Autumn Budget 2025: What UK Small Businesses need to know

A clear, practical guide for small business owners from the team at Halliday Styan

The UK Government’s Autumn Budget 2025 introduces one of the most wide-ranging sets of tax and business changes we’ve seen in recent years. For small businesses, this Budget matters. Not only does it reshape how profits are taxed, but it also affects how you manage cash flow, plan for investment, structure your business, and organise day-to-day financial processes.

At Halliday Styan, we know that small business owners don’t always have the time to decode 100-page Budget papers. So in this article, our team has broken down the key updates into clear, practical insights, with a focus on what you actually need to do next.

1. Corporation Tax: Rates stay the same, penalties increase

The Government has confirmed that Corporation Tax rates will remain unchanged:

• Small profits rate: 19% (profits up to £50,000)

• Main rate: 25% (profits over £250,000)

• Marginal relief applies between £50,001 and £250,000

This stability is positive, businesses can plan with confidence knowing the headline rates will not change during the life of Parliament.

However, there is a catch: late filing penalties are doubling.

From 1 April 2026, penalties for late Corporation Tax returns will increase, in some cases dramatically:

• First late return: £200 (was £100)

• More than 3 months late: £400 (was £200)

• Three successive late filings: £1,000

• Three successive filings more than 3 months late: £2,000

These changes aim to encourage timely submission and reflect inflation since the penalty system was introduced.

What this means for small businesses

Many small companies fall behind on filings because bookkeeping lags behind, or directors leave things until the deadline. Under the new penalty system, that approach becomes much riskier and more expensive.

How Halliday Styan can help:

Our bookkeeping and management accounts services ensure your financial records are up to date throughout the year, making Corporation Tax submissions smooth, accurate, and safely ahead of deadlines.

2. Capital Allowances: A mixed picture for investment planning

For small businesses investing in equipment, vehicles, technology, or tools, the Budget introduces several important updates.

Full Expensing continues (for companies): Companies can still claim 100% relief on qualifying expenditure on new plant and machinery.

This provides a significant tax-saving opportunity, but it continues to apply only to companies, not sole traders or partnerships.

The Annual Investment Allowance remains at £1 million: This is positive news and means most small businesses — incorporated or not — can still deduct the full cost of qualifying purchases each year.

Main writing-down allowance reduces from 18% to 14%: From 1 April 2026, the main rate for writing-down allowances will drop, reducing relief for longer-life assets.

A new 40% first-year allowance: Starting 1 January 2026, a new 40% allowance becomes available for main-rate expenditure. While not as generous as full expensing, it is still an improvement on the forthcoming lower writing-down rate.

What this means for small businesses

If you are planning significant investment in machinery, vehicles (excluding most cars), tools or IT, the timing of purchases could affect the tax relief you receive.

Practical tip: Consider whether bringing forward planned expenditure into 2025/26 could provide a quicker tax benefit.

How Halliday Styan can help:

We can model the tax impact of planned asset purchases and incorporate them into your management accounts to support better capital expenditure decisions.

3. Business Rates: A welcome reduction for many small businesses

Business rates are a major cost for retail, hospitality, and leisure businesses - and this Budget brings updates that are updating rates to a more tailored approach dependent on the size and type of business in operation.

Changes in business rates

From 2026/27:

• Properties in retail, hospitality, and leisure (RHL) with a rateable value (RV) under £500,000 will get permanently lower multipliers (e.g. a “small RHL multiplier” of 38.2p and a “standard RHL multiplier” of 43.0p) instead of paying the previous standard rate.

• For other properties, especially “high-value” ones (RV over £500,000), including large warehouses, distribution centres and big commercial premises, a higher “high-value” multiplier of 50.8p will apply.

In short: the Budget shifts business-rates relief away from temporary pandemic-era subsidies and toward a permanent, banded-multiplier system that favors smaller high-street businesses while increasing the burden on large, high-value properties.

Support packages for businesses: Transitional relief will limit how fast bills increase following revaluation. Small businesses losing Small Business Rates Relief will have increases capped at £800 or the general transitional cap, whichever is higher.

As part of the reforms, there’s a £4.3 billion support package to help sites facing large increases in their bills.

What this means for small businesses

Business owners could see reduced liabilities in 2026 and beyond, provided your property is under the £500,000 threshold. However, revaluations could still increase your property’s rateable value - meaning calculations differ for each business.

Business owners in sectors hit by the increase in tariff rates, business rates, and other payroll taxes are likely to see increased liabilities.

How Halliday Styan can help:

We can help you understand business rates changes in the context of your wider overhead planning and cashflow forecasting through our management accounts service.

4. VAT: Important Changes for Small Businesses

Several announcements in the Budget affect VAT processes, compliance, and reliefs.

VAT relief for donations of goods to charity: From April 2026, businesses can donate goods to a registered charity without creating a VAT liability. This removes a long-criticised disincentive where disposal could be cheaper than donation.

E-invoicing becomes mandatory: From April 2029, all VAT invoices must be issued in a standard electronic format. This will require many small businesses to upgrade or adapt their accounting systems.

