Rachel Reeves has delivered the 2025 Autumn Budget, outlining the government’s economic and fiscal plan, covering taxes, business incentives and broader economic politics. While some measures aim to encourage investment and support the transition to a greener future, other increase costs and tighten oversight.
Below is a clear breakdown of the most important changes announced in the budget and what they could mean for your business.
2% rise to the ordinary and upper tax rates on dividend income from April 2026
This stood out as one of the most important budget updates for our customers. The 2% change means an increase from 8.75% to 10.75% for basic-rate taxpayers, and from 33.75% to 35.75% for higher-rate taxpayers from April 2026. It will also apply on all rates on savings income from April 2027, including interest earned from bank accounts, business savings, bonds, and other interest-generating assets. These changes will ultimately impact business owners who extract profiles through dividends, making it more expensive and reducing the net income you keep after tax.
Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from National Insurance from April 2029.
Contributions above £2,000 will be treated as ordinary employee pension contributions in the tax system and therefore be subject to both employer and employee national insurance contributions, or 15% and 8% respectively for earnings under £50,270 and 2% on income above that level.
In practical terms, this means that for every £1,000 an employee contributes above the threshold, businesses will face an additional cost of around £138 in extra employer National Insurance.
For employers, this means you will need to report the total amount sacrificed through your existing payroll software. HMRC will engage with stakeholders on this, and further guidance is to come.
National Insurance (NI) and income tax thresholds have been frozen for an extra three years beyond 2028.
The government has extended the freeze on National Insurance and income tax thresholds for an additional three years, keeping them unchanged until April 2031. This means that more employees will gradually move into higher tax brackets as wages increase with inflation – a hidden effect known as “fiscal drag.” As earnings rise but thresholds stay still, a larger portion of income becomes taxable at higher rates, increasing the overall tax burden without any explicit rise in tax rates.
This can increase overall payroll costs and potentially reduce take-home pay for directors who pay themselves through a mix of salary and dividends.
From April 2026, the government will decrease the main rate of writing down allowances by 4% to 14%.
Recognising the need to incentivise future investment and encourage growth within the UK economy, the budget announced the main rate for WDA’s will be reduced from 18% to 14%. Additionally, the government aims to preserve the incentive to invest by also introducing a new first-year allowance of 40% for main-rate assets from January 2026.
In practice, this means that when a business buys new main-rate equipment, it can immediately deduct 40% of the cost from its taxable profits in the first year, then claim the reduced 14% WDA on the balance in future years. So, although ongoing annual relief is slightly lower, companies benefit from a larger upfront deduction, designed to improve cashflow and encourage earlier investment.
Business Rates reform: permanent relief for Retail, Hospitality & Leisure
The Chancellor that more than 750,000 retail, hospitality and leisure properties will benefit from permanently lower business rates. After years of pressure from rising operating costs, weaker consumer demand and increasing competition from online shopping, this move is intended to offer lasting support and greater stability for bricks-and-mortar firms.
The reduction in business rates for customer-facing businesses will be funded by increasing rates on commercial properties valued over £500,000, like premises used by online retail giants. Whilst this takes the burden away from high-street SMEs, increased pressure is now placed on logistics and e-commerce operators.
Rising fuel duty from September 2026
Fuel duty will remain frozen until September 2026, but the government has confirmed that staged increases will begin afterwards. For SMEs, this means preparing for higher fuel and transport expenses from late 2026, which could tighten margins for sectors reliant on vehicles such as logistics, construction, delivery services and field-based operations. Businesses may need to reassess fleet costs, explore fuel-efficient alternatives and account for greater volatility in running costs over the medium term.
Increase in Alcohol Tax from February 2026
The government confirmed that tax on alcohol – including draught drinks – will increase in line with the higher Retail Price Index (RPI) from February 2026, meaning higher duties for many alcoholic products across the board. For consumers and hospitality venues, that translates into higher retail prices for bottled or canned drinks, wine and spirits as producers and retailers pass on the added duty. Some drinks may go up noticeably -potentially squeezing margins for bars, pubs and restaurants, especially smaller operators already coping with inflation and rising costs. At the same time, modest relief may remain for certain draught drinks if previous concessions or “draught relief” schemes continue, but overall, the policy signals a clear squeeze on alcohol-related businesses and consumers from early next year.
A new mileage-based tax for electric vehicles and plug-in hybrid cars to be introduced from 2028
From 2028–29, electric vehicle and plug-in hybrid drivers will face a new mileage-based tax of 3p per mile, which the government estimates will cost the average motorist around £255 per year, with rates rising annually in line with inflation.
This marks a shift toward taxing road use as fuel duty revenue declines. To soften the impact, the government will raise the threshold for the “expensive car” supplement on Vehicle Excise Duty from £40,000 to £50,000 for electric vehicles, in place from April 2026. This means fewer EV owners will be hit by the additional VED charge, designed to re-balance some of the cost introduced by the new per-mile tax.
Other Key Changes
- Legal minimum wage for over-21s to rise 4.1% in April, from £12.21 to £12.71 per hour
- Amount under-65s can put into cash ISAs (Individual Savings Accounts) capped at £12,000 a year, with the rest of the £20,000 annual allowance reserved for investments
- Properties in England worth more than £2m to face a council tax surcharge of £2,500 to £7,500, following a revaluation of homes in bands F, G and H
- Tax on profits made by gambling firms from online bets to rise from 21% to 40% in April, alongside abolition of 10% bingo tax
The Office for Budget Responsibility (OBR) has upgraded its UK growth forecast for this year, predicting the economy will grow by 1.5%, up from the 1% forecast made in March. Additionally, inflation is forecast to average 3.5% this year, before easing to 2.5% next year, and returning to the Government’s 2% target in 2027.
What does this mean for UK businesses?
Challenges:
- Higher employment and payroll costs, especially around pensions and tax thresholds
- Increased dividend and savings taxes making it more costly to extract profits
- Reduced long-term growth forecasts and short-term inflationary pressures
- New EV mileage tax increasing future fleet running costs
Benefits:
- Stronger economic growth forecast for the current year
- New 40% first-year capital allowance encouraging investment
- Higher EV “expensive car” threshold reducing some vehicle-related tax burdens
- Clearer focus on financial discipline, helping well-managed businesses outperform competitors
Overall, while the 2025 budget introduces new pressure for businesses, those that plan early, manage cash flow effectively and invest strategically will be best placed to adapt and grow.
If you’re worried about cash flow after the announcement of the Autumn Budget, reach out to us. Moorgate Finance can walk you through a range of options to ease the pressure including Unsecured Business Loans to boost cash flow, Invoice Finance to get your Invoices paid faster, and Keyman Protection to ensure you retain valuable staff in your workforce.
Call us on 01908 92 62 62 to discuss your options or click here to schedule a call back with one of our specialists.