What the Autumn Budget 2025 means for small business owners

On 26 November 2025, Chancellor Rachel Reeves presented the UK's Autumn Budget to parliament.​

For small business owners, company directors and sole traders, government budgets don't just make headlines. They directly affect your take-home income, cash flow and decisions that shape how you run your business.​

The Autumn Budget 2025 sets out several important tax and compliance changes that will start to take effect from 2026 onwards. Below, we've summarised the key points relevant to UK business owners and what they could mean for your business in the months and years ahead.​

The budget confirmed higher minimum pay rates from 1 April 2026:​

If you employ staff on or near minimum wage, your payroll costs will rise from April 2026. This is especially relevant for labour-intensive businesses or those planning to recruit in the new year.​

Employers should plan now to build these increases into their budgets, review pricing where necessary, and make sure growth plans still stack up under higher staffing costs.​

Training for apprentices under the age of 25 will be free for SMEs in England.​

For small business owners looking to grow their team in a cost-effective way, this significantly reduces the financial barrier to hiring and training younger staff. It could be a smart route for building skills in-house while managing payroll and training costs.​

The ordinary and upper dividend tax rates will increase by 2 percentage points from April 2026. This means that many company directors who take a large proportion of their income through dividends will see higher personal tax bills.​

If you currently use a low salary and dividends as your main extraction strategy, this may no longer be as tax-efficient from 2026 onwards. For many directors, it may be worth reviewing how profit is taken out of the business ahead of the changes.​

From April 2027, taxes on savings income and other investment income will also increase by 2 percentage points.​

This will impact business owners who earn interest on savings, hold investment portfolios, or receive non-dividend investment income alongside their business earnings.​

The government has confirmed that National Insurance will apply to both employer and employee salary-sacrifice pension contributions above £2,000 per year from 2029.​

Salary sacrifice has been a popular way for directors and employees to make tax-efficient pension contributions. This change will reduce the tax and National Insurance advantage for higher contributions made through sacrifice.​

For business owners, it's worth reviewing long-term pension and remuneration strategies now. Alternative contribution methods or earlier planning may be more effective before the new rules take effect.​

Making Tax Digital (MTD) for Income Tax has not been delayed in the budget and is still moving ahead from April 2026. This will affect many sole traders, landlords, and individuals with business or property income.​

Under MTD for Income Tax, you will be required to:​

This is a major change in how self-employed people and landlords report their income, and it will significantly increase the importance of good bookkeeping and software systems.​

If you're currently keeping manual records or only updating your accounts once a year, this change will require a big shift.​

Read more: Making Tax Digital (2025 update)​

The government has also confirmed that it's exploring and moving towards e-invoicing as part of its wider tax and reporting reforms. This is likely to come in from 2029.​

This is expected to start with VAT-registered businesses and would involve invoices being created, approved and transmitted digitally in a standardised format.​

For small businesses, this is another sign that investing in proper accounting software is no longer optional. It is fast becoming essential.​

Although headline tax rates have not changed much for salaries, income tax and National Insurance thresholds remain frozen until at least 2030. This means that as your income rises with inflation, more of it could be taxed at higher rates. Even if your business is only growing modestly, you could still end up paying more tax overall.​

For both employees and directors, this can significantly affect take-home pay over time.​

The government is investing more into HMRC's powers to tackle tax avoidance and non-compliance.​

There will be:​

For small businesses this does not mean trouble, but it does mean that good record-keeping, correct reporting and sensible tax planning are more important than ever.​

All of this points to one clear theme - the way you pay yourself and run your finances may need to change.​

You may need to:​

 Business owners who plan early will be in a far stronger position than those who leave this until the last minute.​