VAT on private hire vehicles (taxis): From January 2026, taxi and private hire operators must apply VAT to the full fare unless part of a broader travel package. This particularly affects operators working as principals under the Bolt/Uber rulings.

What this means for small businesses

If your business handles volumes of invoices or donations, or operates in the taxi/private hire sector, you will need to prepare for new processes.

For many businesses, the switch to e-invoicing will require software changes — but it will also improve accuracy and efficiency.

How Halliday Styan can help:

Our bookkeeping service already uses digital-first tools, and we can support you through VAT system transitions to stay compliant ahead of 2029.

5. Income Tax & Dividends: Key updates for Company owners

Dividend tax rates will rise

From April 2026:

• Basic rate: 10.75%

• Higher rate: 35.75%

• Additional rate stays at 39.35%

These increases mean taking dividends becomes more expensive for owner-managers.

Savings and property income tax rates rise

From April 2027:

• Basic rate: 22%

• Higher rate: 42%

• Additional rate: 47%

For directors earning interest on business loans to the company or personally held savings, this is relevant.

Personal allowance and thresholds frozen until 2031: This “fiscal drag” means:

• More individuals will fall into higher tax brackets

• Even with no increase in income, tax bills will rise

What this means for small business owners

You may want to revisit your director remuneration strategy, especially the balance between salary, dividends, and pension contributions.

How Halliday Styan can help:

We prepare both corporation tax and personal tax returns for many director-owners, and we can model the most tax-efficient approach for 2025 - 2028.

6. National Insurance: Salary Sacrifice changes for pension contributions

A major update affects employers offering pension salary sacrifice schemes.

Salary sacrifice NIC exemption capped at £2,000 (from April 2029): If an employee sacrifices more than £2,000 of salary into their pension:

• The employer must pay NIC (15%) on the excess

• The employee must pay NIC (8% or 2%) on the excess

For many small businesses, this increases payroll costs.

What this means for small businesses

If you use salary sacrifice as part of a reward strategy, these rules may increase costs and admin, especially for staff making large contributions to reduce higher-rate tax.

Small employers relying on salary sacrifice to encourage pension saving should evaluate whether adjustments are needed ahead of April 2029.

How Halliday Styan can help:

Our payroll and bookkeeping team can help you navigate these changes and ensure payroll calculations remain correct when the cap comes into force.

7. Making Tax Digital (MTD): Soft landing but more deadlines

Soft landing for first four quarterly updates (April 2026 cohort)

Businesses joining MTD for Income Tax in 2025/2026 won’t receive penalty points for their first four quarterly submissions.

But annual return penalties still apply:

• Late filing of the 2026/27 return will still trigger penalties.

• New late payment penalty regime from April 2027

• Penalties for late payment of Income Tax and VAT will increase, although details follow later.

What this means for small businesses

If you are a sole trader or landlord with income over £50,000 (2026) or £30,000 (2027), you must prepare for quarterly digital reporting.

Accurate, up-to-date bookkeeping will become more important than ever.

How Halliday Styan can help:

Our bookkeeping and management accounts services are fully MTD-ready. We can take the entire digital reporting burden off your shoulders.

8. Other business-relevant measures

A few additional updates small businesses should be aware of:

Furnished Holiday Lettings regime abolished (April 2025): Short-term rental businesses will no longer enjoy special tax treatment. These properties will be taxed under standard property income rules, including restrictions on finance costs.

Electric vehicle mileage tax: From April 2028, EV owners will pay:

• 3p per mile for fully electric cars

• 1.5p per mile for plug-in hybrids

This may affect businesses with electric fleets.

Top Tips for Small Business owners after the Autumn Budget 2025

Here are practical steps our team recommends based on the new rules:

• Review your director salary / dividend strategy: Dividend tax increases mean old approaches may no longer be optimal.

• Bring forward investment if possible: Capital allowances are more generous before April 2026.

• Ensure bookkeeping is updated monthly: The new Corporation Tax penalties make late filing more costly.

• Prepare early for e-invoicing: Ensure your accounting software supports digital invoicing ahead of 2029.

• Evaluate salary sacrifice arrangements: Budget for the new NIC liabilities coming in 2029.

• Reassess furnished holiday lets (if applicable): Many landlords will see higher tax bills from 2025/26.

• Get ready for MTD for Income Tax: Quarterly updates will become mandatory — now is the time to get organised.

How Halliday Styan can support your Business

Our team specialises in helping small businesses navigate financial change confidently. We offer:

• Bookkeeping: keeping your records accurate and MTD-ready

• Management accounts: giving you the insight needed for smarter decisions

• Statutory accounts: ensuring accuracy and compliance

• Corporation tax: efficient, stress-free filing

• Personal tax returns: supporting directors and business owners

We pride ourselves on offering friendly, clear advice without jargon. Just practical guidance and reliable expertise.

A friendly final word

This Autumn Budget brings many changes, some positive, some more challenging, but with the right support, small businesses can navigate them smoothly and even uncover new opportunities.

If you’d like help understanding how these changes affect your specific situation, our team at Halliday Styan is always here to assist.

A conversation with us could give you clarity, confidence, and a plan for the year ahead.

We’re here to help whenever you’re ready.