The November 2025 Budget: key points for small business owners

The Chancellor of the Exchequer, Rachel Reeves, delivered the Labour government’s Budget on 26 November 2025, with a clear aim: to steady the UK economy and bring public finances back under control.

As always, the headlines don’t tell the full story. Below, we break down the key Budget announcements and what they could mean for small business owners and directors over the months and years ahead.

Budget 2025: what really matters for small businesses

Budget 2025 was presented as a plan to restore economic stability and fund public services without increasing the main rates of income tax, National Insurance (NI) or VAT.

However, according to the Office for Budget Responsibility (OBR), the measures announced are expected to raise around £26 billion a year in extra tax by 2029–30, pushing the overall tax burden to a new post-war high.

The wider economic picture is mixed:

• The economy is forecast to grow by around 1.5% in 2025, slightly stronger than previously expected
• Growth is expected to weaken in later years
• Inflation is forecast to average 3.5% in 2025 and 2.5% in 2026, before returning to the 2% target in 2027
• Government borrowing is forecast to fall each year, although public debt remains close to recent highs as a share of GDP

Have taxes gone up?

In headline terms, no – but in reality, yes.

There are no increases to the main income tax or corporation tax rates, which will be reassuring for many individuals and owner-managed businesses.

Instead, the government is raising revenue through:

• Frozen tax thresholds
• Higher tax on investment, dividend and rental income
• New or extended charges on wealth and assets

Labour has kept its manifesto promise not to raise income tax, NI or VAT – but there are still meaningful tax changes to be aware of.

Income tax thresholds frozen until 2031

The existing freeze on the personal allowance and higher-rate threshold has been extended by a further three years beyond 2028. This means income tax thresholds will now stay fixed until April 2031.

This so-called “fiscal drag” is one of the biggest revenue-raisers in the Budget. The OBR expects it to pull hundreds of thousands more people into higher tax bands over time.

In practical terms:

• Pay rises will increasingly be taxed
• More people will move into higher and additional rate bands
• This can happen even if real living standards don’t improve

For company directors paying themselves via a mix of salary and dividends, regular reviews of remuneration strategy are going to be more important than ever.

Higher tax on dividends, savings and rental income

Income tax rates on dividends, savings income and property income are being increased by 2 percentage points.

Dividends (from April 2026)

• Basic rate: 10.75%
• Higher rate: 35.75%
• Additional rate: unchanged at 39.35%

Savings and property income (from April 2027)

• Basic rate: 22%
• Higher rate: 42%
• Additional rate: 47%

For small company owners who mainly extract profits as dividends – and for landlords with personally held property – this represents a significant ongoing cost.

Planning will matter more, including:

• Reviewing profit extraction strategies
• Making full use of ISAs and pensions
• Considering income sharing between spouses where appropriate

National Insurance on salary-sacrificed pensions

From April 2029, salary-sacrificed pension contributions above £2,000 per year will no longer be exempt from National Insurance.

Contributions above this threshold will be subject to:

• Employer NIC at 15%
• Employee NIC at 8% (main band)
• 2% employee NIC above the higher-rate threshold

This change mainly targets higher earners and larger employers who have used salary sacrifice to reduce NIC on substantial pension contributions.

For some directors, this will reduce the appeal of large salary-sacrificed pension payments and may shift planning back towards dividends or bonuses, depending on the numbers.

High-value council tax surcharge (“mansion tax”)

From April 2028, a new high-value council tax surcharge will apply to residential properties in England worth more than £2 million.

The surcharge will be banded:

• £2m–£2.5m: £2,500 per year
• £5m+: £7,500 per year

This is payable on top of normal council tax and is expected to affect fewer than 1% of properties.

A deferral scheme will allow payment to be postponed until the property is sold or the owner passes away.

Electric and plug-in vehicle mileage tax

From 2028/29, a new mileage-based charge will apply to electric and plug-in hybrid vehicles:

• 3p per mile for fully electric vehicles
• 1.5p per mile for plug-in hybrids

Rates will increase annually in line with inflation, and the measure is expected to raise around £1.4 billion once fully implemented.

The interaction with existing business mileage claims and advisory rates is still unclear. However, the direction of travel is clear: the tax advantage of electric vehicles will reduce over time, even though company car benefit charges remain lower than for petrol or diesel cars.

Corporation tax relief on capital investment

From April 2026, the main writing-down allowance for plant and machinery (not covered by full expensing or the Annual Investment Allowance) will fall from 18% to 14%.

For many small companies that keep capital spend within the £1 million AIA limit, this change will have little impact.

It will matter more for:

• Larger investments outside the AIA
• Businesses relying on main pool allowances
• Some unincorporated businesses

The overall trend remains towards more generous upfront relief, but slower ongoing relief.

Employee Ownership Trusts (EOTs)

Capital gains tax relief on sales to Employee Ownership Trusts will be reduced from 100% to 50%.

This means:

• Half of the qualifying gain will now be subject to CGT
• Final rules and rates are still to be confirmed

EOTs will still make sense in some situations – particularly for succession planning and employee engagement – but the tax advantage is now less generous. Any business considering this route should model the after-tax position carefully against a conventional sale.

Business rates and sector-specific changes

Business rates will be reduced for around 750,000 retail, hospitality and leisure properties, funded by higher rates on larger premises and warehouses, including those used by online retailers.

There are also targeted measures including:

• A new tax on ride-hailing journeys (e.g. Uber and Bolt)
• An extension of the soft drinks levy to more high-sugar drinks

For many bricks-and-mortar businesses, this should provide some relief on property costs, although it may take time to feed through into actual bills.

Homeworking expenses relief withdrawn

From 6 April 2026, employees will no longer be able to claim tax relief for additional household costs when working from home if their employer doesn’t reimburse them.

This removes:

• The flat £6 per week homeworking allowance
• Claims based on actual additional costs

Employers can still reimburse qualifying homeworking expenses tax-free, but the responsibility now sits more clearly with the employer.

Other points worth knowing

A few additional changes to keep on your radar:

1. a) ISAs
   From April 2027, the £20,000 ISA allowance remains, but:

• Cash ISA subscriptions capped at £12,000 per year
• Over-65s can still use the full £20,000 in cash

1. b) Fuel duty
   Fuel duty remains frozen until September 2026, with the temporary 5p cut extended to that date. Increases are planned after this.
2. c) Welfare changes

• The two-child benefit cap will be removed from April 2026
• Working-age benefits will rise in line with inflation

1. d) National Living Wage
   The National Living Wage will rise again from April 2026, increasing costs for labour-intensive businesses.
2. e) Other targeted taxes
   Increases to remote gambling taxes, a new tourist tax on overnight stays, and other sector-specific measures may affect businesses such as hoteliers and leisure operators.

The bigger picture

Overall, Budget 2025 continues a familiar pattern: raising revenue by tightening the tax treatment of wealth, investment and property, while relying on frozen thresholds to steadily increase the tax take on earned income.

Headline tax rates may look unchanged, but the cumulative impact for small business owners over the rest of this Parliament will be significant.

If you’re unsure how any of these changes affect you or your business, come and talk to us. The Monies team is here to help you understand both the short-term and long-term implications – and make sure you’re planning smartly for 2026 and beyond.