Based on the Autumn Budget 2025, delivered by Chancellor Rachel Reeves on Wednesday, 26 November 2025, here is a summary of the key points affecting small business owners.
The Budget presents a “mixed bag” for small businesses: while there is targeted relief for the high street (retail, hospitality, and leisure), owners generally face higher costs through wage increases, dividend tax hikes, and extended threshold freezes.
1. Taxation on Business Owners & Dividends
- Dividend Tax Increase (April 2026): The tax rate on dividend income will increase by 2 percentage points.
- Basic Rate: Rises from 8.75% to 10.75%.
- Higher Rate: Rises from 33.75% to 35.75%.
- Impact: This directly reduces the take-home income for limited company directors who pay themselves via dividends.
- Threshold Freezes (Fiscal Drag): Income Tax and National Insurance thresholds, which were due to thaw in 2028, have been frozen for a further three years until 2031. As your earnings (or your employees’ earnings) rise with inflation, more income will fall into higher tax bands.
- Landlord & Property Tax (April 2027): New separate property income tax bands of 22%, 42%, and 47% will be introduced for landlords, effectively a 2% surcharge to counter the lack of National Insurance paid on property income.
2. Business Rates (Property Tax)
- Retail, Hospitality & Leisure (RHL) Relief:
- A permanent lower tax rate (multiplier) is being introduced for RHL properties from 2026-27.
- For the 2025/26 tax year, eligible businesses will receive 40% relief on business rates bills (capped at £110k per business). While this is permanent support, it is less generous than the temporary 75% relief that was in place previously.
- Small Business Multiplier: Frozen for another year, protecting over a million small properties from inflationary bill rises.
- Larger Business Surcharge: To fund the RHL relief, a higher multiplier will apply to properties with a Rateable Value over £500,000 (e.g., large distribution warehouses).
3. Employment & Wage Costs
- National Living Wage Increase (April 2026):
- The rate for workers aged 21+ will rise to £12.71 per hour.
- The rate for 18–20 year-olds will rise sharply to £10.85 per hour, continuing the move toward a single adult rate.
- Impact: This increases payroll costs significantly, following on from the Employer NI increases introduced in the previous budget.
- Employer National Insurance: Rates and thresholds remain as set in the Oct 2024 budget (currently 15% on earnings above £5,000/year), but no new increases were announced in this specific budget.
4. Investment & Corporation Tax
- Corporation Tax Rate: Capped at 25% for the duration of this Parliament (the lowest headline rate in the G7). Small Profit Rate (19%) remains for profits under £50,000.
- Capital Allowances Changes:
- Writing Down Allowance Reduced: The main pool writing down allowance will drop from 18% to 14% from April 2026.
- New First-Year Allowance: To counter this, a new 40% first-year allowance for qualifying main rate assets is introduced from January 1, 2026.
- Electric Vehicles: The 100% first-year allowance for zero-emission cars and charge points is extended to April 2027.
- Annual Investment Allowance (AIA): Remains at £1 million, covering 99% of business investment needs.
5. Other Key Measures
- Fuel Duty: The 5p cut has been extended until August 2026, keeping fuel costs lower for logistics and transport businesses for now.
- VAT on Private Hire: From 2026, private hire vehicle operators (taxi firms) can no longer use the Tour Operators Margin Scheme (TOMS), closing a loophole and ensuring standard VAT rules apply.
- Electronic Invoicing: The government signalled a move toward mandatory electronic invoicing standards to help close the “tax gap,” meaning businesses may need to update accounting software in the near future.
Summary Table for Quick Reference
| Area | Change | Effective Date |
| Dividends | Tax rates increase by +2% (10.75% / 35.75%) | April 2026 |
| Wages | National Living Wage rises to £12.71/hr | April 2026 |
| Business Rates | Permanent lower rate for Retail/Hospitality; 40% relief | 2025/26 |
| Allowances | Main pool writing down allowance cut to 14% | April 2026 |
| Fuel Duty | 5p cut extended | Until Aug 2026 |
| Thresholds | Income Tax & NI thresholds frozen | Until 2031 |