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In the lead-up to the 2024 general election, Rachel Reeves said Labour would form the “most pro-business government the country has ever seen”.
However, in her first Budget last October, the chancellor increased both employers’ National Insurance contributions (NICs) and the National Living Wage (NLW), leading to financial challenges for many business owners.
As such, you might have felt apprehensive about what the most recent Budget, delivered on 26 November 2025, could mean for your business.
Whether you view the changes as positive or negative – or a mixture of both – understanding how they might affect your business could allow you to take control and adapt your financial plans accordingly.
So, keep reading to learn about the key changes for business owners announced in the Autumn Budget 2025.
The National Living Wage and the National Minimum Wage will increase in 2026
The chancellor previously increased the NLW and National Minimum Wage (NMW) in her 2024 Autumn Budget, with the changes taking effect from 6 April 2025.
If you have employees who are paid at these levels, you’ll need to budget for another wage increase from April 2026, when:
- The NLW will rise from £12.21 to £12.71 an hour for workers aged 21 or over
- The NMW will rise from £10 to £10.85 an hour for those aged 18 to 20
- The NMW will rise from £7.55 to £8 an hour for 16- and 17-year-olds and those on apprenticeships.
While higher staff costs might not sound like good news, having clarity on your future business costs allows you to prepare for these changes before they come into effect. For example, you might choose to offer flexible and hybrid working options to reduce office costs.
Equally, you can factor accurate salaries into your calculations if you’re planning for growth or exiting your company.
Income Tax and National Insurance thresholds have been frozen until 2031
The decision to freeze both Income Tax and National Insurance (NI) for three more years, beyond the previous 2028 freeze, could have several implications for you as a business owner.
More of your salary and dividends may be taxed at higher rates
If your business grows, profits rise, or you take a higher salary to keep pace with inflation, more of your income could fall into the higher- and additional-rate tax bands.
Your current income strategy might become less tax-efficient
Combining a modest salary with dividends is currently a tax-efficient way for company directors to draw an income from a business.
However, if you’re dragged into a higher Income Tax band, this strategy might become less tax-efficient as the rate of Dividend Tax you pay depends on which Income Tax band your total income falls into.
Additionally, the chancellor announced that ordinary and upper rates of tax on dividends will increase by two percentage points from April 2026 (more on this later).
One thing to remember is that you don’t pay NI on dividends. As such, taking some of your income this way could remain a useful strategy.
Thousands of retail, leisure and hospitality businesses will benefit from lower business rates
Business rates for retail, hospitality and leisure properties will be permanently reduced. It is estimated that around 750,000 business owners will benefit from this change.
The government will also provide Transitional Relief to cap how much bills can increase when a business has its property revalued for business rates (which occurs every three years).
According to government figures, £4.3 billion will be spent on this support package, which includes protection for businesses that would otherwise have seen a sharp increase in bills next year.
Tax rates on dividends, savings and property income will rise by two percentage points
These changes will be phased in over the next two years and are likely to have a significant impact on some business owners and landlords.
Increases will come into effect as follows:
Dividend income – From 6 April 2026, basic-rate Income Tax on dividends will rise to 10.75% and the higher rate will increase to 35.75%. The additional rate will remain unchanged at 39.35%.
These increases mean that, in addition to paying up to 25% Corporation Tax on your company’s profits, you could also face a higher personal tax bill if you extract those profits as dividends. As such, you may need to rethink how you draw an income from your business and explore other ways to manage your finances as tax-efficiently as possible.
Property income – From 6 April 2027, Income Tax on property rental income will increase to 22% at the basic rate, 42% at the higher rate, and 47% at the additional rate.
After years of rule changes that have made buy-to-let less attractive, such as the removal of mortgage interest tax relief, this new reform could reduce the profitability of property investments further.
Savings income – From 6 April 2027, the basic rate on savings interest will increase to 22%, the higher rate to 42%, and the additional rate to 47%.
Additional changes that might affect you as a business owner
How the changes announced in the Budget affect you will depend on your specific circumstances, such as the type and size of your business.
Here are a few more reforms the chancellor announced that you may wish to explore further:
- Capital Gains Tax (CGT) relief on sales to Employee Ownership Trusts (EOTs) will be cut in half – CGT relief when a business is sold to an EOT will fall from 100% to 50% starting from November 2025.
- Investment and growth incentives will be introduced to promote entrepreneurship in the UK – From 27 November 2025, some businesses will be eligible for Listing Relief from Stamp Duty Reserve Tax. The chancellor also announced reforms to the Enterprise Management Incentive (EMI) regime and Venture Capital Trusts (VCTs). These changes aim to make it easier for entrepreneurs to start and scale businesses in the UK.
- Low-value imports will no longer be exempt from Customs Duty – Currently, the “de minimis” rule allows overseas sellers to send goods valued at £135 or less to British consumers without paying customs duty. This exemption will be scrapped from March 2029 at the latest. As a result, customs duty will be payable on parcels of any value.
- Salary sacrifice on pension contributions will be capped at £2,000 – From 6 April 2029, the government will charge the employer and employee NICs on pension contributions above £2,000 made via salary sacrifice.
- Pre-packaged milkshakes and coffees that are high in sugar will be hit with an extra tax – The “milkshake tax” will be introduced in 2028. Products that have 4.5g of sugar per 100ml or more will incur an extra tax charge.
- Fully funded apprenticeships will be made available to SMEs – From April 2026, training costs for apprentices under 25 will be fully funded by the government, removing the usual 5% employer contribution for SMEs.
Get in touch
If you’re concerned about how the Budget might affect your business and personal finances, we can help you understand the new rules and adjust your financial plans accordingly.
To learn more, please email hello@sovereign-ifa.co.uk or call us on 01454 416653.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
Venture Capital Trusts (VCTs) are higher-risk investments. They are typically suitable for UK-resident taxpayers who are able to tolerate increased levels of risk and are looking to invest for five years or more. Historical or current yields should not be considered a reliable indicator of future returns as they cannot be guaranteed.
Share values and income generated by the investments could go down as well as up, and you may get back less than you originally invested. These investments are highly illiquid, which means investors could find it difficult to, or be unable to, realise their shares at a value that’s close to the value of the underlying assets.
Tax levels and reliefs could change and the availability of tax reliefs will depend on individual circumstances.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
The Financial Conduct Authority does not regulate buy-to-let (pure) and commercial mortgages.
Approved by Best Practice IFA Group Ltd on 9/12/25.