Autumn Budget 2025 Report

Ahead of today’s budget most clients were nervous of how the Chancellor might find ‘fiscal headroom’ for government borrowing.  We examine the impact and key takeaways.

PERSONAL TAX

Probably the most significant announcement of the entire budget for small business owners was the increase from Apr 2026 in Dividend Tax up from 8.75% to 10.75% for Basic Rate and from 33.75% to 35.75% for Higher Rate Tax Payers.

As dividends are such an important part of so many small business owners’ income it has to be said that they will be one of the groups most affected by the budget.  For example a business owner paid £12,570 in PAYE and £37,700 in dividend will pay an extra £754 in tax next year.

Almost all other personal tax rates have been frozen.  Given inflation this does also represent an effective tax increase through what has been termed ‘fiscal drag’.

The budget also announced increases in tax on both Savings and Property Income from April 2027 with current tax rates (Basic 20%; Higher Rate 40% and Additional Rate 45% ) all increasing by 2%.

The benefit of Salary Sacrifice Pension Contributions will be curtailed with NI due on contributions above £2k, however this will affect relatively few small business owners.

BUSINESS TAX & vat

There were few changes to Business Tax that will affect our clients.  Corporation Tax rates and thresholds remain unchanged, as they are for VAT.

Probably the most important announcement was around Business Rates.  The Chancellor set out to ease business rates generally through a revelation from Apr 2026; a lower multiplier and a permanently lower rate for the Retail, Hospitality and Leisure sectors (RHL).

E-commerce retailers will be boosted by the news that by March 2029 latest, the customs duty relief for low-value imports will end.  These imports have put VAT registered retailers at competitive disadvantage to overseas suppliers.

Changes to Capital Allowances were made notably a new 40% First Year Allowance but as the threshold for Annual Investment Allowance remains at £1million this will not affect many small businesses.

Employers

There were no changes to Employers NI but the National Minimum Wage increases by 4.1% to £12.71/hr (up 8.5% for 18 to 20 yr olds to £10.85/hr and 6% for 16 & 17 yr olds to £8/hr)

There is extra funding for Apprenticeships.

MAKING TAX DIGITAL

The roll out of MTD continues and there were a couple of interesting new announcements,  From 2027 software can provide prompts and checks as returns are filed.

Even more significant is the announcement that by 2029 e-invoicing will be mandated. Already used abroad, e-invoicing is a system whereby an invoice raised on the bookkeeping software of Company A is mirrored by a bill appearing on the software of Company B sometimes with real time reporting to government.

ECONOMIC OUTLOOK

The Office of Budget Responsibility believes that the economy will grow by 1.5% this year up from its 1% forecast in March and 1.4% next year.  The market response was marginally positive.