 Valuation Tribunal fees for rating appeals, with refunds for appeals on the 2026 list already paid.
- Vape shops and adult gaming centres losing specified reliefs from April 2027.
Because London rateable values are generally higher than elsewhere, the £18,000 threshold will benefit smaller units most: neighbourhood cafés, salons, independent shops and gyms on secondary high streets. Owners should check their current rateable value on the Valuation Office Agency’s online service to see whether they will qualify.
Energy: short-term help, but costs keep rising
The Budget extended the cut in fuel duty to July 2027 and kept VAT on household electricity at zero until July 2027. Gas standing charges for domestic customers will be scrapped from next year. These measures largely target households, but they matter to consumer-facing firms because they protect disposable income over the winter.
For businesses’ own bills, the outlook remains difficult. The Bank of England expects wholesale gas prices to stay far above pre-conflict levels, and the domestic price cap is forecast to rise sharply in early 2027. Firms on variable or soon-to-expire energy contracts should be reviewing options now.
Banks pay more, and some of that may be passed on
The bank corporation tax surcharge will double from 3% to 6% for 15 months from January. While this is aimed at lenders’ profits, SMEs should watch for any tightening in lending terms or pricing, particularly as the Bank of England has also just raised Bank Rate to 4%.
Founders and investors
The Chancellor announced a new Capital Gains Tax relief for business founders, with the detail set out in the Budget documents published by HM Treasury. Founders planning an exit in the next two to three years should take advice on how the new relief interacts with Business Asset Disposal Relief.
Separately, stamp duty on shares will be replaced by a new Securities Transfer Tax from late 2027, and the tax-free cash ISA allowance stays at £20,000, reversing a previously planned cut. A new “Starter ISA” will be introduced for first-time investors.
Higher tax on property and savings income
Owners who hold commercial or residential property personally, or who rely on savings income, face a further two-percentage-point rise in the tax rates on property and savings income from April 2027, taking them to 24%, 44% and 49% for basic, higher and additional-rate taxpayers. Tax on dividends and employment income is unchanged. Directors who draw income from property held outside the company should model the impact before the new tax year.
Practical steps for London SMEs
- Check your rateable value and whether the April 2027 changes bring you below the £18,000 threshold.
- Review energy contracts ahead of the expected rise in prices in early 2027.
- Refinance early where possible, before any further interest rate rises.
- Plan exits and restructurings with the new founders’ relief and higher property income tax in mind.
- Speak to your accountant before 5 April 2027, when several of these changes take effect.
The bottom line
Healey’s Budget offers genuine relief to many small retail, hospitality and leisure businesses in London, particularly through business rates. It does little, however, to offset the combined pressure of rising energy costs, higher interest rates and slower consumer spending expected in 2027. The firms best placed to benefit will be those that act on the new reliefs early and plan carefully for a more expensive year ahead.
This article is for general information and does not constitute tax or financial advice.