The government's AI plan: what it means for small businesses

The government’s AI plan, published by HM Treasury on 24 October 2026, is mainly about AI security and building up UK AI companies. Only one measure names small businesses directly: £30 million for local AI partnerships run with mayoral authorities. For most small firms, the more useful support is free AI training and the Business Growth Service, which already exist.

What did the government announce?

HM Treasury announced a package of AI funding on 24 October 2026, four days before Budget 2026. The Treasury press release names Chancellor John Healey, Security Minister Dan Jarvis and AI Minister Kanishka Narayan. The Chancellor said “every firm, community, hospital, school, and every aspect of our economy can benefit” from AI.

The release gives no overall total. The main items are:

Which parts help small businesses?

Only the £30 million for local AI partnerships mentions small and medium-sized businesses. The partnerships will be set up with Mayoral Strategic Authorities to improve local services, support local businesses including SMEs, and give workers AI skills.

The release does not say which areas will get partnerships, how much each will receive or when support will start. If your client is in a mayoral authority area, watch for announcements from the combined authority.

Two other measures may matter indirectly:

• The £60 million R&D procurement scheme will buy AI solutions in health and care, and in AI security and safe adoption. Small AI developers may be able to bid.
• The £60 million National Cyber Shield is aimed at protecting the UK from cyber attacks. It is not a grant scheme for small firms.

How many small businesses use AI?

About a third of UK businesses now use AI, but the smallest firms lag behind. Two official surveys give the picture.

The DSIT AI adoption survey, published on 29 October 2026, found 32% of businesses used at least one AI technology in 2026, up from 16% in 2025. It surveyed 3,503 businesses between January and April 2026. Larger firms were at 52%.

The ONS analysis of 20 July 2026, from its June 2026 business survey, found:

• 28% of businesses with fewer than 10 employees used AI
• 35% of businesses with 10 or more employees used AI, up from about 12% in September 2023
• 49% of businesses with 250 or more employees used AI

What holds small firms back?

Skills, not price, is the main barrier. In the DSIT survey, 67% of businesses already using AI cited limited skills or knowledge, rising to 78% of those planning to start. An unclear business case was the top reason given by 65% of firms not using AI.

Cost was mostly about the time needed to set AI up, not the price of tools. Of the businesses that could estimate it, 47% spent nothing on AI in 2025, often because they used free tools or AI features already built into their software.

The results were modest but real: 50% of adopters reported higher productivity, and 24% saw lower operating costs.

What support can small businesses use now?

Existing programmes are more useful today than the new package. Here is what applies to you.

• If you or your staff need basic AI skills: use the free AI Skills Boost courses. ICAS reported on 19 February 2026 that every adult is eligible, with some courses taking about 20 minutes.
• If you want general digital advice: start with the Business Growth Service, launched in July 2025. The SME Digital Adoption Taskforce update of 26 June 2026 says it signposts Made Smarter and Help to Grow.
• If you are in a mayoral authority area: watch for the local AI partnerships funded from the £30 million.
• If you already use accounting software: check the AI features you are already paying for. See our coverage of Xero and Google Gemini and Intuit’s AI agents for QuickBooks.

What does the plan mean for tax and HMRC?

The plan cites HMRC’s own use of AI as an example of what the technology can do. Its Ask HMRC assistant handled about 6.3 million interactions in 2025-26. HMRC’s new customer systems contract with Salesforce also includes AI tools; see HMRC’s Salesforce deal.

What advisers should do

Accountants can help clients turn the headlines into practical steps.

1. Start with one admin task. The DSIT survey found 81% of users apply AI to administration. Our AI adoption guide for accountants covers the first steps.
2. Point clients to free training. AI Skills Boost costs nothing and suits small teams.
3. Check data protection first. Before clients put customer data into an AI tool, read our guide to AI and data privacy.
4. Do not promise grants. No national grant for small business AI adoption was announced on 24 October 2026.

Frequently asked questions

Is there government funding for small businesses to adopt AI?

Not directly from the October 2026 plan. The only SME-related item is £30 million for local AI partnerships with mayoral authorities, and no application details have been published.

When was the government’s AI plan announced?

HM Treasury published it on 24 October 2026, four days before Budget 2026 on 28 October.

What percentage of small businesses use AI?

The ONS found 28% of businesses with fewer than 10 employees used AI in June 2026. Across all businesses, the DSIT survey put adoption at 32% in 2026.

Is government AI training free for small business owners?

Yes. The AI Skills Boost courses are free for every UK adult, and some take about 20 minutes to complete.

What is the biggest barrier to AI for small businesses?

Skills. In the DSIT survey, 67% of AI users and 78% of planned users said limited AI skills or knowledge held them back.