Autumn Budget 2025 – How will it impact your business?

Each year sees the delivery of an Autumn Statement or Budget given by the Chancellor, detailing what changes there will be in taxes in the coming years. 

The language used by Chancellors during the delivery of such a Budget can often be headline grabbing, assuming you can hear them over the general noise in the House of Commons.  But what filters out over the following days and weeks can regularly feel somewhat different to the words you heard during the budget speech.

So, what does it all mean to small business owners?

A Freeze on income tax and national insurance thresholds

If you are feeling like the personal allowance of £12,570 (the amount you can earn before you pay income tax) has been around for some time, then you would be correct.

The last time there was a meaningful increase in this personal allowance amount was in 2019/2020.  At this point it went up from £11,850 to £12,500.

If this personal allowance had increased with inflation over the past few years, it would now be in the region of £15,000.  However, it has not increased, leading to something called fiscal drag.  Many more people are dragged into paying tax, and many more are dragged into paying higher rates of tax because of these freezes.

In this Budget, it was announced that the current £12,570 will be around for several more years too.  The freeze is now in place until at least 2031.

This freeze impacts:

• The personal allowance: £12,570
• The Primary Threshold for employee NICs: £12,570
• The basic-rate income-tax band threshold: £37,700
• The Upper Earnings Limit: £50,270
• The employers Secondary Threshold: £5,000

Tax rate increases

The rate of tax paid will be increased for sources of income that do not attract national insurance contributions.

• Dividend Income

A 2% increase with effect from April 2026

The dividend allowance will remain unchanged at £500

• Savings Income

A 2% increase with effect from April 2027

The personal savings allowance remains unchanged

From 6 April 2027 the annual ISA cash limit will be set at £12,000, within the overall annual ISA limit of £20,000. Savers over 65 will continue to be able to save up to £20,000 in a cash ISA each year.

• Property Income

A 2% increase with effect from April 2027

For property income over £1,000

Note: Relief for residential fiancé costs will be calculated at the property basic rate of 22%

Minimum Wage increases

The new rates will come in from April 2026

Salary Sacrifice on Pension Contributions

Starting 6 April 2029, the amount of pension contributions made via salary‑sacrifice that is exempt from National Insurance Contributions (NICs) will be capped at £2,000 per year

Any salary‑sacrifice pension contributions above £2,000 in a year will be treated as ordinary pension contributions — i.e., they’ll be subject to both employee and employer NICs, just like normal salary.

Importantly: the change only affects the NIC exemption under salary sacrifice. Income tax relief on pension contributions remains unaffected.

• Employer contributions made directly (without using salary sacrifice) are not impacted by this change.

That means both employee and employer will face extra NIC costs on the excess increasing the cost of pension‑saving via salary‑sacrifice compared to before.

• As a consequence, some individuals may find salary‑sacrifice less attractive and shift toward other pension contribution methods (e.g. employer-direct contributions, or after‑tax personal contributions).

Business Rates

In the Budget, there was an announcement of a new lower retail, hospitality and leisure multiplier.  This was to lower the business rates for qualifying small businesses.

However, these reduction come at the same time as:

• A revaluation of all non-domestic properties in England & Wales from April 2026
• The Retail, Hospitality and Leisure Relief introduced during the pandemic is due to end on 31 March 2026!  This is currently 40%.

Transitional arrangements have been brought in to support these businesses over the next 3 years,  These will:

• Cap the revaluation increases
• The grace period under the Small Business Rates Relief (SBRR) scheme is being extended, so that businesses will keep the SBRR on their first property for three years after they take on a second property (previously one year)

Transitional Relief Caps (from 2026 revaluation)

There are different numbers for London.

Capital Allowances

A new 40% First Year Allowance was announced for qualifying expenditure on “main-rate” plant and machinery assets from 1^st Jan 2026

This will not cover cars or second-hand assets, but will include assets bought for leasing and expenditure by unincorporated businesses (sole traders and partnerships).

This allows 40% of the cost of qualifying expenditure to be claimed in the same year of making the purchase.

Annual Investment Allowance remains unchanged.

The standard writing down allowance rate for the main-pool of plant and machinery is to be reduced from 18% to 14% from April 2026

Extension of first-year allowances for zero-emission cars and charging points one year to April 2027.

Other Changes

There will be a change to the order of taxation for the purpose of income tax calculations.  The new order is:

1. Income which is not property, savings or dividend income; then
2. Property income; then
3. Savings income; then
4. Dividend income

Business Asset Disposal Relief

The allowance is unchanged with a lifetime allowance of £1 million, and the rate will increase from 14% to 18% as previously announced from 6th April 2026

Corporation Tax filing penalties are being doubled from April 2026

Fully funded training for apprenticeships for under 25 year olds.