Introduction
The Chancellor’s Autumn Budget 2025 was presented as a plan to steady the economy without increasing the main tax rates. But behind the headlines sits a wide range of changes that will affect small business owners over the coming years.
This article breaks the Budget down in calm, clear, plain English. No jargon. No technical complexity. Just what matters for you, your business and your future planning.
Our aim is simple: Clarity. Confidence. Control.
The Big Picture: Are Small Businesses Better or Worse Off?
The short answer: most small business owners will feel the impact over the coming years.
While income tax and corporation tax rates remain unchanged, several quieter measures will increase the overall tax burden. The biggest influence comes from frozen thresholds, higher taxes on dividends and rental income, and changes to pension planning.
Planning ahead will be essential.
Key Changes You Need to Know About
Dividend, Savings and Rental Income Tax Increases
From April 2026 (dividends) and 2027 (property and savings income), several rates rise by 2 percentage points.
What this means for you:
Taking profits as dividends becomes more expensive.
Landlords with personally held property will see higher tax bills.
Reviewing profit extraction, pension use and ISA planning becomes increasingly valuable.
Frozen Income Tax Thresholds Extended to 2031
This is one of the most significant changes.
When thresholds stay frozen but wages rise, more of your income gets taxed. You may even move into a higher tax band without feeling better off.
What this means for you:
Expect to pay more tax over time even if your income only rises with inflation.
Directors who take a low salary and dividends may need to revisit their remuneration strategy.
Budgeting and forecasting become more important as the squeeze continues.
- There is the possibility that employees will ‘demand’ higher wages to compensate for the additional tax that they are paying.
Salary Sacrifice Pension Changes (from 2029)
Pension contributions through salary sacrifice above £2,000 per year will attract National Insurance.
What this means for you:
High earners and directors using salary sacrifice for large pension contributions will pay more.
You may need to re‑evaluate the balance between salary, dividends and pension funding.
Corporation tax relief on capital investment
From April 2026, the writing-down allowance for plant and machinery in the main pool will reduce from 18 percent to 14 percent. This slows the rate at which companies can claim tax relief on assets that are not covered by full expensing or the Annual Investment Allowance (AIA).
What this means for you:
For most small business owners, this change will make little difference in practice as you have up to £1m AIA or full expensing.
Bigger investments may see relief spread over a longer period.
Planning your capital spend becomes more important, especially if you are considering major upgrades or equipment changes.
The direction of travel is clear. The government wants to encourage upfront investment while giving less generous relief over time. Understanding which assets qualify for each type of allowance will help you plan ahead with clarity and avoid unexpected tax timings.
New High-Value Property Surcharge (from 2028)
Properties over £2m and then £5m will face an additional annual council tax surcharge.
What this means for you:
Only relevant if you own or plan to buy such a property.
It’s expected that a scheme will be developed to allow payments to be deferred until sale or death.
Mileage Tax on Electric and Plug‑In Cars (from 2028/29)
Electric vehicles will face a mileage-based tax of a proposed 3p per mile for electric vehicles and 1.5p per mile for plug-in hybrid electric vehicles.
What this means:
Running an electric car becomes slightly more expensive.
Company car tax advantages still remain but are reducing.
- How this will be monitored and fit in with existing rates is still to be determined.
Business Rates Relief (for retail, hospitality and leisure)
Rates will drop for around 750,000 smaller properties.
What this means:
Potentially lower property costs if you operate in these sectors.
Larger warehouses and online distribution centres face increases.
Homeworking Expense Relief Withdrawn (from 2026)
Employees can no longer claim the £6 per week relief.
What this means:
Costs are small, but it’s one less relief for employees.
Employers can still reimburse legitimate homeworking costs.
Other Small but Notable Points
ISA changes from 2027: cash ISA limit restricted to £12,000.
Fuel duty frozen until September 2026.
National Living Wage rising again in April 2026 (plan ahead !!).
New taxes affecting ride‑hailing, gambling and tourism.
So Are You Better or Worse Off?
For most business owners, the overall effect is:
More tax over time, mainly due to frozen thresholds.
Higher tax on dividends and property income.
More pressure on cashflow as wage and cost pressures continue.
This doesn’t mean your business can’t grow or thrive.
It does mean planning becomes essential.
Budgeting, forecasting and understanding your real-time numbers will help you stay ahead rather than react to surprises.
Planning Ahead: How to Take Back Control
Periods of rising tax pressure and economic uncertainty can create anxiety for many business owners. You are not alone.
A few practical steps can help:
Review your remuneration strategy
Especially if you rely on dividends.
Update your cashflow forecast
Factor in wage increases, tax changes and rising costs.
Look at pension and investment planning early
ISA and pension changes will affect long-term planning.
Keep your bookkeeping accurate and up to date
Clarity begins with clean data.
Don’t make decisions in isolation
A conversation with a financial expert can save substantial tax and stress.
Good decisions come from good information.
That’s where clarity, confidence and control come from.
Final Thoughts
The 2025 Budget introduces a mix of modest support and long-term tax pressure.
While headline rates may be unchanged, the real impact will build year after year.
Understanding how these changes affect your business, and planning early, will give you the confidence to navigate the coming years with a clear focus and foresight.
Need help understanding what this means for your business?
If you’d like to talk through how these changes affect you, your remuneration strategy or your financial plans, we’re here to help.
A calm conversation can bring a lot of clarity.
Get in touch: Click here to contact us
