On 30th October, Chancellor Rachel Reeves delivered her highly anticipated Autumn Budget to parliament. As predicted, the Budget introduced several substantial changes that will affect businesses. Here we outline the main headlines, and the details of the key measures in more detail. You can find our experts’ view on The Autumn Budget here: “Investment and Stability, But the Burden Falls on Businesses“. If you have a question about any of the measures outlined below and how they might affect your business, please contact our accounting team without delay and we would be happy to help you. ## The Main Headlines for Businesses > There will be increased costs for many employers from April 2025 through both increases to the national minimum wage and employers’ national insurance contributions. > A change in tax treatment for double-cab pick up vehicles coming into effect in April 2025. > Corporation tax rates and thresholds will remain the same. The government also published a “corporate tax roadmap” to create a more predictable and stable tax environment for business owners. > Business rates relief for Retail, Hospitality and Leisure (RHL) businesses > No Changes to UK VAT Regime or to UK R&D tax reliefs ## Increase in Employers’ National Insurance (NIC) From 6th April 2025, the rate of employers’ national insurance will increase from 13.8% to 15%. Adding further cost to employers, the secondary threshold – the level at which employers start paying NI on each employee’s salary – will reduce from £9,100 to £5,000. However, by way of slight mitigation, the Chancellor also announced that the ‘employment allowance’ will increase from £5,000 to £10,500. The employment allowance enables eligible employers to reduce their employers’ Class 1 National Insurance liability. Previously, the employment allowance was only available to businesses who have incurred an employers’ Class 1 NICs liability of less than £100,000 in the previous tax year, but that restriction will be removed for 2025/26. ## Increase to The National Living Wage and National Minimum Wage Adding to employers’ costs, the Chancellor announced a significant increase to the National Living Wage (NLW) and the National Minimum Wage (NMW) from 1st April 2025. Labour has previously stated its ambition for all adults to eventually receive the same minimum wage. Employers must pay their employees at least the NLW, for workers aged 21 and over, or the NMW otherwise. The minimum hourly rates change on 1st April each year and depend on the worker’s age and if they are an apprentice. From 1st April 2025, the 18–20 year old rate will increase by a significant 16.3% to £10.00 per hour and the 16-17 year old/apprentice rate will increase by 18% to £7.55 per hour. The National Living Wage for employees aged 21 and over will increase from £11.44 to £12.21. ## Corporate Tax Rates and Thresholds Remain Unchanged For the financial year 1st April to 31st March 2026, corporation tax rates and thresholds will remain unchanged. | Financial year to 31 March 2026 | | | --- | --- | | Financial year to 31 March 2026 | | | Main rate | 25% | | Small profits rate | 19% | | Small profit threshold | £50,000 | | Main rate threshold | £250,000 | | Marginal relief fraction | 3/200 | | Effective marginal relief rate | 26.5% | Companies with profits between the small profit and main rate thresholds will qualify for marginal relief, which effectively means they pay tax at 19% up to the lower threshold and at 26.5% on the balance of their profits. Business owners are reminded of the associated companies rules when determining which threshold applies. The government also published a “corporate tax roadmap” in order to create a more predictable and stable tax environment for business owners. The government confirmed that it will make no changes to the following during the life of this parliament: > Corporation tax rates will not increase beyond the rates shown above. This includes retaining the small profits rate and marginal relief. > They will maintain the annual investment allowance, giving 100% tax relief on the acquisition of up to £1 million worth of new or second-hand qualifying plant and machinery each year. > The ‘full-expensing’ regime will be maintained, giving 50% or 100% tax relief on the acquisition of new and unused qualifying plant and machinery, without limit. > The current rates of Research & Development tax reliefs will be maintained. > The territorial scope and structure of the UK corporation tax regime, such as exemptions for substantial shareholding disposals and dividend income will remain the same. > There will be no change to the current overall approach to the patent box and taxation of intangible fixed assets. > The availability of the audio-visual and the video game expenditure credit will remain ## Business rates for Retail, Hospitality and Leisure Businesses The Government announced that it is looking at introducing permanently lower business rates for retail, hospitality and leisure (RHL) businesses from 2026/27, specifically for RHL properties with a rateable value below £500,000. For 2025/26, RHL businesses will be given a 40% relief on their business rates. The small business tax multiplier, which applies to properties with a rateable value of less than £51,000, will also be frozen next year. ## Benefits in Kind Update Employees must pay income tax on certain non-cash benefits. For example, a company car would constitute a taxable ‘benefit in kind’. In 2025/26, employers must also pay Class 1A National Insurance Contributions at 15% on the value of benefits (up from 13.8% in 2024/25). The official rate of interest (currently 2.25%) used to calculate the benefit value of employment-related loans and living accommodation will, from April 2025, be allowed to change on a quarterly basis. Previously the rate has been set for a full tax year. ## Tax Treatment of Double-Cab Pick Up Vehicles Uncertainty surrounding the tax treatment of double cab pick-up vehicles with a payload of 1 tonne or more was also addressed. These types of vehicle that are not predominantly suitable for carrying goods are to be treated as cars for benefit in kind purposes. However, vehicles that were acquired or ordered before 6th April 2025 can be treated as vans until the earlier of disposal, lease expiry, or 5th April 2029. If you are considering buying a double cab pick-up vehicle (with a payload of 1 tonne or more), then you may want to order it before 6th April 2025 to ensure it attracts the more beneficial tax treatment for vans. Likewise, with regards to plant and machinery capital allowances claims, from April 2025, most double cab pick-up vehicles with a payload of 1 tonne or more will need to be treated as cars for capital allowances purposes. This is less favourable than the existing classification as a goods vehicle. While the change will apply from April 2025, if the expenditure on the double cab pick-up vehicle was incurred as a result of a contract entered into before 1st April 2025 for companies – or 6th April 2025 for non-corporate businesses – and the expenditure is incurred by the business before 1st October 2025, the vehicle can continue to be treated as a goods vehicle. Also on motor vehicles, it was confirmed in the Budget that the 100% first-year allowance for zero-emission cars will be extended until 31st March 2026 for corporation tax and 5th April 2026 for income tax. ## No Changes to UK VAT Regime The VAT registration and deregistration thresholds will remain at £90,000 and £88,000 respectively from 1st April 2025. There have been no changes to the rates of VAT and the standard rate continues to be set at 20%. However, in a key change to VAT, private school fees will now be made subject to VAT at 20%. This will start from the school term beginning in January 2025. ## Interest on unpaid tax liabilities to increase From 6th April 2025, the late payment interest rate charged by HMRC on unpaid tax liabilities will increase by 1.5 percentage points. For most taxes, this will set late payment interest at the Bank of England base rate plus 4%. ## Research & Development (R&D) reliefs The R&D tax relief regime has seen a lot of change in recent years so the Government announced that it is committing to the current rates of R&D tax relief. Since 1st April 2024, this equates to a 20% taxable contribution from HMRC on qualifying R&D expenditure in the "merged scheme" (used by most claimant companies) and, for ‘loss-making R&D intensive SME companies’, an 86% uplift in deductible qualifying expenditure with a 14.5% payable tax credit. An R&D intensive company is one that qualifies as an SME and at least 30% of its total expenditure is invested in R&D. ## Company Car Tax Rates The government set company car tax rates, with some significant changes for cars with emissions of 1g to 50g of CO2 per kilometre, including hybrid vehicles: For 2028/29 and 2029/30, company car tax rates were set as follows: > For zero emission and electric vehicles: 7% for 2028/29 and 9% for 2029/30 > For cars with emissions of 1g to 50g of CO2 per kilometre, including hybrid vehicles: 18% for 2028/29 and 19% for 2029/30. Note: This a big change for users of some vehicles, as for the current tax year, the appropriate percentage is as low as 2%. > For all other vehicles: the appropriate percentage will increase by 1 percentage point for each of 2028/29 and 2029/30. The maximum percentage will be 38% for 2028/29 and 39% for 2029/30 for all other vehicle bands. ## National Insurance for The Self-Employed Self-employed individuals pay Class 2 and Class 4 National Insurance Contributions (NICs). The relevant rates and thresholds are: | | 2025/26 | 2024/25 | | --- | --- | --- | | | 2025/26 | 2024/25 | | Class 2 NICs per year – mandatory* | £nil | £nil | | Class 2 NICs per year – voluntary* | £182.00 | £179.40 | | Small profits threshold (SPT) | £6,845 | £6,725 | | Lower profits limit (LPL) | £12,570 | £12,570 | | Upper profits limit (UPL) | £50,270 | £50,270 | | Class 4 NICs on profits below the LPL | 0% | 0% | | Class 4 NICs on profits between the LPL and the UPL | 6% | 6% | | Class 4 rate on profits above the UPL | 2% | 2% | * From 2024/25 onwards, Class 2 NICs are effectively abolished. If trade profits exceed the Small Profits Threshold (SPT), the individual will accrue entitlement to state benefits such as the state pension. However, if trade profits fall below the SPT, the individual will need to pay Class 2 NICs voluntarily if they need the tax year to qualify for state benefit purposes.
