The Autumn Budget 2025 was revealed last week by Chancellor Rachel Reeves, and there are several changes that small business owners should be aware of. Here’s a straightforward breakdown of the key updates and how they may affect your business over the coming years.
Minimum wage increases
From April 2026, the National Living Wage for workers aged 21 and over will rise to £12.71 per hour. Rates for younger workers will increase as well, including £10.85 for 18-20-year-olds and £8 for under-18s and apprentices.
If your business relies heavily on hourly staff, such as in hospitality, retail or customer service, these changes will almost certainly push up operating costs. Now is a good time to review staffing plans, shift structures and pricing to maintain healthy margins.
Dividend tax increases 2%
Chancellor Rachel Reeves has hiked tax rates on dividends, property and savings income by two percentage points in the Budget.
The basic rate of dividend income has risen from 8.75% to 10.75%, while the higher rate has moved from 33.75% to 35.75%. The measures kick in in April 2026.
Business rates (retail, hospitality and leisure)
Business rates are set to shift for retail, hospitality and leisure businesses in England, and many will see their bills rise. The current 40% discount is being replaced with a small 5p drop in the multiplier (the number used to work out what you actually pay). In practice, that means support will shrink to around 12%, but this time it’s here to stay rather than being a short-term relief. One exception: film studios will continue to enjoy a 40% reduction right through to 2034.
Freeze on income tax thresholds
The Chancellor has confirmed that income tax thresholds will be frozen until the 2030-31 financial year. The previous Conservative government froze personal tax thresholds from 2021 to 2028, so this is a 3-year extension on that.
E-invoicing
From 2029, the Government will make e-invoicing the standard for all VAT invoices, whether you’re billing another business or working with the public sector. In short, paper and PDF invoices will take a back seat as digital-only becomes the norm.
£2,000 cap on salary sacrifice into a pension
This is about pension saving – so workers, rather than those who are already retired.
More specifically, about a third of private sector employees and a tenth of public sector workers use a salary sacrifice scheme for their pension savings. They give up a portion of their salary in return for their employer paying the equivalent amount into their pension.
The benefit to both employee and employer is that they make savings in National Insurance.
The plan is to put a £2,000-a-year cap on the amount that can be put into pensions through this salary sacrifice arrangement. Contributions above that will be taxed in the same way as other employee pension contributions.
Youth employment guarantee
The government is to fund a new “youth guarantee” which will provide £820m over the next three years. Additional funding is set to become available to make training for people under-25 on apprenticeships free for small and medium-sized enterprises.
The initiative builds on a the “youth guarantee” scheme announced last November, which promised every 18 to 21-year-old in England access to an apprenticeship, training, education opportunities or help to find a job.
Low value imports
From 2029, the rules for low-value imports are changing. Any parcel coming into the UK from abroad will face customs duty, no matter how small the order is. That means the current £135 exemption for cheaper items bought from overseas retailers will come to an end.
Electric vehicles
From 2028, electric cars and plug-in hybrids will see a new cost added to the mix – a 3p-per-mile charge on top of the road taxes already in place. It’s a heads-up for drivers that running an EV won’t be quite as tax-free as it used to be.
Fuel duty frozen until 2026
Fuel duty will remain frozen until September 2026. For businesses with vehicles on the road, this offers some stability in running costs, even if broader expense pressures carry on rising.
What this means for small businesses
Most of the Budget’s impact is focused on rising wage and employment costs. Some cost freezes provide short-term relief, but the overall direction points to tighter margins and the need for careful financial planning. Businesses that rely on large teams or operate on slim margins are likely to be most affected.
What should small businesses do next?
In light of the latest Budget, it’s worth looking at how it affects your small business specifically.
Take the chance to really dig into your payroll projections so you’re clear on how future wage increases might shape your budget. It’s also a good time to revisit your pricing or service rates to see if they’re still working for you, or if they could do with a refresh. With the 2029 pension and benefits changes on the horizon, double-check that your plans are up to date and ready for what’s coming.
Look for simple ways to streamline your operations too, so rising costs don’t hit as hard. And don’t forget to keep your team in the loop – they’ll appreciate knowing what’s changing and how you’re planning ahead.
