Yesterday’s 2025 Autumn Budget brought plenty of speculation but relatively little genuine support for small business owners. While there have been no increases to the main rates of tax, National Insurance or VAT, the reality is that businesses are being asked to absorb rising costs for longer, with very little incentive to grow or invest.
Below is a clear summary of the key changes most likely to affect you and your business.
1. Minimum wage rises – higher payroll costs from April 2026
From 1 April 2026, the National Living Wage and National Minimum Wage will rise:
- National Living Wage (21+) increases by 4.1% to £12.71 per hour
- 18–20 year olds increase by 8.5% to £10.85 per hour
- 16–17 year olds & apprentices increase by 6.0% to £8.00 per hour
- Accommodation offset increases to £11.10 per day
What this means for you:
If you employ staff on or near minimum wage, your wage bill will rise again, along with employers’ NI and pension costs.
Action: These rates should be built into your budgets and pricing strategy now so margins are not slowly eroded.
2. Frozen income tax thresholds – the stealth tax continues
Income tax thresholds remain frozen until 2031. While tax rates have not risen, more of your income will gradually fall into higher bands as earnings rise.
What this means for you:
Directors and employees alike will experience higher effective tax rates over time, even where pay increases are modest.
3. Dividend, property and savings tax – key increases
Dividend tax
- Basic rate up 2 percentage points to 10.75%
- Higher rate up 2 percentage points to 35.75%
Property income (from April 2027)
New property-specific tax rates will apply:
- Basic rate 22%
- Higher rate 42%
- Additional rate 47%
Finance cost relief will be restricted to the 22% property basic rate.
Tax on savings interest (from April 2027)
Tax band rates on savings interest will increase by 2 percentage points. New tax rates will be 22% at the savings basic rate, 42% at the savings higher rate and 47% at the savings additional rate for 2027 to 2028.
What this means for you:
- If you pay yourself mainly via dividends, your personal tax bill will rise.
- If you own rental properties or have significant savings income alongside your business income, your overall tax burden will increase again.
Action on dividends: Ask us for a personalised calculation to see if it is still worthwhile extracting profits via dividends or whether you may now be better off taking a higher salary, reducing Corporation Tax but accepting higher personal tax.
4. Property tax – challenging environment for landlords
Combined with the new property tax rates, this is not a friendly landscape for traditional buy-to-let landlords.
You may wish to consider whether limited company ownership would improve your position; however, transferring property into a company is complex and only works where strict conditions are met. It does not suit everyone and can trigger Stamp Duty and Capital Gains Tax.
Action: Seek specialist advice before making any structural changes. We have a trusted property tax advisor who can assist where appropriate.
5. Pension salary sacrifice – NIC advantage capped
From April 2029:
Salary sacrifice pension contributions above £2,000 per year will no longer be fully exempt from National Insurance. Both employee and employer NIC will be payable on the excess.
What this means for you:
Salary sacrifice still has value, but the strongest NI benefit is capped. This needs to be factored into longer-term planning rather than assumed to remain optimal.
6. Business rates – relief and expansion no longer penalised
From 1 April 2026:
- Lower rate multipliers for many retail, hospitality and leisure premises with rateable values under £500,000
- A new higher multiplier for properties with rateable value above £500,000, particularly impacting large warehouses and distribution sites
- Transitional relief and an extended Small Business Rates Relief grace period of up to three years when taking on a second property
What this means for you:
If you occupy small high-street premises, you may benefit from lower long-term rates. If you operate from large or high-value premises, costs may rise.
Important change for expanding businesses:
Previously, opening a second premises meant losing your business rates relief and both sites becoming fully chargeable. Under the new rules, you will now keep your relief when opening another branch. Expansion is no longer financially penalised in the same way.
7. Capital allowances – timing now matters more
From 1 January 2026:
- New 40% First Year Allowance introduced
- Writing Down Allowance reduced from 18% to 14%
There is still incentive to invest, but careful planning around timing and scale of expenditure will now have greater tax impact.
8. Electric vehicles – new mileage charge
From 1 April 2028, a new mileage levy will apply:
- 3p per mile for electric vehicles
- 1.5p per mile for hybrids
This will be payable alongside road tax.
What this means for you:
EVs remain tax-efficient in some scenarios, but long-term cost calculations should now include this additional charge.
9. ISA changes – reduced cash allowance from April 2027
- Previously £20,000 could be held in a Cash ISA
- Now limited to £12,000 cash. The overall ISA limit remains at £20,000, meaning you can invest the remaining £8,000 in stocks & shares
- More generous limits continue for those aged over 65, enabling them to continue investing £20,000 into a cash ISA
This nudges savers towards higher investment exposure and may affect how you structure personal reserves.
10. Taxi Tax – VAT now applies to the full fare
Taxi and private hire operators previously paid VAT only on their commission portion. With effect from 2 January 2026, VAT at 20% will apply to the entire journey fare. The policy closes the long-contested Tour Operators Margin Scheme (TOMS) exemption. Private hire vehicle operators such as Uber and Bolt, will all be on a level playing field with respect to VAT accounting.
What this means for you:
As a taxi operator, this will increase VAT liabilities and may force price increases or reduced margins within the sector. As a taxi-user, your fares could increase by up to 20%.
Final take – is it good or bad?
Despite all the speculation, there is some marginal good news for business owners. There have been no increases to the main rates of tax, National Insurance or VAT.
However, this is not support, it is prolonged pressure.
Costs will continue to rise, particularly through minimum wage increases, while frozen tax thresholds quietly squeeze profitability. There remains no meaningful incentive to stimulate growth or encourage investment.
Cash flow management will therefore remain challenging for many businesses. Keeping up-to-date accounts, understanding your numbers and reviewing your financial position regularly remains as crucial as ever.
The businesses that adapt will be the ones that stay close to their data, challenge their assumptions and make decisions based on clarity rather than instinct.
If you’re inclined to do so, you can read the full Autumn Budget 2025 here.
If you would like to discuss how these changes specifically affect your business or your personal tax position as a director, please get in touch to arrange a complimentary 20 minute call and review. We’ll be happy to help.