7. June 2026

Autumn Budget 2025: The Tax Changes That Actually Matter to Small Business Owners

The Autumn Budget introduced a number of tax changes, but not all of them will affect the average small business owner, sole trader, landlord or company director.

I've put together a summary of the key changes that are most likely to impact my clients, along with what they mean in practice.

Dividend Tax Increases

If you own a limited company and take dividends, this is probably one of the most significant changes.

From 6 April 2026:

• Basic rate dividend tax increases from 8.75% to 10.75%
• Higher rate dividend tax increases from 33.75% to 35.75%
• Additional rate dividend tax remains at 39.35%
• The dividend allowance remains at £500 per year

What does this mean?

For company directors, dividends are becoming less tax-efficient than they once were. Limited companies can still be a fantastic structure, but it is becoming increasingly important to review how profits are extracted and ensure sufficient funds are set aside for future tax liabilities.

Income Tax Bands Remain Frozen

There were no changes to the personal allowance or income tax bands.

The personal allowance remains at £12,570, with the higher-rate threshold remaining at £50,270.

What does this mean?

While the rates haven't increased, frozen thresholds mean that as incomes rise, more people are gradually pulled into higher tax brackets. This is often referred to as "fiscal drag" and can result in a higher tax bill without any formal increase in tax rates.

Savings and ISA Changes

One of the more surprising announcements related to ISAs.

The overall ISA allowance remains at £20,000 per year. However, only £12,000 of this allowance can now be held within a Cash ISA.

To utilise the full £20,000 ISA allowance, the remaining £8,000 must be invested in another type of ISA, such as a Stocks & Shares ISA.

What hasn't changed?

Income generated within an ISA remains extremely tax-efficient:

• Interest remains tax-free
• Dividends remain tax-free
• Withdrawals remain tax-free

For individuals holding significant cash savings, it may be worth reviewing whether their savings strategy remains appropriate under the new rules.

Capital Gains Tax and Business Asset Disposal Relief

The Capital Gains Tax annual exemption remains at £3,000.

This means that anyone selling investments, cryptocurrency, or a second property is more likely to have a taxable gain than they would have a few years ago.

Business Asset Disposal Relief (BADR)

Business Asset Disposal Relief remains available, allowing qualifying business owners to benefit from reduced Capital Gains Tax rates when selling all or part of their business.

Current rates are:

• 10% on qualifying disposals up to 5 April 2025
• 14% on qualifying disposals from 6 April 2025

The lifetime limit remains £1 million of qualifying gains.

Holding Companies and Business Restructures

A particularly important change for business owners relates to company reorganisations.

Historically, when transferring shares into a holding company structure, relief was often obtained automatically.

Going forward, relief must be actively claimed and the transaction structured correctly.

Why is this important?

If the appropriate relief claim is not made, a Capital Gains Tax charge could arise even though no actual sale has taken place and no money has changed hands.

If you are considering:

• Creating a holding company
• Group restructuring
• Succession planning
• Preparing for a future business sale

it is important to obtain advice before implementing any changes.

Capital Allowances

There is good news for businesses investing in equipment.

Limited Companies

Full Expensing continues.

This means qualifying expenditure on new plant and machinery can still receive 100% tax relief in the year of purchase.

Sole Traders and Partnerships

The Annual Investment Allowance remains at £1 million, allowing most businesses to continue claiming 100% tax relief on qualifying equipment purchases.

Written Down Allowance Reduction

From April 2026, the main Written Down Allowance on the general pool will reduce from 18% to 14%.

This affects assets that do not qualify for Full Expensing or the Annual Investment Allowance, meaning tax relief on those assets will be obtained more slowly.

For most small businesses, day-to-day claims remain largely unchanged, but larger purchases may require more careful planning.

Pensions and Salary Sacrifice

Pensions continue to be one of the most tax-efficient planning tools available.

However, changes have been announced to salary sacrifice arrangements.

From April 2029, only the first £2,000 of pension contributions made via salary sacrifice will remain exempt from National Insurance.

Income tax relief will still be available, but the National Insurance advantage will be significantly reduced for higher contributions.

For many clients, pensions remain an excellent planning opportunity, but contribution strategies may need reviewing closer to implementation.

Making Tax Digital (MTD)

Although not part of the Budget itself, it is worth mentioning that Making Tax Digital for Income Tax is approaching.

From April 2026:

• Sole traders and landlords with qualifying income over £50,000 will be required to comply with MTD.

From April 2027:

• The threshold is expected to reduce to £30,000.

This will involve keeping digital records and submitting quarterly updates to HMRC using compatible software.

Final Thoughts

While many of the headline announcements received significant media attention, the changes most likely to affect small business owners are the increase in dividend tax rates, the ISA reforms, the reduction in Written Down Allowances, and the increased importance of obtaining advice before carrying out business restructures.

As always, tax planning works best when it is done proactively rather than reactively.

If you would like to discuss how any of these changes affect you or your business, please get in touch.