TTR Barnes

The 2025 Autumn Budget, delivered on 26^th November 2025, brought with it new pressures for small and medium-sized enterprises. Several changes, especially around taxation, pension rules and allowances, have a direct impact on the average UK business.

The Budget aims to reduce pressures on public services, tackle national debt and address the cost of living but, for many SMEs, it will bring changes that affect day-to-day costs, payroll and business planning.

Read our breakdown of the factors that matter most for local SMEs, and some practical suggestions on what to consider.

• From April 2026, the standard Writing Down Allowance (WDA) rate will drop from 18% to 14%. Currently, most businesses claim WDA at 18% per year on the “main pool” of qualifying assets, giving a reliable and predictable way of reducing taxable profits over the long-term.  A lower rate means it will take longer to write off the cost of assets. For example, under the current 18% rate, it would take around 10 years to claim most of the relief. At 14%, that would move closer to 13 years.
• To mitigate the impact of the change to the WDA rate, from 1^st January 2026, a new 40% First Year Allowance (FYA) will apply to qualifying new plant and machinery for companies and unincorporated businesses. This gives a valuable opportunity for accelerated tax relief when investing in new equipment or technology and is particularly beneficial to those businesses unable to use the full expensing or AIA routes.

The effects of these changes will vary considerably, depending on individual business circumstances.  Businesses should consider their existing and future investment patterns, as well as size and structure, before analysing the best combination of reliefs across FYA, WDA, AIA and full expensing.  When considering large investment in plant and machinery, it may be useful to move purchases forward to take place ahead of April 2026 in order to benefit from the current 18% rate, utilising the new 40% FYA for qualifying expenditure from January 2026.

• From April 2029, the National Insurance (NI) advantages of pension salary sacrifice schemes will be capped.  Only the first £2,000 of sacrifice each year will get full relief. Beyond that, employee and employer NICs will apply.
• This reduces the attractiveness of large end-of-year pension contributions or high-benefit pension packages, which many owner-managers and SMEs use to optimise remuneration. Employers will also pay NICs on these excess contributions, increasing the cost of salary sacrifice for them.

SMEs with generous pension arrangements should prepare for higher long-term employment costs and consider revisiting their compensation strategies. 

• Personal tax thresholds (for Income Tax and NI) remain frozen, extended now until 2030-2031, with the personal allowance remaining at £12,570, the higher rate threshold at £50,270 and the additional rate at £125,140.
• This means that as wages rise over time, more individuals will be dragged into higher tax bands, increasing their tax burden even without explicit rate hikes.
• These rising wages will also push up employer NICs at the same time.

For SMEs, this can affect take-home pay, staff morale and wage cost planning, creating a difficult dynamic for salary conversations. A pay rise that looks meaningful initially can seem insignificant once the higher-rate tax rate is applied.  Being transparent in pay negotiations, as well as increasing the benefits package through other means, such as employee discounts, development or flexible working, could help to ease frustrations.

• Dividend taxation is rising.  From April 2026 dividend rates will increase by 2%.  The new rates will be 10.75% (basic rate) and 35.75% (higher rate), up from 8.75% and 33.75% respectively
• Combined with the threshold freeze and pension changes, the benefit of drawing profits as dividends, often favoured by owner-managed businesses.  Business owners who pay themselves a low salary and extract the bulk of their income via dividends will face a higher personal tax liability, which may affect profit extraction strategies.

The optimal balance between salary, dividends, and pension contributions is shifting. Business owners should model different scenarios to determine the most tax-efficient approach for their specific circumstances.  Business owners may consider bringing forward dividend payments before the April 2026 deadline to take advantage of the current, lower rates.

• For small high-street businesses such as shops, pubs, cafés, as well as businesses in retail, hospitality or leisure, there is welcome news. From April 2026, business rates multipliers for these “RHL” businesses will permanently reduce compared to larger properties, offering some relief.
• This could help ease pressure on costs for smaller premises, freeing up cash for reinvestment or managing rising labour/other overheads.   Though the revaluation could still push some bills up for higher property values.  One-year increases will be capped through transitional relief however, giving some respite to those negatively affected.

You should allow for revised business rates within your 2026/27 budget and site development planning.  Large expansions or large building purchases could become more expensive as time progresses and any potential impact should be modelled.  

• The National Living Wage will go up again, with anyone over 21 earning at least £12.71 (Up from £12.21) from April 2026, while 18-20 year olds will see their minimum wage jump from £10 to £10.85 an hour.
• Businesses employing anyone currently paid below these rates will see payroll costs going up as of next year, with those employing higher proportions of under-21s feeling it most – though all pay bands and associated differentials may feel the impact as gaps between lower and higher paid roles are maintained to ensure staff satisfaction at all levels.

Analysing roles, rotas and departments now to understand future cost impacts could give a clearer picture of how to manage budgets in 2026.  Employee communications should also be considered carefully so that teams understand any potential changes.

• Employee Ownership Trusts (EOTs) will see a reduction in Capital Gains Tax (CGT) relief for selling shareholders from 100% to 50%, effective for disposals on or after November 26, 2025.
• The government reduced the relief to ensure business owners pay some tax on their gains, as the cost of the original 100% relief had significantly exceeded initial estimates.

At TTR Barnes we know running a business in the North East means balancing ambition with resilience. That’s why we advise:

• Taking a proactive approach:   Don’t wait until the end of year, start reviewing your business now and the impact of any changes.
• Running “what-if” scenarios: These will help you see the impact of changes on cashflow and take-home profit.
• Staying alert to policy shifts: These Budget-driven changes mark a significant shift in taxation and corporate planning; long-term clarity requires careful review on an ongoing basis.

We’re here to help businesses across the North East navigate these changes. If you’d like a personalised review of what these changes may mean for you, please do get in touch with your adviser or drop us a line, we’re here to help you stay ahead of the curve.

All information correct at time of going to print/live and on the best knowledge and understanding of the author at the time. This article is for general information only and does not constitute financial advice or recommendations for individual circumstances. No responsibility is taken for any actions taken on the base of the information within this article. For information of users: This material is published for the information of clients. It provides only an overview of the regulations in force at the date of publication, and no action should be taken without consulting the detailed legislation or seeking professional advice. Therefore no responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by the authors or the firm.