UK Autumn Budget 2025 – Key SME Takeaways

1. Wages and Statutory Rates

• Income Tax, NICs, and VAT headline rates unchanged.

• Income Tax and NIC secondary thresholds frozen until April 2031.

• National Minimum and Living Wage (from April 2026):

  • 21+ NLW: £12.71/hr (+4.1%)

  • 18–20: £10.85/hr (+8.5%)

  • 16–17 / apprentices: £8/hr (+6%)

• Accommodation offset: £11.10/day (+4.1%).

• Potential knock-on effects for managerial pay.

2. Making Tax Digital (MTD)

• Soft landing in 2026/27: no penalties for late quarterly updates; annual submission still liable.

• Penalties for late Self Assessment and VAT increase from April 2027.

• Some small taxpayer exemptions and deferred start dates until April 2027.

3. Apprenticeships & Skills

• £1.5bn funding: £820m for Youth Guarantee (paid work placements for 18–21s), £725m for Growth and Skills Levy (SME apprenticeships for under 25s).

• Funding for over-21s removed from January 2026.

4. Pension Salary Sacrifice

• From April 2029, salary sacrifice tax/NIC relief capped at £2,000/year per employee.

• Higher-paid employees most affected; software adjustments required.

• Employers encouraged to review workforce impact.

5. Supporting the High Street

• Removal of customs duty relief on low-value imports.

• Planning reforms and permanently lower RHL business rates (-5p).

• Higher rates applied to properties over £500,000.

• Expansion of Supporting Small Business scheme to protect independent pubs/shops.

6. E-Invoicing for VAT

• Mandatory for B2B and B2G transactions from April 2029.

• Structured digital invoices improve efficiency and automate reconciliation.

• Builds on MTD for VAT; software updates will implement the feature.

7. Business & Property Taxation

• Corporation Tax: no rate changes; late filing penalties double from April 2026.

• Transport taxes: fuel duty cut extended; VED, Van/Car Benefit Charges uprated.

• Business rates: small multiplier 43.2p, standard 48p from April 2026.

• Property income tax (from April 2027): 22%/42%/47%

• Dividend tax (from April 2026): ordinary & upper rates +2%; additional unchanged.

• Dividend tax credit abolished for non-UK residents.

• UK Listing Relief: SDRT exemption for 3 years from Nov 2025.

• HMRC digital prompts for VAT (2027) and Corporation Tax (2028); system integration improvements planned.

8. Employee Ownership Trust (EOT) Relief

• CGT relief cut from 100% → 50% immediately.

9. EMI, EIS & VCTs

• Increased company eligibility limits to support scale-ups.

• VCT Income Tax relief reduced from 30% → 20%.

10. AI Adoption

• AI champions introduced; BridgeAI funding expanded.

• AI in accounting software (e.g., Sage Copilot) boosts productivity, reduces errors, accelerates payments.

11. Writing Down Allowances

• Main rate reduced to 14% from April 2026.

• Permanent 40% first-year allowance for main-rate assets from Jan 2026.

• £1m Annual Investment Allowance retained.

12. Next Steps for SMEs

• Seek professional advice on impact of Budget changes.

• Create schedules for new deadlines and enforcement dates.

• Ensure FY26 plans incorporate all relevant measures for a successful year.