Autumn Budget: Key takeaways Autumn Budget: Key takeaways
Rachel Reeves’ Autumn Budget 2025 didn’t contain many headline measures specifically targeted at small and medium-sized businesses, but it did include several decisions that will significantly influence how SMEs operate, invest and extract profit in the coming years. Below is a breakdown of the key changes business owners should be aware of.
Dividend, savings and property income tax changes
- From 6 April 2026, the ordinary and higher-rate tax on dividend income increases by 2 percentage points. The basic (ordinary) dividend rate will become 10.75%, the higher rate 35.75%; the additional rate remains at 39.35%.
- For savings interest and property income: from 6 April 2027, tax rates will also go up by 2 percentage points across the board.
- For SME owners running limited companies and paying themselves via dividends, this means their take-home pay may shrink unless they adjust their drawdown strategy.
Freeze on income tax and National Insurance thresholds until 2031
- Personal income-tax thresholds (e.g., personal allowance, higher-rate threshold) and the equivalent thresholds for NICs will be frozen until at least 5 April 2031.
- As pay or dividends rise over time (e.g., due to inflation or business growth), this freeze can lead to “fiscal drag,” pushing more income into higher tax/NIC bands. SMEs, and their directors or staff, could gradually face higher effective tax burdens even without rate increases.
New investment relief and revised capital allowances for business assets
- From 1 January 2026, a new 40% First-Year Allowance (FYA) will apply to qualifying capital expenditure on plant and machinery (excluding cars and second-hand assets).
- From 1 April 2026, the standard Writing-Down Allowance (WDA) rate for the “main pool” of capital assets drops from 18% to 14%.
- For SMEs planning investment in new equipment or machinery: this could be a good time to accelerate purchases, since the upfront deduction is generous, but long-term annual allowances are reduced.
Business-rate relief for retail, hospitality and leisure (RHL) properties
- The Budget introduces permanently lower business-rate multipliers for eligible retail, hospitality, and leisure properties (RHL) under certain rateable value thresholds starting 2026.
- More than 750,000 RHL properties are expected to benefit from this relief.
- For SMEs occupying premises in those sectors, this should reduce fixed property-related costs, helping cash flow and potentially making property-based business models more affordable.
Pension salary-sacrifice changes, NIC exemption cap from April 2029
- From April 2029, the favourable National Insurance treatment for pension contributions via salary sacrifice will be capped: only the first £2,000 per year will remain exempt from NICs. Amounts above that will attract both employer’s and employee’s NICs.
- This change reduces the attractiveness of using salary sacrifice for larger pension contributions, a method often used in owner-managed companies to minimise tax/NICs. Businesses that currently rely on this structure may want to reconsider or restructure pension contributions ahead of 2029.
What This Means for Your Business and What to Do Next
- If you draw profits via dividends: consider reviewing how much you plan to take out in 2026 onwards, and whether restructuring your remuneration mix makes sense.
- For investment plans: if you were already thinking of upgrading equipment or machinery, the new 40% FYA makes 2026 an attractive window to invest.
- For high street retail/hospitality/leisure: check whether your premises qualify for the lower RHL business-rate multiplier, could mean meaningful savings.
- If you, your directors or employees use salary-sacrifice pension schemes: start reworking pension contribution and pay-structure plans ahead of the 2029 NIC changes.
- Be aware of “fiscal drag”: with thresholds frozen until 2031, inflation and nominal pay rises will push more income into higher tax/NIC bands over time, so regular reviews of salary, dividends and drawings are wise.
As always, the Perk team is here to support business owners with clear, tailored advice. If you’d like to talk through how these changes might affect your business, you can reach us on 07958 979902 or at enquiries@perkaccounting.co.uk. A little proactive planning now can go a long way in helping SMEs stay compliant, manage costs, and stay ahead in a changing tax landscape.
Please note: The information in this article is based on our current understanding of the Autumn Budget 2025. While we take care to ensure accuracy, we cannot accept responsibility for any errors or omissions. This content is for general guidance only and should not be relied upon as tax or investment advice.
