Autumn Budget 2025: The Key Changes for UK Business Owners

The Chancellor of the Exchequer, Rachel Reeves, presented her 2025 Autumn Budget on Wednesday 26th November. With an aim of addressing the UK’s £22bn fiscal shortfall, she outlined a package of tax and economic measures to be introduced over the next five years.  These include the freezing of personal tax thresholds, the extension of National Insurance to certain salary sacrifice arrangements, and higher taxes on dividends. 

Below, we highlight the most significant measures and what they mean for UK business owners. 

Minimum wage changes

The National Living Wage will increase from £12.21 to £12.71 per hour on 1 April 2026, representing a 4.1% increase. 

The National Minimum Wage for 18-20 year olds will rise from £10.00 to £10.85, an 8.5% increase, potentially boosting annual earnings by up to £1,500 a year. This reflects the government’s aim to narrow the wage gap between younger workers and those on the National Living Wage. 

Additionally, the rate for 16-17 year olds and apprentices will increase from £7.55 to £8.00 per hour, a rise of just over 6%.

These increases will raise staffing costs for many employers and should be factored into future cashflow and budgeting forecasts. 

Personal Tax Thresholds Remain Frozen 

Income tax and employer National Insurance thresholds will remain frozen until at least April 2031. 

While nominal tax rates remain unchanged, as wages rise with inflation more individuals will be drawn into higher tax brackets over time, increasing the overall tax burden for both employees and employers. 

Corporation Tax, Capital Allowances, and the New First Year Allowance. 

• Corporation Tax will remain capped at 25% for the rest of this parliament. 

• From April 2026, writing-down allowances will be reduced from 18% to 14%, affecting the tax relief businesses can claim on capital expenditure. 

• To offset this, a new 40% First Year Allowance will be introduced from 1 January 2026. This will apply to most main-rate assets, including expenditure on assets for leasing and expenditure by unincorporated businesses.

The balance between reduced ongoing relief and enhanced upfront relief makes the timing of capital investment more important than ever. 

Increased Dividend Tax. 

From April 2026, dividend tax rates will rise by two percentage points for basic and higher-rate taxpayers: 

• Basic rate: 8.75% to 10.75% 
• Higher rate: 33.75% to 35.75% 

This directly impacts the widely used low-salary/high-dividend remuneration strategy adopted by many owner-managed businesses. 

ISA Reforms

From April 2027, the annual ISA allowance will be reduced from £20,000 to £12,000 for individuals under 65. 

The government hopes this will encourage grater participation in Stocks and Shares ISAs to support long-term investment and economic growth, though it reduces the scope for tax-free personal savings. 

Limitations on Pension Contributions via Salary Sacrifice

From 2029, the National Insurance exemption on pension contributions made via salary sacrifice will be capped. Only the first £2,000 per person, per year, will remain exempt from National Insurance. Contributions above this threshold will be subject to Nation Insurance, reducing the overall tax efficiency for larger pension funding strategies. 

Employee Ownership Trusts (EOTs)

Capital gains tax relief on disposals to Employee Ownership Trusts is being reduced from 100% to 50%. This significantly lessens the attractiveness of EOTs as a tax-efficient exit strategy for business owners and may prompt a reassessment of long-term ownership plans. 

Conclusion

Taken together, these measures represent a gradual tightening of the tax environment for both individuals and businesses. With personal thresholds frozen, dividend taxes rising, and pension and salary sacrifice benefits being restricted, many business owners may need to reconsider how they extract income, potentially shifting the balance between salary, dividends, and pension contributions. 

Careful forward planning is now more important than ever. At Sawford Bullard we are already helping clients assess how these changes will affect their personal and business finances, and we can work with you to optimise your tax position, review remuneration strategies, and plan confidently for the years ahead.