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Part of the special edition: Autumn Budget 2026: what it means for you

What's changingTax & allowances

Budget 2026 for workers and families: minimum wage, tax bands, mileage, side income, Child Benefit and carers

The National Living Wage rises to £13.21 an hour from April 2027 and the tax-free trading allowance triples to £3,000. Income tax bands stay frozen, and help for carers and self-employed parents comes later.

Published 28 October 2026Last checked 28 October 2026UK-wideFrom HM Treasury and HMRC

A work van's dashboard with a small notebook of mileage notes, a flask of tea and a child's drawing tucked into the sun visor.

Illustration generated with AI

What's happening

For most workers, income tax and National Insurance on pay work the same in 2027 to 2028 as now. The Personal Allowance stays at £12,570 and the higher rate still starts at £50,270. The National Living Wage goes up 3.9% to £13.21 an hour from 1 April 2027. People with small side incomes can earn up to £3,000 a year tax-free under the trading allowance from 6 April 2027, up from £1,000. Drivers who use their own car for work get 35p a mile above 10,000 business miles from April 2027. Child Benefit rises to £28.00 a week for the eldest child. Changes for carers and self-employed parents come later, in 2029 and 2030 to 2031.

The question: What does the Budget change for my pay, side income and family benefits?

This applies to you if…

  • You are paid at or near the National Living Wage or National Minimum Wage
  • You earn a little from selling, crafts, odd jobs or other small trading
  • You drive your own car or van for work
  • You get Child Benefit, Universal Credit or Carer's Allowance

Not for you if…

  • Tax rates on wages, which are not changing
  • Savings and rental income, which have their own rate rise (see our savings deep dive)

What it's worth

What it's worth: From a few pounds to £910 a year for most people, depending on circumstances

National Living Wage £13.21 from 1 April 2027 (+3.9%); trading allowance £3,000 from 6 April 2027; mileage 35p above 10,000 miles from 6 April 2027; Child Benefit £28.00 and £18.55 a week in 2027 to 2028 (Annex A).

Tax year 2027 to 2028

Illustrative calc: Child Benefit for two children in 2027 to 2028

  1. Annex A lists Child Benefit at £28.00 a week for the eldest or only child and £18.55 for each other child in 2027 to 2028.
  2. For two children that is £46.55 a week.
  3. Over 52 weeks that is £2,420.60 a year.
  4. In 2026 to 2027 the rates are £27.05 and £17.90, which is £44.95 a week or £2,337.40 a year.

About £83 a year more for a family with two children

Illustrative calc using HMRC's Annex A rates. Child Benefit is paid every four weeks. The High Income Child Benefit Charge may apply to higher earners.

How to do it

  1. 1

    Check your pay against the new rates from 1 April 2027

    The National Living Wage is £13.21 an hour and the rate for 18 to 20 year olds is £11.27. Your employer must pay at least these.

    Takes about 5 minutes

  2. 2

    If you have side income, check the trading allowance

    From 6 April 2027, if your trading or miscellaneous income is £3,000 or less before expenses, you will not need to declare or pay tax on it.

    Takes about 10 minutes

  3. 3

    Claim mileage tax relief if your employer pays less

    If your employer pays less than the approved rate, you can claim tax relief on the approved amount minus what your employer pays you.

    Takes about 15 minutes

The catches

Frozen bands

The Personal Allowance and higher-rate threshold do not rise in 2027 to 2028. If your pay goes up, more of it may be taxed. Most National Insurance thresholds stay at 2026 to 2027 levels until 2030 to 2031.

Trading allowance is all or nothing on expenses

You either use the £3,000 allowance or deduct your actual expenses, not both. If your costs are high, claiming expenses may be better.

Carers wait until 2030 to 2031

The Carer's Allowance earnings taper will be brought in during 2030 to 2031. Until then, going over the weekly earnings limit still stops the payment.

Self-employed parental pay from 2029

Self-employed fathers, partners and adopters in Great Britain will be able to get parental pay from April 2029, not before.

Illustrative example

A full-time care worker who drives between visits

Lena works full time on the National Living Wage as a home care worker in England. She drives her own car about 6,000 business miles a year and her employer pays less than the approved rate.

  1. From 1 April 2027 her hourly pay rises to at least £13.21. The Treasury says that is £910 more a year before tax for a full-time worker.
  2. The 55p a mile rate for the first 10,000 business miles is now permanent. The Treasury says someone driving 6,000 business miles gets about £120 a year in extra tax savings.
  3. Her income tax bands are the same as in 2026 to 2027.

Higher pay from April 2027 and a permanent, higher mileage rate

Illustrative example. Lena is made up. The £910 and £120 figures are the Treasury's own estimates.

Common misreadings

You might hear: Income tax and National Insurance rates are going up.

Actually: The Budget says there is no increase to the headline rates of income tax, National Insurance or VAT.

You might hear: The Carer's Allowance cliff edge ends now.

Actually: The taper will be implemented during 2030 to 2031.

You might hear: Anyone can earn £3,000 more tax-free.

Actually: The £3,000 trading allowance covers small trading and miscellaneous income, such as selling crafts or doing odd jobs. It does not apply to wages.

