What the October 2026 Budget Could Mean for Directors With Personal Guarantees

The October 2026 Budget is approaching, and many business owners will be watching closely to see what it could mean for their finances, with potential changes to taxation, business support and wider economic policy all under discussion.

For SME directors who have signed personal guarantees, those implications could extend beyond the business. 

While the Budget is unlikely to change the terms of an existing personal guarantee directly, changes to tax liabilities, business costs and the wider lending environment could affect a company’s ability to keep up with its borrowing.

So, what should directors with personal guarantees be looking out for in the October 2026 Budget, and what can they do now to protect themselves?

When is the October 2026 Budget?

The Chancellor of the Exchequer, John Healey, will deliver the Autumn Budget on Wednesday October 28th 2026. It will be his first Budget since taking office in July.

The announcement comes at a time when businesses are already dealing with cost pressures and uncertainty over taxation.
The Government has indicated that fiscal discipline, economic stability and supporting growth will be central to its approach. However, the precise measures will not be known until the announcement.

For those considering new borrowing, refinancing existing facilities or managing personal guarantees already in place, the Budget could provide greater clarity about the conditions you can expect to face over the coming years.

What tax changes could affect SME directors?

Taxation is one of the main areas to watch, with Government discussion focused on how to manage public finances while supporting economic growth. However, specific tax measures have not been confirmed, so directors should be wary of any speculation.

Even so, there are several factors that are particularly relevant to SME finances. These include:

• Personal income tax: Changes to tax rates or thresholds could affect how much income directors retain from salaries and other earnings.

• Dividend taxation: Any change to the tax treatment of dividends could affect directors who take part of their income from their company in this way.

• Capital gains tax: Changes could influence decisions around selling business assets, restructuring ownership or exiting a company.

• Investment incentives: New incentives could influence decisions about equipment, expansion and other forms of business investment. 

For directors with personal guarantees, the concern is whether changes to their business or personal finances could make existing financial commitments harder to manage.

If a company is already operating with tight margins, even a relatively modest increase in costs or reduction in available cash could make its borrowing harder. And if the company subsequently defaults on the finance, the personal guarantee could be called on.  

How could the Budget affect business borrowing?

Many SMEs rely on borrowing to manage cash flow, fund expansion or buy equipment. Depending on the type of finance, lenders may ask directors to provide a personal guarantee.

The Budget could affect the availability of business finance through changes to support schemes, investment incentives and wider economic policy, but these changes won't necessarily affect whether a lender asks for a personal guarantee. Lenders will still assess each business individually, looking at its financial position, ability to repay, trading performance and available security.

Even Government-backed lending schemes may still require a personal guarantee. For example, the Growth Guarantee Scheme helps eligible businesses access finance by providing lenders with a Government-backed guarantee covering a proportion of their losses if a borrower defaults. This protects the lender rather than the borrower, so directors may still be asked to provide a personal guarantee.
For businesses seeking finance after the Budget is announced, the terms of the borrowing will be just as important as the availability of the finance itself. A cheaper or more accessible facility is not necessarily less risky if it comes with a significant personal commitment. 

Why economic uncertainty matters when signing a personal guarantee

A personal guarantee is a legally binding commitment that can leave a director responsible for business borrowing if the company cannot repay it.

That means a business loan can create a personal financial risk as well as a business one. Depending on the terms of the guarantee, lenders can pursue personal assets, including savings, investments and property, to recover outstanding debt.

This risk exists regardless of the Budget, but changes in the wider economy can affect how likely a business is to run into difficulty.
A company may have taken out finance when its forecasts looked healthy, only to find that conditions have changed. The more difficult it becomes to maintain cash flow, the harder it may be to keep up with existing commitments.

Potential challenges include:

●    Higher operating costs reducing profitability
●    Changes to taxation affecting available cash flow
●    Increased borrowing costs when refinancing
●    Customers delaying payments or reducing spending
●    Lower demand affecting revenue forecasts
●    Reduced financial flexibility when unexpected costs arise

None of these circumstances means that a company will fail or that a guarantee will be called upon. They do, however, show why directors need to consider potentially risky scenarios surrounding borrowing.

Will the October Budget change existing personal guarantees?
The Budget itself will not automatically alter an existing personal guarantee. A personal guarantee is a separate legal agreement between the guarantor and the lender. The terms, including the amount covered, when it can be enforced and how long it remains in place, will depend on the agreement the director signed. A change in tax policy or Government spending does not, by itself, cancel those obligations.  

What should directors with personal guarantees do before the Budget?

While directors cannot predict what the Chancellor will announce, they can take steps to understand and manage their existing financial commitments.

For those with personal guarantees in place, or those considering one as part of a new finance arrangement, it is worth reviewing:

1. Your existing guarantees
Check which borrowing facilities are personally guaranteed, the amount of liability involved and whether the guarantee is capped or unlimited.

2. Your business's financial position
Consider whether current cash flow forecasts allow for changes to operating costs, taxation or borrowing expenses.

3. Your personal exposure
Understand which personal assets could potentially be at risk if a lender enforces the guarantee.

4. Your future borrowing needs
If your business is planning to refinance, expand or take on additional borrowing, consider how new commitments could affect your overall exposure.

5. Consider available protection
Personal Guarantee Insurance may help reduce the personal financial impact if an insured guarantee is enforced.
Taking these steps before financial difficulties arise can give directors more time to consider their options and make more informed decisions.

How Personal Guarantee Insurance can help directors manage risk

Whatever measures are announced in the October Budget, directors who have signed a personal guarantee remain exposed if their company cannot repay its debts.
Personal Guarantee Insurance (PGI) is designed to help reduce that risk.

At Purbeck, our policies can provide cover for up to 80% of the personal guarantee amount, depending on the type of borrowing and policy terms.

This protection can be particularly valuable for directors who have signed substantial personal guarantees or have multiple guarantees across different finance arrangements.

It’s important to note that PGI does not cancel the guarantee or change what the director owes the lender. Instead, it provides financial protection against part of the liability.

Support when businesses face financial pressure

Purbeck policyholders also have access to our Business Support Service, which offers expert assistance when a business starts to experience financial difficulties.

This can include support with:
●    Cash flow management and financial planning
●    Debt management and creditor negotiations
●    Conversations with lenders
●    Business recovery and restructuring options
●    Understanding the implications of personal guarantee demands

Getting advice at an early stage can give you more options where there is still time to act. For businesses facing uncertainty around taxation, borrowing costs or wider economic conditions, having access to specialist guidance can be invaluable. 

Looking ahead to the October 2026 Budget

While the upcoming Budget announcement may impact the financial environment, directors can take steps now to protect themselves against the risks they have already accepted.

Whether you're considering taking out new finance, refinancing an existing facility or reviewing the guarantees you have already signed, understanding your exposure is essential.

If you have an existing personal guarantee or are considering signing one, speak to our specialist team to discover how PGI can help protect your assets.