Autumn Budget 2025: what does it mean for your business?

Stuart Noakes, Partner and Head of Tax, Carpenter Box

Many business owners were watching the Autumn Budget closely to see whether the Chancellor would introduce further cost pressures after a challenging year. However, this Budget was noticeably kinder to businesses than last year’s, with fewer direct tax increases and a more measured approach to reliefs and thresholds.

Below is a summary of the key announcements and what they mean for employers, business owners and growing companies.

Freezing of allowances and tax rate bands

The freezing of the personal and other allowances, along with the current tax rate bands until 2030/31 will have the biggest tax impact on the country as a whole over the next few years.

Depending on the rate of inflation and each taxpayer’s circumstances, this “fiscal drag” is equivalent to a few percentage points increase in the income tax and National Insurance rates.

Minimum wage increases

Above-inflation increases to both the National Living Wage and National Minimum Wage were confirmed. While expected, these changes will particularly affect sectors with a high proportion of employees on minimum wage, including hospitality, leisure and entertainment, retail, care and support services.

For these industries, where labour costs make up a substantial proportion of overall business expenditure, the increases could be significant.

The Chancellor did announce targeted business rates support for hospitality and leisure businesses to help soften the impact. Details will follow, but any reduction will be welcomed by operators who have faced sustained cost pressures since the pandemic.

Salary Sacrifice for pensions

One of the more notable announcements relates to pension salary sacrifice. Currently, both employers and employees save National Insurance on all eligible salary sacrifice pension contributions. From April 2029, this will change.

Under the new rules:

• The first £2,000 of pension contributions made via salary sacrifice will continue to be free from employer and employee National Insurance.

• Any contributions above £2,000 will attract National Insurance at the usual rates.

HMRC will consult on how this will operate in practice, but businesses have several years to plan. For now, employers can continue with existing arrangements while awaiting further technical guidance.

Capital Allowances: minor changes for most businesses

A reduction in the writing down allowance for plant and machinery, from 18% to 14%, was announced. This will only affect companies with long-standing capital allowance pools or very high historic capital expenditure.

The Full Expensing regime remains unchanged, meaning most new qualifying plant and machinery can still be written off at 100% in year one. As a result, the impact of this change will be minimal for the majority of businesses investing in new equipment.

Leasing companies are not entitled to Full Expensing but will benefit from a new 40% First Year Allowance.

Expanding EMI and EIS to support growing companies

Businesses using employee share schemes will see some positive developments:

• EMI thresholds have been expanded so that companies with up to 500 employees and no more than £120m in gross assets can now qualify. This significantly broadens the number of mid-sized companies able to offer tax-efficient employee share options.

• EIS eligibility has also been extended to businesses with up to £30m in gross assets. While this will only apply to a minority of companies seeking investment, it is a welcome enhancement to the UK’s growth-focused incentives.

These changes may encourage more employers to adopt long-term incentive plans and make it easier for scale-up businesses to raise external capital.

Capital Gains Tax – Employee Ownership Trusts (EOTs)

Sales to an EOT, an increasingly popular approach to succession planning, also saw a significant change.

Previously, business owners selling their company to an EOT could claim full relief from Capital Gains Tax (CGT) on the sale. Moving forward, only 50% of the gain will be subject to relief from CGT and the remaining 50% will be taxable at the standard CGT rates.

Although this reduces the impact of the relief, an effective 50% CGT relief remains attractive for many business owners considering an employee-led ownership model.

Income tax increases

Perhaps the most important announcement for many business owners relates to the taxation of dividends. From 6 April 2026, dividend income tax rates will rise by 2% for basic rate taxpayers and higher rate taxpayers. There is no change for additional rate taxpayers until 6 April 2027.

Dividend tax rates have increased notably in recent years and the cumulative effect will be meaningful for entrepreneurs who continue to withdraw most of their income from their companies by way of dividend. This may lead many to reconsider:

• how they take profits

• whether their current business structure remains optimal

• whether a combination of salary, dividends and pension contributions is more tax-efficient

• how future profits should be timed  or distributed

Each business owner’s circumstances should now be reviewed on a case-by-case basis to ensure the most tax-efficient approach is identified.

April 2027 will also bring a 2% increase in the income tax rates that apply to property and savings income.

Inheritance tax

Last year, the big talking point was  the changes to inheritance tax with 100% business or agricultural property relief restricted to an allowance of £1m per individual (with 50% relief on any qualifying assets above this limit) with effect from 6 April 2026 and with unused pension savings due to form part of an individual’s estate from 6 April 2027.

There have been no substantial amendments to the new legislation that will be introduced next year and the year after.

Mitigating the effects of the upcoming changes has been one of the hottest points of discussion over the past year and continues to be so.

How we can support you

Overall, this Budget brings fewer shocks and far fewer business tax rises than many anticipated. Most employers will experience manageable changes, and some sectors will benefit from targeted support. However, following the changes to inheritance tax and capital gains tax announced last year, the adjustments to dividend taxation and salary sacrifice rules mean careful planning is now even more important for owner-managed businesses.

Carpenter Box’s award-winning tax team will be happy to help you adapt and reassess your plans in light of these legislative changes.

Please visit our dedicated Budget Hub which includes more details on the announcements as well as video reactions from our team.

Information correct as of 26 November 2025.