Where the UK nations differ

UK-wide
The National Living Wage, trading allowance, mileage rates and Child Benefit apply across the UK.
Scotland and Wales
Income tax rates and bands on earnings for Scottish taxpayers are set by the Scottish Parliament. Welsh rates are set by the Senedd.
England and Wales
The Carer's Allowance taper is expected to benefit about 48,000 carers in England and Wales. Scotland has its own Carer Support Payment.
Great Britain
Parental pay for self-employed fathers, partners and adopters applies in Great Britain from April 2029.

What you could do

  1. are paid by the hour

    Check your payslip after 1 April 2027 shows at least £13.21 an hour (or £11.27 if you are 18 to 20).

    By 2027-04-30

  2. earn a little from selling or odd jobs

    From 6 April 2027 you will not need to tell HMRC about trading income of £3,000 or less.

  3. drive your own vehicle for work and get less than the approved rate

    Claim tax relief on the approved rate minus what your employer pays you.

Timeline

  1. 1 April 2027

    New minimum wage rates

    National Living Wage £13.21. 18 to 20 rate £11.27.

  2. 1 April 2027

    Universal Credit surplus earnings

    The £2,500 threshold is extended for one year.

  3. 6 April 2027

    Trading allowance and mileage

    Trading allowance rises to £3,000. Mileage rate above 10,000 miles rises to 35p.

  4. 6 April 2028

    Employment expenses

    The £2,500 Self Assessment threshold for expenses claims is removed, so more people can claim through PAYE.

  5. 1 April 2029

    Self-employed parental pay and tax payments

    Self-employed fathers, partners and adopters can get parental pay. People who make payments on account start paying more regularly.

  6. 6 April 2030

    Carer's Allowance taper

    To be implemented during 2030 to 2031.

The detail

The rules

  • Income tax 2027 to 2028: Personal Allowance £12,570; basic rate band £37,700; additional rate over £125,140 (Annex A).
  • National Insurance 2027 to 2028: Lower Earnings Limit £133 a week; Primary Threshold £242 a week; employee rate 8% and 2%; Class 4 6% and 2%; Small Profits Threshold £7,355; voluntary Class 2 £3.80 and Class 3 £19.05 a week (Annex A, OOTLAR 2.1).
  • National Living Wage £13.21 from 1 April 2027; 18 to 20 rate £11.27 (Budget 2026, 4.5).
  • Trading Allowance £3,000 from 6 April 2027, with the Self Assessment reporting threshold also £3,000 (OOTLAR 1.5).
  • Approved Mileage Allowance Payments above 10,000 miles rise from 25p to 35p from 6 April 2027 (OOTLAR 2.7). The 55p rate for the first 10,000 miles is made permanent (Budget 2026, 4.4).
  • Child Benefit 2027 to 2028: £28.00 eldest or only child, £18.55 other children; Guardian's Allowance £23.75 (Annex A).
  • Universal Credit £2,500 surplus earnings threshold extended for one year from 1 April 2027 (Impact on households, 1.4).
  • Jobs Guarantee for eligible 18 to 24 year olds on Universal Credit (Budget 2026, executive summary). No start date given.

References

  • Budget 2026, 4.4 and 4.5: Mileage, minimum wage, parental pay and Carer's Allowance.
  • OOTLAR 1.5, 2.1, 2.7, 2.9 and 2.31: Trading allowance, NI thresholds, mileage, employment expenses and payments on account.

Documents

Words explained

Trading allowance
A yearly tax-free amount for small income from selling or services. If your income is under it, you do not need to tell HMRC.
Approved Mileage Allowance Payments
The tax-free amount an employer can pay per business mile when you use your own vehicle.
Surplus earnings
A Universal Credit rule that carries very high earnings in one month into the next month's assessment.
Payments on account
Advance payments towards next year's Self Assessment tax bill.

In short

Tax on pay stays as it is, with frozen bands. Minimum wage rates rise on 1 April 2027 and side income up to £3,000 becomes tax-free from 6 April 2027. Higher mileage rates help people who drive for work. Carers and self-employed parents have to wait until 2029 or later.

Related dates

  • 28 Oct Autumn Budget 2026Announcement · today
  • 31 Oct Paper Self Assessment return deadline (2025 to 2026)Deadline · in 3 days
  • 7 Nov Making Tax Digital: second quarterly update dueDeadline · in 10 days
  • 15 Dec £65 rental property register fee starts rolling outChange · in 48 days
  • 30 Dec File Self Assessment online to pay through your tax codeDeadline · in 63 days
  • 31 Jan Online Self Assessment return and payment deadline (2025 to 2026)Deadline · in 95 days
See the money calendar

Sources

  1. Budget 2026 (HTML), HM Treasury (2026-10-28)
  2. Budget 2026: Overview of tax legislation and rates (OOTLAR), HMRC (2026-10-28)
  3. OOTLAR Annex A: rates and allowances, HMRC (2026-10-28)
  4. Impact on households: distributional analysis to accompany Budget 2026, HM Treasury (2026-10-28)
  5. National Minimum Wage and National Living Wage rates, GOV.UK
  6. Tax-free allowances on property and trading income, HMRC

This is guidance, not regulated financial advice. Check figures against the linked official source before you act. Written with AI assistance and checked against primary sources. How Kitty works. For free, impartial help, try MoneyHelper or Citizens Advice.