Tax allowances for business owners to think about before November Budget

The next UK Budget takes place on 26th November. No one knows what the Chancellor will announce, but with the limited financial headroom, it is unlikely that allowances will become more generous.

If you are a business owner, it is sensible to review and use today’s available allowances while you can. The budget could bring significant changes which may reduce future benefits.

01 Make the most of your tax allowances and exemptions

Despite changes to pensions and inheritance tax, pensions remain a tax-efficient way for business owners to save for retirement. Using allowances like pension annual limits, ISAs, dividend allowances, R&D tax credits, and capital allowances is even more important as the tax burden grows.

02 Understand the impact of the increase in minimum wage and employer NICs

In April this year, employer NICs rose from 13.8% to 15%, with the threshold dropping from £9,100 to £5,000. The minimum wage also increased by 6.7%, from £11.44 to £12.21 for those aged 21 and over. These changes have significantly impacted business costs. SME owners should review the potential effect on staffing and pricing if there are further changes.

03 Be aware of changes to Business Relief (BR)

From April 2026, a 20% inheritance tax will apply to BR assets above £1 million, reducing the full exemption previously available. For businesses over this threshold, lifetime gifting may become an important strategy.

04 Reconsider your remuneration strategy

Recent tax changes have altered the most efficient ways to draw money from companies. The increase in Employer NICs this year has further complicated matters. Seeking advice from your accountant regarding your remuneration strategy remains key.

05 Understand the impact of the Capital Gains Tax (CGT) changes

The main rates of CGT for non-residential property have risen from 10% and 20% to 18% and 24%. In addition, Business Asset Disposal Relief (BADR) rates have increased to 14% and rise again to 18% in 2026. Where appropriate, advancing exits from a business may be attractive due to the rising CGT burden.

06 Reconsider your drawdown strategy

With pension funds becoming liable for inheritance tax from April 2027, drawing retirement income from pensions may become more attractive if you face IHT liability. Building a tax-efficient drawdown strategy is increasingly important.

Many of the changes already announced have increased the tax burden for small business owners. It is prudent to prepare for more changes in the budget, which may mean making fundamental adjustments to achieve your financial goals. At Southover Wealth, we can help you put a plan in place or bring your existing plan back on track.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.

William Martin DipFA CeMAP
Managing Director, Southover Wealth
Senior Partner Practice of St. James’s Place

020 8058 8230
07487 727 498
www.southoverwealth.co.uk
william.martin@sjpp.co.uk