Budget 2025 if you’re a business owner…
Budget 2025
You may be asking yourself - “The budget was announced last week, why am I only seeing your blog post today?”.
Well, the truth is - it’s bleak, in my opinion. It has taken me a good few days to get to the point where I don’t just write a full on rant about the Government, and how they don’t support business owners who create employment and wider opportunities, and also do not support taxpayers as a whole.
So, after that slight delay, and in a much calmer tone - here is a rundown on some of the major announcements. There are of course many more changes, given the Budget Document is 150 pages, but these are the highlights I feel you need to be aware of.
Here are what we consider to be the headline changes for business owners from the, 150 page, 2025 Budget document…
Tax breaks changes on Qualifying Asset/Equipment purchases
From 1st January 2026 the government will introduce a new 40% First Year Allowance for main rate expenditure - including most expenditure on assets for leasing and expenditure by unincorporated businesses.
From 6th April 2026 for Income Tax, main rate tax writing-down allowances will reduce from 18% to 14%.
National Minimum Wage and National Living Wages increases - effective April 2026
21 and over 18 to 20 Under 18 Apprentice
April 2025 £12.21 £10.00 £7.55 £7.55
April 2026 £12.71 £10.85 £8.00 £8.00
Percentage change ↑ 4.1% ↑ 8.5% ↑ 6.0% ↑ 6.0%
Many people I speak with feel increases to the above are essential, but if we have learnt anything over recent years - the increases simply push inflation up and the cost of living increases in line. As business owners have no choice but to increase their prices to afford the wages burden. Furthermore, businesses who employ skilled workforces will either feel the pinch more, or face an unmotivated workforce - as the wage gap between unskilled and skilled workers is squeezed.
Capital allowances: First year 100% allowances for zero emission vehicles (ZEVs) and chargepoints
The government will extend for a further year the 100% first year allowances (FYA) for qualifying expenditure on zero emission cars and the 100% first year allowances for qualifying expenditure on plant or machinery for electric vehicle (EV) chargepoints. The first year allowances will now be in place until 31 March 2027 for corporation tax purposes, and 5 April 2027 for income tax purposes.
Business rates
From 1 April 2026, business rates bills in England will be updated to reflect changes in property values since the last revaluation in 2023. As a result of the revaluation, the small business multiplier will decrease from 49.9p in 2025-26 to 43.2p in 2026-27, and the standard multiplier will decrease from 55.5p to 48p.
The government will also introduce new permanently lower retail, hospitality and leisure multipliers. English local authorities will be fully compensated for the loss of income as a result of these business rates measures and will receive new burdens funding for administrative and IT costs.
Full details can be found on pages 102 and 103 of the Budget Document.
Targeted research and development (R&D) advance assurance service
The government will pilot a targeted advance assurance service from spring 2026, enabling small and medium-sized enterprises to gain clarity on key aspects of their R&D tax relief claims before submitting to HMRC. The government is also publishing a summary of responses to the advance clearance consultation.
Penalty reform: Updates to the penalty regime for Self Assessment and VAT
The government will not apply late submission penalties for quarterly updates during the 2026-27 tax year for Income Tax Self Assessment (ITSA) taxpayers required to join Making Tax Digital (MTD). The government will apply the new penalty regime for late submission and late payment to all ITSA taxpayers not already due to join the new system from 6 April 2027. This will be legislated for via secondary legislation. The government will increase the penalties due for late payment of ITSA and VAT from 1 April 2027. This will be legislated for via secondary legislation.
VAT and PAYE timely payments
The government will publish a consultation in early 2026 considering ways VAT and Pay As You Earn (PAYE) liabilities can be paid promptly without the taxpayer falling behind on their payments, including requiring more tax payments by direct debit.
Employer National Insurance contributions – secondary threshold
The government is maintaining the per-employee threshold at which employers become liable to pay National Insurance (the Secondary Threshold) at £5,000 from April 2028 until April 2031. The government will legislate for this measure in affirmative secondary legislation in early 2028.
Considerations in respect of your employees
Company car tax: Plug-in hybrid electric vehicle (PHEV) tax easement
The government will introduce a temporary benefit in kind tax easement for plug-in hybrid electric vehicles (PHEVs) in the Benefit in Kind system to prevent their tax charge increasing significantly due to new emissions standards. This easement will be in place from 1 January 2025 to 5 April 2028.
Expanding workplace benefits relief
The income tax and National Insurance exemption for employer-provided benefits will be extended to cover reimbursements for eye tests, home working equipment, and flu vaccinations. This will be legislated for in Finance Bill 2025-26 and this will take effect from 6 April 2026.
Non-reimbursed employment expenses for homeworking
The government will remove the deduction from Income Tax for non-reimbursed home working expenses. Employers can still reimburse employees for these costs where eligible without deducting Income Tax and National Insurance contributions. This will be legislated for in Finance Bill 2025-26 and take effect from 6 April 2026.
Employee Ownership Trusts
The government will reduce the Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts from 100% of the gain to 50%. This will be legislated for in Finance Bill 2025-26 and take effect from 26 November 2025. Employee Ownership Trusts have been a very tax efficient exit strategy for business owners who could exit their business and pay 0% tax, that benefit has now been restricted.
E-invoicing - effective April 2029
The government will require all VAT invoices to be issued in a specified electronic format from April 2029. The government will work with stakeholders to develop an implementation roadmap to be published at Budget 2026.
If you’re a Limited Company business owner, see the points raised above, plus…
Corporation Tax
No changes to the rates of Corporation Tax
Dividend tax
Note: the 2% increase does not impact additional rate tax payers in respect of dividends (this rate remains 39.35%)
Increases to Corporation Tax late filing penalties
The government will double the penalty for taxpayers submitting a Corporation Tax return late from 1 April 2026. This will be legislated for in Finance Bill 2025-26.
Tax Writing Down Allowances on equipment
From 1 April 2026 for Corporation Tax, main rate tax writing-down allowances will reduce from 18% to 14%.
Existing clients have access to book a 60-minute ‘Personalised Budget Update Session’ with Nick Bromley FCCA (£225+vat) - to understand what the changes mean for you and your business, please contact us on hello@nb-accountancy.co.uk with the subject ‘Personalised Budget Session’.