Budget, Business Growth

Autumn Budget 2025 and how it affects your business

Posted on by Sharon Baker
28
Nov

Let’s look at the Autumn Budget 2025 and how it affects your business

Today Rachel Reeves announced her 2nd Budget, amidst a lot of worry and concern abut tax hikes.

We saw less big changes for small business, but let’s get into what has changed.

We also have a handy download with all the main details.

Changes to the cost of employing people from April 2026:

1. National Minimum Wage and Living Wage

National Living Wage will increase from £12.21 to £12.71 in April 2026, for ages 23 and over

    • This is an 4.10% increase
    • For an employee on a 40 hour week, this will increase by £1,040 per year, or £86.66 per month
    • This is a further increase on last year’s increase to £12.21, previously £11.44

National Minimum Wage for 18 – 20 year olds will increase from £10.00 to £10.85

    • This is an 8.5% increase
    • For an employee on a 40 hour week, this will increase by £1,768 per year, or £147.33 per month

What you can do:

  • Speak to your accountant about what these changes mean to you.
  • If your employees aren’t on minimum wage, in theory you don’t need to increase their wages, but you may need to think about whether you need to increase all employees’ pay.

2. National Insurance Charge on Pension Contributions

The main NIC rates and allowances haven’t changed, however, the Government have brought in a cap on pension contributions from April 2029, where there was previously no cap.

  • Salary sacrifice pension contributions will now be subject to a £2,000 pa cap
  • This means that employees’ and employers’ NIC would be payable on pension contributions above £2,000
  • Income tax is not affected
  • This should not affect company directors

3. Apprenticeship Funding

The Government announced that apprenticeship training for apprentices aged up to 25 years will be fully funded.

This is an incentive to get more 16 to 25 year olds into employment.

Income Tax and NICs for employees and the self-employed

No changes to these rates, which effectively means that more people are going to start earning over the tax free allowance, as the national living wage, and other wages start to rise.

Therefore people will start to pay more tax.

1. Income tax:

The income tax allowances will be frozen until April 2031. This was previously frozen to 2028, so the freeze has been extended by 3 years.

This means that over the coming years, more people will be brought into paying tax, due to pay increases and inflation.

Here’s a reminder of the income tax thresholds:

    • Tax free allowance 0%: up to £12,570
    • Basic rate 20%: on income between £12,571 and £50,720
    • Higher rate 40%: on income between £50,721 and £125,140
    • Additional higher rate 45%: on income above £125,141

2. Dividend tax:

This is increasing by 2% for the basic rate, and higher rate dividend income. The additional higher rate isn’t changing.

New rates:

  • Basic rate dividend tax: 10.75% (previously 8.75%)
  • Higher rate dividend tax: 35.75% (previously 33.75%)

What this means:

If you take salary and dividends up to the higher rate threshold of £50,270, you’ll pay an additional £744 in tax each year.

Consider how you take funds from your company, as this may need to change. You could also review your tax and national insurance if you became self employed, instead of a limited company.

However, you may have to sign up to Making Tax Digital, which may not suit you.

4. Employees pay Class 1 NIC (no change):

    • No NIC on earnings up to £12,570
    • 8% on earnings between £12,571 and £50,270
    • 2% on earnings over £50,271

5. Self employed pay Class 4 NIC (no change):

    • No NIC on profits up to £12,570
    • 6% NIC on profits between £12,571 and £50,270
    • 2% NIC on profits over £50,271

Reminder of Changes announced Autumn 2024, these remain the same:

1. Employers’ NIC Threshold Reducing to £5,000

The threshold is the amount your employees can earn before you start paying employers’ national insurance.

    • This is reducing from £9,100 per year to £5,000
    • This means that for every employee you’ll pay employers’ national insurance on an additional £4,100 of wage cost
    • At the new rate of 15%, this means additional employers’ national insurance at £805.80 per year

2. Employers’ NIC Allowance increasing to £10,500

This is the allowance to be used up against your total Employers’ NIC cost each tax year.

    • It’s increasing from £5,000 to £10,500 for each tax year.
    • After you’ve used up this allowance, you start to pay the Employers’ NIC as usual.
    • At the new rate of 15% it means you’ll pay £5,500 less Employers’ NIC each year.
    • watch out: this is only available if you have more than 1 employee!
    • If you take into account the NIC threshold reducing to £5,000, you’ll use up the extra allowance of £5,500 with less than 6 employees

We’ve put together a separate blog going into more detail on the NIC changes, and how we can help you here.

3. Capital gains tax (CGT) on exiting your business

There are many ways to exit your business, and be tax efficient at the same time. One way is to sell your shares, or some of your shares.

If you’re selling all or most of your business via shares, there may be relief available.

Business Asset Disposal Relief (BADR)

This was previously known as Entrepreneur’s Relief.

If you meet all the criteria, this means that you’ll only pay 10% capital gains tax on the proceeds from the sale of your shares, in your own business.

(we’re simplifying things here, do get specialist advice to fit your circumstances)

BADR remains at 10% up to 5 April 2025, then increases as follows:

  • 6 April 2025 14%
  • 6 April 2026 18%

This could mean additional capital gains tax of £20,000 on proceeds from the sale of your shares of £500,000.

4. Corporation tax

There are no changes to corporation tax.

Corporation tax is charged at:

    • 19% on taxable profits up to £50,000
    • 25% on taxable profits over £250,000
    • Marginal rate on profits between £50k and £250k

5. VAT Threshold

This hasn’t changed in the Autumn 2025 Budget

 

Get in touch

We’re determined to help small business owners make sense of their numbers, and make a plan to realise their dreams. So we’re offering a Business Diagnostic Review, worth £795 plus VAT to help you to find clarity and focus and to make a plan for your business!

Get in touch today if you think we can support you too, and feel free to download our Autumn Budget factsheet.

Sharon

Sharon Baker