Autumn Budget 2025: Full Small Business Guide to Tax Changes and Rates
- John Massey
- 6 hours ago
- 5 min read
The 2025 Autumn Budget was highly anticipated. With a £20–£30bn gap to close—and earlier attempts to cut welfare or raise income tax abandoned—the government instead delivered a “smorgasbord” Budget: small tax rises and policy tweaks across almost every area. It’s the widest range of fiscal measures announced in more than 36 years.
Read on for my Autumn Budget TLDR, followed by Key Measures in more detail.
Autumn Budget 2025 TLDR for small business owners
My summary of how the Autumn Budget affects small businesses:
Income tax free Personal Allowance of £12,570 and Basic and Higher rate thresholds frozen until 2031.
Dividend, savings and property income tax rates increasing by 2%.
MTD for sole-traders and landlords starting April 2026.
NMW increases 50p to £12.71
CGT on selling a business (BADR) increases to 18% (up from 10% a couple of years ago)
No change to VAT
A new Electric Vehicle Excise Duty (eVED) of 3p per mile from April 2028 (~£300 a year)
Employee pension contributions made through salary sacrifice capped at £2,000 per year.
Key measures in more detail
Corporation tax
The main rate of corporation tax remains at 25% (and 19% for profits under £50,000).
Penalties for late submission of corporation tax returns doubled to £200.
Capital Allowances
The Annual Investment Allowance will continue to offer 100% first-year relief for plant and machinery investments up to £1m for all businesses, including unincorporated ones (i.e. small business will not be affected by the following changes).
From 1 January 2026 a new First-Year Allowance of 40% for main-rate assets is introduced for companies; applying to certain assets beyond the current availability of full expensing and the AIA (mainly the plant leasing sector).
From April 2026 the main rate writing-down allowances will reduce from 18% to 14%.
Making Tax Digital (MTD)
Confirmed the intention to roll-out MTD for sole-traders and landlords starting 1 April 2026 for those with incomes over £50,000 and extending to those with incomes over £20,000 by April 2028. This is one of the most impactful 2025 tax changes for sole traders and landlords.
There will be no late-submission penalties for MTD quarterly updates in the first year.
National Minimum Wage (NMW) increases for 2026 💷
A 50p increase (4.1%) in the NMW to £12.71, equivalent to around £1,000 extra for a full-time worker and making the cost to an employer around £30k per year. This increase forms part of wider 2025 tax changes affecting employment costs for small businesses.
Full and latest NMW rates, including a discussion of just how fast wages bills have risen over the last few years – see my post: National Minimum Wage rates from April 2026.
Lower Business Rates
A 5p rates reduction for retail, hospitality and leisure properties with a rateable value (RV) below £500,000.
For example: A small local pub with a RV of £100,000 would see its rates bill reduce from £50k to £38k (around 25% reduction).
Capital Gains Tax (CGT)
Capital Gains Tax on business disposals (BADR) now in-line with the main CGT rate of 18% (just a couple of years ago you could sell a business and pay only 10% CGT).
VAT 🧮
VAT remains unchanged in the Autumn Budget 2025, offering stability for small business owners.
There will however, be an increase in late payment penalties from April 2027.
Income tax
Personal tax and employer National Insurance thresholds frozen for a further three years to 2030/31 (nine consecutive years of threshold freezes).
The other key changes affect those in receipt of savings, rental and dividend income:
Dividend income
From April 2026, dividend tax rates will increase by two percentage points, with the:
ordinary rate rising from 8.75% to 10.75%
upper rate rising from 33.75% to 35.75%
Rental and savings income
From April 2027, +2% on rental and savings income will be introduced:
22% (basic rate)
42% (higher rate)
Salary sacrifice capped for pension contributions
From April 2029 the amount of employee pension contributions made through salary sacrifice that is exempt from National Insurance contributions (NICs) will be capped at £2,000 per year.
Employees working from home
Employees required to work from home (WFH) will no longer be able to claim tax relief for costs not reimbursed by their employer. This rules out employees making their own claims to HMRC via Self-Assessment.
Employers can continue reimbursing, tax-free, HMRC’s fixed rate £6/week (or agreed actual costs).
Company Cars ⚡🚗
As previously announced, the government set company car tax rates (benefits-in-kind) for tax years 2028/29 and 2029/30.
Appropriate percentages for zero emission and electric vehicles will increase by 2% per year in 2028/29 and 2029/30 (9% by 2029/30).
Appropriate percentages for all other vehicle bands will increase by 1% per year
A new Electric Vehicle Excise Duty (eVED) of 3p per mile from April 2028 (c. £300 a year). Collected on estimated mileage and balanced out the next year. If your EV is under 3 years old – you’ll need to visit an MOT centre to have your mileage validated 🙄
Overall, company EVs remain tax-efficient, but the gap is closing.
Cash ISA allowance reduced
Whilst the overall ISA allowance is unchanged at £20k – you’ll be restricted to £12k cash + £8k stocks & shares (i.e. a nudge to invest rather than save cash only).
More Timely Tax Payments 🕒
Alongside the more tax investigations for small businesses + increases to Self-Assessment, Corporation Tax, and VAT penalties, the government is also tightening how and when tax is collected.
From April 2029, two major changes take effect:
HMRC will require businesses to pay VAT and PAYE via direct debit.
Income Tax Self Assessment (ITSA) taxpayers who also receive PAYE income will have more of their tax collected through the year via the PAYE system.
In plain English: If you’re a company director, HMRC will begin collecting tax on your dividends in real time, adjusting your PAYE code so that dividend tax is paid much earlier instead of via January/July payments on account.
This will have cash-flow impacts for many owner-managed businesses, especially where dividends vary year to year.
Key Takeaways 📌
Overall, the Autumn Budget 2025 introduces a broad range of tax changes that every small business owner should plan for.
Tax thresholds frozen until 2031 ❄️ – pulling more profit into higher tax bands over time.
Dividend, rental and savings income taxes increase 📈 – reducing take-home income for directors and landlords.
National Minimum Wage rises to £12.71 💷 – increasing wage bills for employers.
Making Tax Digital mandatory from April 2026 🧾 – affecting sole traders and landlords earning £50,000+.
CGT on selling a business increases to 18% 💼 – ending the era of 10% BADR rates.
Company EV benefits remain attractive ⚡🚗 – though the gap narrows with distance-based eVED charges.
No change to VAT or the £90k threshold 🧮 – short-term relief for many small businesses.
Salary sacrifice pension contributions capped from 2029 🏦 – reducing NIC savings for higher earners.
Business rates drop for RHL properties 🏪 – offering targeted support for retail, hospitality and leisure.
More tax collected earlier ⏳ — From 2029, HMRC will mandate direct debits for VAT/PAYE and will collect dividend tax in real time via PAYE for directors, tightening cash flow for many small businesses.
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