Autumn Budget 2025: How Will It Impact Business?

On 26 November 2025, Chancellor Rachel Reeves announced tax-raising measures worth up to £26 billion in the Autumn Budget. These changes include extending the freeze on Income Tax thresholds for another three years. 

Alongside the continued freeze on Income Tax thresholds, taxes on property, dividends, and savings income will rise over the next two years. The Budget also introduces National Insurance contributions (NICs) on salary sacrifice pension contributions above £2,000 a year and a new tax on homes valued at £2 million or more. 

To ease living costs, the Chancellor announced steps to cut energy bills, freeze rail fares, and remove the two-child benefit cap. From April, households will see an average of £150 taken off their annual energy bills. Reeves said these measures put ‘money off bills, and in the pockets of working people.’ 

Employment 

Employee NIC rates remain at 8% and 2%, employer rate at 15%. The Secondary Threshold, above which employers pay NIC on each employee’s earnings, stays at £5,000 until 2031. Self-employed NIC rates remain unchanged, though Class 2 and 3 rates will rise slightly from April 2026. 

Employment Allowance

The Employment Allowance, which gives eligible employers a £10,500 reduction in their employer NICs, remains unchanged and the relief for employer’s NICs on earnings up to £50,270 in the first year of qualifying veterans’ employment is extended to April 2028. 

National Living Wage

From April 2026, the National Living Wage rises in line with the recommendation of the Low Pay Commission to £12.71 per hour for those aged 21+, with increases for younger workers and apprentices with the minimum rate £8. 

Company Car Tax

As previously announced, company car tax rates increase by 1% from 2026/27 for zero and low emission cars, with zero-emission cars taxed at 4%. Increases are published some years in advance, to provide certainty over a typical company car ownership cycle. 

The benefit in kind rates for plug-in hybrid electric vehicles (PHEVs) were due to increase significantly due to increased CO2 emissions ratings for these vehicles. Emissions on these types of vehicles can vary greatly, depending on length of journeys and whether the user keeps then charged, and the CO2 ratings and benefit rates cannot easily cover the broad range of real use possibilities.  

A temporary easement is being introduced until April 2028 to mitigate the increase, with some transitional arrangements for the following 3 years.   

Benefits in Kind

As previously announced, reporting benefits in kind via payroll will become mandatory from April 2027. 

Umbrella Companies

In an effort to protect workers providing their services through umbrella companies that may not apply PAYE appropriately, recruitment agencies or end clients contracting with umbrella companies will become liable for PAYE and NICs on the relevant workers from April 2026. 

Salary Sacrifice Pension Contributions 

Salary sacrifice pension contributions currently benefit from an NIC exemption for both employers and employees. This exemption will be capped at £2,000 from April 2029, so that excess contributions are subject to NIC in the same way as employee pension contributions. 

Currently if employers provide eye tests or home working equipment to employees these are not a taxable benefit for the employee, but if the employee pays for them and is reimbursed by the employer there is no relief. From April 2026 the relief will be extended to reimbursement by the employer, and flu vaccines will also be brought within the scope of the reliefs. 

Business

Corporation Tax 

Corporation Tax stays at 25% for large companies and 19% for small profits, as per the corporate tax roadmap published at last year’s budget. Late filing penalties double from April 2026.  

Capital Allowances

Capital allowances see changes, including a new 40% first-year allowance (FYA) from January 2026 and reduced main writing-down rate from 18% to 14% from April 2026. 

The new FYA of 40% on main rate assets will be available to all businesses, not just companies as with some existing FYAs, and on most assets used for leasing. Consistent with other FYAs there are some exclusions, for cars, second-hand assets and overseas leasing. 100% FYA for zero-emission cars and EV charge points have been extended to March 2027. 

The 100% Annual Investment Allowance continues to be available to all businesses with an annual limit of £1m. 

Following consultation, a pilot advance assurance service will enable small and medium enterprises to get certainty over key aspects of their R&D tax relief claims before submission. This will start in spring 2026. 

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) Reliefs

There is significant expansion to the scope of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) reliefs from April 2026. Currently investments could qualify for either scheme where a company’s gross assets are not more than £15m before issue, which will increase to £30m, and the post-issue limit of £16m increases to £35m.

The maximum amount a company can raise annually under the schemes doubles from £5m to £10m, or from £10m to £20m for Knowledge Intensive Companies, and the company lifetime limits also double to £24m and £40m respectively. The VCT Income Tax relief for individuals drops to 20% from 30%, but EIS relief remains at 30%. 

Enterprise Management Incentive (EMI) Scheme Eligibility Limits

Enterprise Management Incentive (EMI) scheme eligibility limits also increase significantly from April 2026, applying to companies with gross assets up to £120m (currently £30m), and 500 employees (currently 250).

The limit on total EMI options in the company also doubles, from £3m to £6m, and the maximum exercise period is extended from 10 to 15 years, and existing contracts will be able to be amended to match the longer period. 

Stamp Duty Reserve Tax Exemption

There is a Stamp Duty Reserve Tax exemption for newly listed companies for three years. 

Capital Taxes 

Employee Ownership Trust

Employee Ownership Trust (EOT) relief is cut to 50% immediately. Previously on selling to a qualifying EOT a seller could benefit from relief from the whole of their capital gain, with the gain being carried over so that it would be taxed on a future disposal (or deemed disposal) by the EOT.  

Now only 50% of the gain will be relieved and carried forward in the EOT, the balance will be taxable on the seller. If this relief is claimed then Business Asset Disposal Relief (and Investors’ Relief, which may apply for non-employees) cannot also be claimed. 

Agricultural and Business Property Relief 

As announced at the 2024 Budget, 100% agricultural and business property relief will be capped at £1 million per person from April 2026, with the excess benefiting from 50% relief. In this budget it was announced that the £1m allowance will be transferable between spouses and civil partners, including where the first death was before April 2026. 

Other Matters 

VAT

The VAT registration threshold remains at £90,000. 

MTD ITSA

Making Tax Digital for Income Tax starts in April 2026 for qualifying incomes over £50,000, expanding gradually to those on lower incomes. 

From April 2029 businesses will be required to issue all VAT invoices as e-invoices, with a roadmap on implementation to be published next year. This is consistent with many overseas jurisdictions that are following this path, and may have become a practical requirement to transact with some customers in the EU and elsewhere anyway. 

Electric Vehicle Excise Duty

Electric Vehicle Excise Duty will be introduced from April 2028 for electric and PHEV cars, at 3p per mile for EVs and a lower rate for PHEVs to reflect that they may also be paying fuel duty. It will not apply to other vehicle types, which are generally less advanced on the transition to electric power.