Analysis of the Autumn Budget

27 November 2025

Analysis of the Autumn Budget (2025) & its Impact on Business Owners

The Chancellor’s Autumn Budget has introduced a number of changes that will materially affect business owners, particularly those running limited companies, SMEs, or preparing for future exit planning. Understanding these shifts is crucial for cash flow management, remuneration strategy, and long term planning.

1. Dividend Tax Increase

One of the most significant changes is the increase in tax rates on dividends. Dividend tax rates are rising by 2 percentage points across the board. For business owners who rely on dividend income (after paying themselves a modest salary), this move erodes the attractiveness of dividends compared to previous years.

Higher dividend taxation means less net personal income from distributed profits, which could shift the balance: owners may reconsider increasing salaries (or taking more income as salary) to compensate, though that comes with its own costs.

2. Corporation Tax Stability, but Higher Employer NICs

One positive for businesses is that the corporate tax rate is capped at 25% for the lifetime of the current Parliament. That provides a degree of certainty for profitability forecasts, planning reinvestment, or paying out dividends in future.

However — and more sharply felt — the threshold at which NICs become payable is being lowered. This raises the cost of employing staff, which could squeeze cashflow for growing businesses or those with tighter margins.

There is a mitigating measure: the Employment Allowance (which reduces NIC liability) is being raised to £10,500/year and the previous £100,000 maximum threshold for eligibility is being removed. For many small companies, that allowance could offset some of the increased NIC burden, but the net benefit depends on current NIC liabilities.

3. Capital Gains & Exit Planning: BADR Changes

For business owners planning to sell part or all of their company, the changes to Capital Gains Tax (CGT) are very relevant. The main rates of CGT are being increased — the basic rate jumps from 10% to 18%, and the higher rate from 20% to 24%. Meanwhile, the special relief for business disposals — Business Asset Disposal Relief (BADR, formerly Entrepreneurs’ Relief) — remains, but qualifying BADR rates will increase over time: 10% until 6 April 2025, then 14%, and eventually 18% from April 2026.

This narrows the window for lower-tax exits and will raise the tax cost of selling a business. Business owners should carefully reconsider timing of sale: if a sale is imminent, accelerating it (if feasible) could secure lower BADR rates, or owners should revisit valuations and cash flow forecasts to reflect higher CGT.

4. Investment Incentives Preserved

Despite tax increases elsewhere, the Budget retains several positive investment incentives: full expensing for plant & machinery (allowing 100% first-year allowances) is being kept, and R&D reliefs remain in place. For business owners, investing in equipment, innovation, or growth remains relatively tax efficient and could provide a way to absorb higher costs or offset some tax burden by reinvesting profits.

5. Compliance Risk & Cash Flow Pressure

The Budget also signals tougher compliance: more resources for tax authorities to close the “tax gap” and additional scrutiny. For company owners, this underscores the importance of clean bookkeeping, accurate deductions, and proactive tax planning. Underestimating the cash flow impact of higher NICs, dividend tax, or compliance costs could lead to unpleasant surprises.

Strategic Suggestions for Business Owners

Re-evaluate your pay mix strategy: Given higher dividend tax, assess whether a slightly higher salary (or different extraction strategy) is more tax efficient — especially in light of rising NIC costs.
Plan exits sooner: If you’re thinking of selling part or all of your business, now may be a good time to run the numbers or move forward before CGT rises further on BADR.
Use investment tax reliefs: Take advantage of full expensing and R&D relief to reinvest profits, both to grow the business and reduce taxable surplus.
Stress-test cash flow: In your projections, include the impact of higher employer NICs, potential dividend tax, and compliance costs.
Stay compliant: Make sure your accounting, payroll, and tax processes are solid — the Budget’s increased compliance drive increases risk.