The real test of a Budget isn’t what the Chancellor announces, but what businesses and investors do differently as a result. That was a central theme in our annual conversation with Lord Philip Hammond, former Chancellor of the Exchequer, following the 2026 Budget.

From property taxation to business exit reliefs, we explored what the measures could mean for entrepreneurs and investors, and the bigger questions around the UK’s economic direction.

A Budget of restraint, not direction

Lord Hammond’s assessment was that the Budget offered little clarity on the government’s longer-term economic plans. Several widely discussed tax changes did not materialise, while questions remain about how future spending commitments will be funded. As he put it:

“Whether you like a measure or don’t like a measure is not really the question. The question is, is it going to change anybody’s behaviour?”

For entrepreneurs weighing up investment, expansion or hiring decisions, even modest tax changes can influence confidence, particularly when they build on previous measures.

Property investors: successive increases could change the economics

The Budget confirmed a further two-percentage-point increase in tax on property income from April 2027, following an equivalent rise announced in 2025. For additional-rate individual landlords in England, Wales and Northern Ireland, that means a 49% rate, up from 45% before the two increases.

Lord Hammond questioned whether the additional revenue justified the potential impact on investor sentiment. Higher taxation could change the returns needed to justify purchases, prompt landlords to reassess portfolios or encourage consideration of corporate ownership structures.

While such decisions require careful assessment, successive increases could discourage investment in rental property, with implications for housing supply and rents.

Foreign capital: significant change, potentially limited disruption

From January 2029, the government plans to tax certain UK real estate income and gains earned by foreign sovereign investors.

Lord Hammond expected limited disruption, noting that relatively few investors would be directly affected and that some already use alternative investment structures. Access to real estate investment trusts (REITs) will also remain available, subject to relevant conditions.

For developers reliant on institutional funding, the real test will be whether the change alters investors’ appetite for UK real estate or ultimately affects the availability and cost of capital.

Entrepreneurs: who benefits from the new reliefs?

For business owners, the Budget sends a mixed message. From April 2027, the lifetime limit for Business Asset Disposal Relief (BADR) will fall from £1m to £500,000, reducing the qualifying gains eligible for its preferential 18% capital gains tax rate.

Meanwhile, the proposed Founders’ Relief would offer a 10% rate on up to £10m of lifetime gains for qualifying founders and early investors in high-growth businesses, subject to eligibility rules being finalised.

The distinction matters. BADR supports a broader range of owner-managed businesses, while Founders’ Relief targets a narrower group. Lord Hammond suggested the new relief could help founders realise value before a full exit, but questioned how much exit tax incentives influence decisions to start or grow a business.

Lord Hammond pointed to two bigger challenges for UK entrepreneurs:

“Access to patient capital and the valuations businesses can achieve when they exit are far more important to growth. Both remain more attractive in the US.”

For established mid-market businesses, access to funding, strong performance and credible exit opportunities may matter more than targeted tax incentives.

The bigger fiscal questions remain unanswered

Beyond individual measures, Lord Hammond highlighted three long-term pressures on public finances: demography, defence and decarbonisation.

His concern was that funding these commitments will require difficult decisions on taxation, borrowing and public spending – decisions that remain largely unresolved.

For businesses making long-term investment decisions, that uncertainty matters. Confidence depends not just on today’s tax rates, but on the predictability of future policy.

What should entrepreneurs and investors take away?

Three considerations stand out:

  • Property investors should assess the impact of higher taxation on returns, ownership structures and acquisitions.
  • Entrepreneurs should review how exit reliefs affect their plans, while prioritising access to capital and sustainable growth.
  • Both groups should prepare for further policy changes without letting uncertainty stall commercially sound investment.

Lord Hammond’s message is clear: modest tax changes can influence business behaviour, but the larger fiscal challenges remain unresolved.

For entrepreneurs and property investors, access to capital, confidence in future returns and the ability to act on opportunities remain critical.

At OakNorth, we work with ambitious businesses and property investors to understand their plans and provide the funding to support them, even as the economic environment changes.

This article reflects views shared in our conversation with Lord Philip Hammond, alongside OakNorth’s analysis. It is for general information only and does not constitute tax, legal or financial advice.