What Changed for UK Small Businesses in April 2026

6 April 2026 marks the start of the new UK tax year. Several changes announced in the Autumn Budget 2025 are now in effect, and they hit small businesses from multiple directions — higher wages, tighter tax reliefs, and adjustments to capital allowances. But alongside the cost pressures, there are real funding opportunities open right now. This article covers both sides.

The Key April 2026 Changes

National Living Wage rises to £12.71

The National Living Wage for workers aged 21 and over increased by 4.1% to £12.71 per hour on 6 April. For a full-time employee on the minimum wage, that works out at roughly £900 more per year in wage costs for the employer.

For small businesses with hourly-paid staff — particularly in retail, hospitality, care, and warehousing — this is a direct hit to the wage bill. It is worth reviewing staffing budgets now and considering whether operational efficiencies, automation, or technology adoption can help offset the increase. Several grant schemes specifically fund digital adoption and productivity improvements.

Dividend tax rates increase

The basic and higher rates of tax on dividends increased by 2 percentage points from April 2026. The additional rate stays at 39.35%. This affects owner-managers who pay themselves through dividends — a common structure for limited company directors across the UK.

The change narrows the gap between dividend and salary taxation, potentially altering the optimal pay mix for some directors. If you have not already reviewed your remuneration strategy with your accountant, now is the time — the most tax-efficient split between salary, dividends, and pension contributions may have shifted.

Business rates: pubs get a discount, retail relief drops

Pubs and music venues in England receive a 15% business rates discount for 2026-27, with rates frozen for two further years. This is funded by a £300 million support package aimed at protecting the hospitality sector.

However, the broader retail, hospitality, and leisure relief has been reduced. The net effect depends on your specific sub-sector and location. If you operate a pub or live music venue, the new discount should reduce your rates bill. If you operate a shop, restaurant, or leisure facility, check your latest rates notice carefully — the overall relief may be lower than last year.

Business Asset Disposal Relief rate rises to 18%

The capital gains tax rate when claiming Business Asset Disposal Relief (formerly Entrepreneurs' Relief) increases from 14% to 18% from April 2026. The lifetime limit remains £1 million.

For business owners planning to sell in the next few years, this is a meaningful increase in the tax payable on disposal. If you are considering an exit, factor the higher rate into your financial planning. The relief is still valuable — 18% is well below the standard CGT rates — but the window of lower rates has closed.

Writing down allowances reduced

The main rate of writing down allowances for plant and machinery drops from 18% to 14%, stretching out the period over which businesses receive full tax relief on capital investment. This means it takes longer to write off the cost of vans, equipment, machinery, and other qualifying assets.

However, a new 40% first-year allowance introduced in January 2026 partially offsets this for new equipment purchases. If you are planning significant capital expenditure, it may be worth bringing purchases forward to benefit from the first-year allowance before any further changes.

Business property relief capped at £2.5 million

Inheritance tax changes cap 100% business property relief at a combined £2.5 million — up from the originally proposed £1 million following significant pushback from farming and business groups. Relief at 50% applies above this threshold. Spouses can pass up to £5 million between them.

This primarily affects business succession planning for larger SMEs and family businesses. If your business is likely to exceed the threshold, take professional advice on succession structures sooner rather than later.

Where the Funding Opportunities Are

While costs are rising, the grant landscape remains active. Several significant funding opportunities are open right now or opening in the coming weeks.

Innovate UK: Live Competitions Closing Soon

Several Innovate UK grant competitions are currently accepting applications, with deadlines approaching fast:

Frontier AI and machine learning feasibility studies — up to £3 million for UK SMEs exploring AI applications. Closing 29 April 2026.
Software security code of practice— up to £5 million for projects improving software supply chain security. Closing 29 April 2026.
Agri-tech manufacturing(two competitions) — up to £5 million and £8 million respectively for agricultural technology and manufacturing innovation. Closing June 2026.
Pharma process automation— up to £7.5 million for pharmaceutical manufacturing process improvements. Opening 13 April 2026.

These competitions tend to suit R&D-focused businesses with specific innovation projects. If your business is working on technology development, it is worth checking whether any align with your roadmap. Browse Innovate UK grants on Subsidy Scanner to see the full list.

UK Shared Prosperity Fund — Still Active Locally

The UK Shared Prosperity Fund continues to distribute grants through local councils across the country. As a recent example, twelve businesses in Newark and Sherwood received grants of £2,500 to £10,000 in April 2026 for productivity improvements, new technology adoption, and environmental sustainability. Since 2022, over £1 million has gone to 74 businesses in that district alone.

Similar schemes operate across the UK, though they vary significantly by area. Check with your local council or regional Growth Hub to find out what is available in your postcode. Search by region on Subsidy Scanner to find local opportunities.

Boiler Upgrade Scheme: Easier Access from April 2026

Two changes make the Boiler Upgrade Scheme more accessible from April 2026. First, EPC requirements have been relaxed — properties no longer need to meet insulation recommendations before applying for a heat pump grant, removing a major hurdle for businesses in older buildings. Second, the reimbursement process now allows installers to deduct the grant directly from the invoice, reducing upfront costs for applicants.

The scheme has been extended to 2028 and now covers air-to-air heat pumps alongside the existing air-source and ground-source options. If you operate from premises with an aging heating system, this is worth investigating — the grants can cover a significant portion of installation costs.

Growth Hub Grants Across the Regions

England's network of Growth Hubs continues to offer local grants and support services. Many administer schemes funded through the UK Shared Prosperity Fund, with grants typically ranging from £500 to £25,000. These are often easier to access than national Innovate UK competitions and have less demanding application processes.

Growth Hub grants cover activities like digital adoption, skills training, sustainability improvements, and export readiness. For a detailed overview of what is available, see our complete guide to UK small business grants, or browse regional grants across England.

What to Do Next

Review your payroll and dividend strategy with your accountant to account for the April changes — the optimal pay mix may have shifted.
Check which grants you might qualify for — Subsidy Scanner tracks over 2,300 grants across 35+ official sources. Create a free profile to get matched.
Note the Innovate UK deadlines: 29 April for two competitions, early June for two more. If you have an R&D project, start your application now.
Talk to your regional Growth Hub — the advice is free, and they can point you to local funding opportunities you might not find online.

The new tax year brings challenges, but also genuine opportunities for businesses willing to seek them out. We'll continue covering the latest grant news and funding changes here on the blog.