🍂 Autumn Budget 2025: What Small Businesses Need to Know

After months of leaks, rumours, and hints, Chancellor Rachel Reeves still managed to throw a few curveballs for small businesses in her Autumn Budget. Here’s a friendly guide to the key changes that might affect your clients.

💸 Personal Tax: Watch Out for Fiscal Drag

Good news first: Income Tax and National Insurance (NI) rates aren’t going up. But here’s the catch—the thresholds at which these taxes kick in will stay frozen until 2030-31. That means as wages rise with inflation, more people could find themselves paying higher tax rates. This sneaky effect is known as “fiscal drag.”

👩‍💼 Class 2 National Insurance: A Slight Lift

For sole traders, the Small Profits Threshold—the level below which paying Class 2 NI is optional—will rise to £7,105 from April 2026. The weekly rate will be £3.65.

🏦 Taxes on Income from Assets Are Rising

While earned income rates remain steady, income from property, dividends, and savings will get hit:

• 💹 Dividends: +2% from April 2026 (basic 10.75%, higher 35.75%, additional 39.35%)

• 🏦 Savings: +2% from April 2027 (basic 22%, higher 42%, additional 47%)

• 🏠 Property rental income: +2% from April 2027 (basic 22%, higher 42%, additional 47%)

  
  

🏋️ Pensions & Salary Sacrifice: A Big Cap

From April 2029, salary sacrifice for pensions will be capped at £2,000 per year without triggering NI. Anything above that? Both employees and employers will pay NI, which could mean higher payroll costs and possibly lower pension contributions.

🏗️ Capital Allowances & Corporation Tax: Timing Matters

• 📅 From 1 Jan 2026: 40% first-year allowance on main rate expenditure (good news for unincorporated businesses and lease assets).

• 🔻 From April 2026: Main rate writing-down allowances drop from 18% to 14%.

• ⏰ Late filing penalties for Corporation Tax: Will double from April 2026.

  
  

💰 Capital Gains & Employee Ownership Trusts

The tax relief for selling a business to an Employee Ownership Trust (EOT) is halved—from 100% to 50%. This is because the scheme’s cost has ballooned way beyond original estimates.

🚀 Enterprise Management Incentives (EMI) & Investment Schemes

The government is making it easier for growing companies to attract talent and funding:

• 👥 EMI limits increase: up to 500 employees, £120m in assets, £6m share option limit, and a 15-year maximum holding period from April 2026.

• 💸 Venture Capital Trusts (VCT) & Enterprise Investment Scheme (EIS): limits go up to £10m (£20m for Knowledge Intensive Companies). Lifetime company investment limits increase too.

  
  

🎓 Apprenticeships: Free for Small Businesses

Small businesses in England can soon take on younger apprentices for free. More details and start dates are coming soon.

💵 Minimum Wage: Time to Pay Up

Millions of workers will see a rise in pay from April 2026:

• 🧑‍💼 21+ (National Living Wage): £12.71/hr (+50p)

• 👩‍🎓 18-20: £10.85/hr

• 👶 Under 18 & apprentices: £8/hr

  
  

📲 Making Tax Digital: Potential Changes

From April 2029, the government wants Self Assessment taxpayers with PAYE income to pay more in-year via PAYE. Some small taxpayer groups will be exempt, and certain start dates are deferred to April 2027. Details are still emerging.

This Budget packs a lot for small businesses—higher costs for some, new opportunities for others.

Heather Watson

Arendelle Ltd