A worked example
These figures are illustrations, not Budget figures: staff on an average of £45,000; each director on a £12,570 salary and £60,000 of dividends, as on the salary and dividends page; taxable profit of £400,000, as on the corporation tax page. The company claims the Employment Allowance and pays its staff the minimum pension.
| 2027/28 and the year to 31 March 2028 | Before the Budget | After the Budget | Difference |
|---|---|---|---|
| Employer's National Insurance, staff: 20 × (£45,000 − £5,000) × 15% | £120,000.00 | £120,000.00 | |
| Employer's National Insurance, directors: 3 × (£12,570 − £5,000) × 15% | £3,406.50 | £3,406.50 | |
| Less the Employment Allowance | −£10,500.00 | −£10,500.00 | |
| Employer's National Insurance | £112,906.50 | £112,906.50 | £0.00 |
| Staff pension, minimum: 20 × (£45,000 − £6,240) × 3% | £23,256.00 | £23,256.00 | £0.00 |
| Directors' dividend tax: 3 × £11,971.25 | £35,913.75 | £35,913.75 | £0.00 |
| Corporation tax on £400,000 at 25% | £100,000.00 | £100,000.00 | £0.00 |
What does change for a firm like this:
- Mileage. The tax-free rate for business miles in an employee's own car or van stays at 55p for the first 10,000 miles (made permanent) and rises from 25p to 35p above 10,000 miles from 6 April 2027. An employee driving 15,000 business miles can be paid up to £500 a year more free of tax and National Insurance (5,000 miles × 10p).
- Benefits through payroll. From 6 April 2027, company cars and vans, fuel and medical benefits are reported and taxed through payroll; most other benefits follow from 6 April 2028.
- VAT and PAYE. VAT invoices must be electronic from April 2029, and a Direct Debit must be in place for VAT and PAYE liabilities from April 2029.
- The directors' own savings. Interest on savings held personally is taxed at 24%, 44% and 49% from 6 April 2027.
When it takes effect
Nothing changes in the firm's National Insurance, dividend tax or corporation tax for 2027/28. The mileage rate and benefits payrolling start on 6 April 2027; e-invoicing and Direct Debit in April 2029.
Who it doesn't affect
The Budget had no measure on personal service companies, umbrella companies or partnerships. A firm whose staff do not drive for work, and which provides no company cars or other benefits, sees almost nothing change before 2029.
Where this comes from
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), Annex A, National Insurance contributions: employer's rate 15% above the secondary threshold (£96 a week) and the £10,500 Employment Allowance for 2027/28
- Budget 2026 OOTLAR, Annex A: dividend rates 10.75%, 35.75% and 39.35%, the £500 allowance and the income tax bands for 2027/28
- Budget 2026 OOTLAR, Annex A, Corporation Tax rates: 25% above £250,000 for the year from April 2027
- Budget 2026 (HM Treasury), "Support with fuel prices and other motoring costs": the 55p rate for the first 10,000 business miles made permanent, and 35p above 10,000 miles
- Budget 2026: Overview of Tax Legislation and Rates (HMRC), section 2.7: Approved Mileage Allowance Payments above 10,000 miles from 25p to 35p from 6 April 2027, with the matching National Insurance disregard
- Budget 2026 OOTLAR, section 1.24: company cars and vans, fuel and medical benefits through payroll from 6 April 2027, most other benefits from 6 April 2028
- Budget 2026 OOTLAR, sections 1.58 and 2.32: VAT e-invoicing from April 2029, and Direct Debit for VAT and PAYE liabilities from April 2029
- Budget 2026 (HM Treasury), Table 6.1 (policy decisions): no measure on personal service companies, umbrella companies or partnerships
- Workplace pensions: what you, your employer and the government pay (GOV.UK): the employer minimum of 3% of earnings between £6,240 and £50,270
Every figure on this page comes from the Budget documents published on GOV.UK on , and was checked by Lewis Back ACA. Last updated . It is general information, not advice on your own position.