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We take a look at how the Autumn Budget 2025 impacts owner managed businesses
08 December 2025
The Autumn Budget 2025 impacts owner-managed businesses in terms of tax rises, frozen tax allowances, new dividend tax rates and extra employers' National Insurance from salary sacrifice schemes.
The Autumn Budget 2025, delivered by Chancellor Rachel Reeves on 26 November, contained mixed news for OMBs in that whilst it announced increased limits for Venture Capital Trusts and Enterprise Investment Schemes, a wider use of employee share options, and more funds from the British Business Bank, it also ushered in more taxes on dividends, savings income and salary-sacrifice pensions, as well as a further freeze on tax thresholds.
This article summarises the key announcements affecting owner-managed and small and medium-sized businesses, alongside practical planning actions to consider.
Businesses generally face modest economic growth at the moment, with ongoing inflationary pressures particularly on energy and labour costs. Interest rates for borrowing remain high.
While some targeted reliefs remain, the Budget does not deliver the type of stimulus many SMEs had hoped for. Instead, the focus is on increasing the tax burden.
The National Living Wage for workers aged 21+ will rise to £12.71 per hour from April 2026. Younger workers will receive proportionally larger increases. See our separate article on the National Living Wage and what employers can do to mitigate the costs. Labour-intensive sectors such as retail, hospitality, and care are most affected.
From 2029, employer pension contributions made via salary sacrifice will be capped at £2,000. This reduces the NIC advantage of large salary-sacrifice arrangements and will require businesses and directors to rethink remuneration structures. There are rumours that the Chancellor may bring in this change much sooner than 2029, so employers will need to keep aware of any acceleration of the cap's imposition. See our separate article on salary sacrificed pensions.
The Budget widens access to Enterprise Management Incentive (EMI) schemes, enabling more growing businesses to issue tax-advantaged share options. However, tax reliefs for Employee Ownership Trusts (EOTs) are being tightened, altering the planning landscape for succession and employee-ownership transitions.
Dividend tax rates will rise by 2% from April 2026 (ordinary rate to 10.75% and upper rate to 35.75%). Many owner-managers pay themselves via dividends; so this change will reduce post-tax income and affect profit-extraction strategies.
For those extracting profits via dividends, this represents a 23% increase in tax liability on ordinary rate dividends.
The usual dividend versus salary adjustments versus pension contributions optimal mix depends on your personal circumstances, your business structure, and your timeline. It is important to review this ahead of the April 2026 date.
Business owners may wish to take a dividend before the rate increase in April, and will need to bear in mind that the date dividends are paid is when they become due and payable, so a resolution should be in writing to this effect.
The freeze on personal tax thresholds continues through to 2031. This creates significant fiscal drag, pulling more business owners and employees into higher tax bands over time.
New business-rate measures will support many retail, leisure and hospitality premises from 2026, but larger commercial properties (including warehouses) may face higher liabilities.
However, many businesses face higher rates bills because current rates relief is scheduled to end in April 2026, having previously been reduced from 75% to 40%. Some hospitality and leisure businesses may also see increases to their venues' rateable values, leading to higher bills.
Businesses should review their property footprint and cashflow assumptions accordingly.
The Budget confirms greater pressure on the taxation of income from assets, including capital gains. Owners considering an exit or asset disposal should re-evaluate timing and available reliefs such as Business Asset Disposal Relief (BADR).
See our article: Solvent liquidation: why timing matters more than ever.
There will be a new mileage charge for electric and plug-in hybrid cars from April 2028. This will be set on a per-mile basis and motorists will pay alongside their existing Vehicle Excise Duty. Plug-in hybrid cars will pay 50% of the rate paid by electric cars. The rates will increase by the CPI in future years.
For businesses with a fleet of electric and hybrid cars, this not only represents an extra cost, but also an additional administrative burden in keeping records of mileage.
Collectively, the Budget’s measures increase the financial and administrative pressure on business owners. Key impacts include:
Overall, SMEs should prepare for a period where cost control, efficient remuneration and strategic planning become increasingly important drivers of profitability.
The following steps can help businesses prepare ahead of the 2026 and 2029 implementation timelines:
The Autumn Budget 2025 represents a significant tightening of the tax and regulatory environment for SMEs and owner-managed businesses. While certain incentives, such as wider EMI access, provide opportunities, the overall picture is one of higher costs and reduced tax efficiency.
Owners who act now to restructure remuneration, review share schemes, adjust wage budgets and re-evaluate exit plans will be best placed to navigate the more demanding landscape that lies ahead.
Overall, the burden of these changes is unwelcome. As some of the measures do not come into force until next year or even further ahead, business owners have time to prepare.
If you would like to discuss how these changes affect you and/or your business, please contact your usual Bishop Fleming advisor.
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