Autumn Budget 2025: What Small Business Owners Need to Know
The dust has settled on Rachel Reeves' second Autumn Budget, and with £26 billion in tax rises announced, there's plenty for small business owners to digest. While the Chancellor avoided the headline-grabbing income tax increases many feared, the changes coming over the next few years will still have a significant impact on how you run your business.
Here's our summary of what matters most.
Employment Costs Are Rising
From April 2026, the National Living Wage for workers aged 21 and over increases from £12.21 to £12.71 per hour – a 4.1% rise. For a full-time employee on minimum wage, that's an extra £972 per year on your payroll.
The 18-20 age group sees an even bigger jump of 8.5%, taking their rate to £10.85. If you employ younger workers, this is one to factor into your budgets now.
New rates from April 2026:
- Workers 21+: £12.71 per hour (+4.1%)
- Workers 18-20: £10.85 per hour (+8.5%)
- Under 18s and apprentices: £8.00 per hour (+6%)
Good News on Apprenticeships
There is a silver lining for SMEs looking to grow their teams. The government has announced that apprenticeship training for under-25s will be completely free for small and medium-sized businesses. If you've been considering taking on an apprentice, this removes a significant cost barrier.
To qualify as an SME, your business must have fewer than 250 employees and either annual turnover of £44 million or less, or a balance sheet total of £38 million or less.
Dividend Tax Is Going Up
Company directors who extract profits through dividends will pay more from April 2026. The basic rate rises from 8.75% to 10.75%, and the higher rate from 33.75% to 35.75%. The additional rate stays at 39.35%.
New dividend tax rates from April 2026:
- Basic rate: 10.75% (currently 8.75%)
- Higher rate: 35.75% (currently 33.75%)
- Additional rate: 39.35% (unchanged)
To put that in perspective, if you take £30,000 in dividends, you'll pay around £589 more per year in tax. Now might be a good time to review your remuneration strategy with us.
Business Rates Reform
For those in retail, hospitality and leisure, there's a mixed picture. The current 40% relief scheme ends on 31 March 2026, but it's being replaced by permanently lower business rates multipliers.
New multipliers from April 2026 (for properties under £500k rateable value):
- Small business RHL: 38.2p (for RV under £51k)
- Standard RHL: 43p (for RV £51k to £499k)
- Standard rate: 49.9p (non-RHL businesses)
However, with the 2026 revaluation also taking effect, many businesses will see their rateable values increase to reflect post-COVID recovery. The net effect will vary property by property, so it's worth checking where you stand.
Pension Changes on the Horizon
From April 2029, salary sacrifice pension contributions above £2,000 per year will attract National Insurance – 15% for employers and 8% for employees. This is still a few years away, but if you operate a salary sacrifice scheme, it's worth planning ahead.
Example: An employee currently salary-sacrificing £10,000 into their pension saves both parties NI. From 2029, the £8,000 above the cap will cost the employer an extra £1,200 in NI alone.
ISA and Savings Tax Changes
From April 2027, the cash ISA allowance for under-65s drops from £20,000 to £12,000. The overall £20,000 ISA allowance remains, but at least £8,000 must now go into investments rather than cash.
At the same time, tax on savings and property income rises by 2% across all bands:
- Basic rate: 22% (currently 20%)
- Higher rate: 42% (currently 40%)
- Additional rate: 47% (currently 45%)
If you've been meaning to maximise your ISA contributions, the next couple of years are your window.
Other Key Measures
- Corporation tax: Maintained at 25% – the lowest in the G7
- Income tax thresholds: Frozen until 2030-31, meaning more fiscal drag
- Fuel duty: 5p cut extended until August 2026
- Capital allowances: New 40% first-year allowance, but writing-down allowance reduced from 18% to 14%
- Employee Ownership Trust relief: CGT relief reduced from 100% to 50%
What Should You Do Now?
With changes phased in between 2026 and 2029, there's time to plan – but don't leave it too late. We'd recommend:
- Review your wage budgets ahead of April 2026
- Consider your dividend and salary mix before the tax increase
- Check how business rates revaluation affects your premises
- Maximise ISA contributions before the 2027 changes
- Talk to us about pension arrangements if you use salary sacrifice
- Consider apprenticeships now that training is free for SMEs
Need Help?
If you'd like to discuss how any of these changes affect your business, get in touch. We're here to help you navigate what's coming.
📞 Call: 01474 619 990 📧 Email:
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