A guide for UK business owners navigating the new budget
The Autumn Budget 2025 has been announced by the chancellor today (26th November 2025), bringing a fresh wave of updates and tax increases for UK business owners and individuals to navigate. As usual, there is a lot to digest, from changes in the national minimum wage wages, new sugar taxes, a shake up to higher banded council tax rates and a further freeze on income tax thresholds.
Our accounting team has been spending time reviewing the details and fine print to get a grip on how these changes will everyone. There is a lot to go through, so let’s dive into the highlights and key points to explore what these changes might mean for both individuals and business owners.
National Minimum and Living Wage Increases
From April 2026, the National Minimum and Living Wage is set to rise to £12.71 for anyone aged 21 and over. For businesses with a larger workforce or those operating in labour-intensive sectors, it’s a considerable expense to factor into your company budget for next year. This represents a 4.1% increase in the minimum wage for those over 21, which employers will have to pay.
Additionally, rates for employees younger than 21 are also increasing. From April 2026, 18–20 year olds will see their hourly minimum wage increase to £10.85 per hour, a 8.5% rise from the current £10.00. This is while 16–17 year olds and apprentices will earn £8.00 minimum wage per hour, marking an 6% jump from the current rate of £7.55.
Income Tax Thresholds Frozen Further
Despite manifesto pledges not to raise taxes for the general public, fiscal drag continues to pull more people into higher tax brackets by not raising the income tax thresholds. It was announced today that they will be further frozen for an additional three year past the 2028-29 tax year that was announced in the last budget.
What this means is that more of your wage will be paid at the higher rates via a stealth tax raid on your hard earned cash. The headline tax threshold rates remain the same, at 20%, 40% and 45%, and the allowance will remain £12,570.
Corporation Tax & Income Tax Changes
Businesses investing in equipment, plant & machinery, computers and other fixed assets currently have a few options for tax savings via the annual investment allowance, first year allowance and writing down allowances, which allows businesses to save tax. The changes announced in the Autumn budget 2025 will reduce the writing down allowance rate from 18% to 14%, meaning businesses using this mechanism will be restricted from claiming full tax relief, from April 2026.
Tax Rates Increased for Dividends, Savings Interest and Property Rentals
Currently the dividend tax rate stands at 8.75%, 33.75% and 39.35% for dividends over the tax free dividend allowance of £500. From 2026, the rates will increase to 10.75%, 35.75%, with the highest rate remaining 39.35% respectively.
Savings interest tax rate is currently taxed at the same rate as income tax (20%, 40% and 45%). This will increase by 2% from April 2026. The personal savings allowance (PSA) of £1,000 remains in place, allowing 90% of savers to earn interest on their savings (up to £1,000) without paying tax.
Landlords will see an increase in income tax paid on rental profits of 2%, so these will increase to 22%, 42% and 47% from April 2026.
Salary Sacrifice Pension Taxes
From April 2029, any pension payments made via salary sacrifice arrangements will face national insurance charges for payments totalling more than £2,000 per tax year.
Limiting the national insurance relief that is currently in place will lead to higher national insurance bills for both employees who use the salary sacrifice scheme, and their employers.
If you’re not sure what a salary sacrifice scheme is – a formal agreement between employees and employers whereby you voluntarily give up a proportion of your gross salary to pay it into a pension, which in turn reduces employees national insurance contributions, and employers national insurance contributions.
Cash ISAs Changing
Reforms to cash ISAs have been announced to encourage more to invest in businesses in the UK. Initially there was talk that the limit would be lowered, however it will remain at £20,000, but £8,000 of this will now be designated for investment purposes only, so savers will only be able to put in £12,000 of cash into an ISA per year.
Over 65s will retain the full £20,000 cash allowance.
Electric & Plug-in Hybrid Vehicle Taxes Increased
Ahead of the budget announcement, a spokesperson for the government said that there was no system to ensure everyone using the UK roads paid their share of vehicle taxes, including vehicle excise duty and fuel duty. Electric vehicles were branded the best tax saving option for businesses who wanted to invest in more energy efficient vehicles, which were taxed at a much lower tax rate as a benefit in kind, however we now must consider the ‘pay per mile’ tax charge that will be introduced and vehicle excise duty charges that are in place as these now pose an additional cost on businesses as well as individuals.
The new pay per mile system will charge 3p per mile to electric & 1.5p per mile for plug in hybrid vehicle users, and is touted to will be based on estimated mileage, with a ‘catch up’ payment once the actual mileage is known, or for any overpayments to be carried ahead to the next year. This will come into place from April 2028, and further details will be announced later.
The expensive car supplement for new vehicle excise duty charges for higher priced electric & hybrid vehicles will be increased, so the higher charges will only apply for vehicles worth more than £50,000 (was £40,000).
Electric vans will be exempt from these new rules.
Other Headline Taxes…
‘Milkshake tax’ – the sugar tax will be extended to include dairy-based drinks such as milkshakes, and pre-packaged coffees, but not coffee shop coffees. This will include all drinks containing at least 4.5g of sugar per 100ml.
‘Mansion tax’ – an increased council tax charge on properties worth more than £2m – taking effect from 2028.
Child benefit changes – the two child limit cap will be removed from April 2026.
Capital gains tax (CGT) on disposals to employee trusts – the CGT allowance will be reduced from 100% to 50% from April 2027.
Fuel duty frozen – no further increases until September 2026.
Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) schemes – extensions announced for income tax deductions for investors.
Apprenticeship boost – youth guarantee scheme to encourage young people into employment. 100% funding for apprenticeship training for under 25s (currently 95% funded) for small and medium sized businesses.
Gambling taxes – gambling firms will see their tax rate increased from 21% to 40% for remote and online gambling from April 2026. A general betting duty for remote betting will also be increased from April 2027 to 25%, up from 15%. This is not payable by gamblers, but the firms who provide online gambling.
Energy bill obligation scheme – the removal of a levy on energy bills worth £150 per year.
Tobacco and alcohol duty changes – an increase of 2% above RPI on tobacco products and an RPI increase on the duty on alcohol.
Welfare reforms – removal of premium vehicles being included in motability schemes, along with the end of VAT and insurance premium tax relief on motability vehicles.
Local government funding – additional funding for local areas such as Leeds, as well as Wales, Scotland and Northern Ireland.
Business rates – permanent reduction in business rates for 750,000 retail, hospitality and leisure businesses, paid for by higher rates on properties worth more than £500k used by warehouse giants. Support will be available for businesses where they suffer a large increase in their bill.
Customs duty changes – customs duty will apply to parcels of all values to stop online retailers undercutting high street retailers.
Budget 2025: The Conclusion From Our Accounting Team
All in all, this budget offers some significant changes for business owners and individuals. It’s less of a fiscal shock than initially anticipated and a reminder to budget for higher payroll and employer costs for businesses employing staff. With these changes in mind, business owners can approach the new financial year prepared and ready to adapt to the Autumn budget impact, and of course we will be here to guide you!
With these changes, navigating the complexities of payroll, corporation tax, and VAT can be challenging for business owners. We anticipate their will be some changes both personally and in business to how you approach investment, savings and spending in the coming 12 months, and it is a lot to balance while you run your business. At Freedom In Numbers, we offer comprehensive accounting services tailored to your needs, ensuring compliance and efficiency in these critical areas.
Our expert accounting team is here to help relieve your financial stresses, allowing you to focus on what you do best: giving excellent service to your customers and growing your business. So get in touch with us if you are worried about changes in this coming budget to see how our team can help you manage your accounting going forward.
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