Budget 2025: The key measures, what you need to do now, and in the near future
Updated: May 12
In this article we outline the key measures and changes announced in the Budget 2025, and what they mean for you and your business.
We do not expect our clients to know and understand all of these changes.
While it’s good to understand the main measures announced by the Chancellor, that’s what we’re here for!
As we say every year, the critical point is to make sure that you are claiming all of the reliefs and allowances you are entitled to.
Please be aware that there were also some other accounting and tax changes identified in the Budget that are not covered below.
Rest assured that if a measure is relevant to your business, we will let you know.
There are some measures announced that require immediate action, but we don’t want our SME business owner clients to simply focus on the short term but on the long-term strategic planning implications that come from this Budget.
That’s what we do. We don’t just report on the past, we help you to plan for the future. Please get in touch with us to discuss your future goals and ambitions.
Despite the current economic challenges, we’re determined to help you to achieve your goals with forward-looking, strategic accounting support.
Finally, there is no such thing as a silly question!
If you have a question about any of the points below, please contact us and we can help you by explaining what the changes mean for you.
Dividends Tax Increase
From 6th April 2026, the government announced a 2% increase in the ordinary and upper rates of income tax applicable to dividends, except for the additional rate which will remain unchanged at 39.35%
For 2026/27, the first £500 of dividends is chargeable to tax at 0% This £500 ‘Dividend Allowance’ will stay in place for 2026/27.
From 6th April 2026, dividends received above the Dividend Allowance will be taxed at the following rates:
10.75% for basic rate taxpayers
35.75% for higher rate taxpayers
39.35% for additional rate taxpayers
What you need to do now:
Speak to us about the most tax-efficient way to take money out of your business. Although, there isn’t a silver bullet for reducing your tax bill, you need to make sure you’re taking advantage of all of the reliefs and allowances you’re entitled to.
National Minimum Wage Increase (April 2026)
From 1st April (not 6th April) 2026, the National Living Wage and National Minimum Wage will increase to:
National Living Wage: £12.71
18 – 20 Year Olds: £10.85
16-17 Year Olds: £8.00
Apprentices (apprentices under 19 or 19 and over): £8.00
What you need to do now:
This is a considerable increase in costs for many businesses. Particularly those in retail, leisure and hospitality. You need to plan for these costs immediately.
Can you find productivity gains in other areas? Can you invest in training to improve productivity? If you need to raise prices in April to cover the increase in costs, can you communicate the price increase now so there are no shocks?
Above all, you need to make sure you have a clear cash flow forecast, updated for the rise in costs. Now is the time to prepare as the cost rise doesn’t come into effect until April.
Freezing of Income Tax Bands
The Income Tax personal allowance will remain frozen at the current level of £12,570 until April 2031.
The basic rate band will stay at £37,700, with the higher rate threshold staying at £50,270.
The additional rate threshold will remain at £125,140.
What you need to do now:
The freezing of tax bands will create increased taxation through stealth or ‘fiscal drag’ as people enter higher tax bands as their wages increase. What can you do? Not much!
National Insurance Contributions
The NICs Primary Threshold and Lower Profits Limit stay at £12,570.
The NICs Upper Earnings Limit and Upper Profits Limit will stay linked to the higher rate threshold at £50,270 up to April 2031.
Other employer NICs relief thresholds aligned to the Upper Earnings Limit will also stay at this level.
What you need to do now:
The freezing of these NIC bands will also increase tax take through stealth or ‘fiscal drag’.
There are some reliefs you can claim but ultimately this is another cost you need to consider in your cash flow forecast and planning.
Benefits in Kind and Payroll Software Requirements
From April 2027, companies must use payroll software to report on and pay tax on benefits in kind. This will apply to Class 1A NICs and income tax.
What you need to do now:
Payroll is a necessary but often onerous task for business owners who want to focus on running the business. We can manage this task for you. If you don’t already outsource your payroll, then speak to us and find out how we can help.
Salary Sacrifice NIC Changes
Salary sacrifice is when an employee agrees to reduce their gross salary (or sacrifices a bonus) in return for their employer paying in the same amount into a pension.
Currently, both employers and employees do not have to pay National Insurance Contributions (NICs) on any amount of salary exchanged for pension.
Starting in 2029, only the first £2,000 of pension contributions per employee will be exempt from NICs. Any employee contributions above £2,000 will be subject to employee and employer NICs, similar to other employee workplace pension contributions.
Employers will be expected to report the total amount of salary sacrificed through their payroll. Employer pension contributions will still be free of NICs.
This measure is aimed at higher earners and companies heavily using salary sacrifice. Importantly, employees will be able to continue to use salary sacrifice to access Tax Free
Childcare and Child Benefit.
What you need to do now:
Business owners who use salary sacrifice schemes as part of remuneration packages should start to plan for 2029 now. This will also increase your employer costs through increased NICs. It must also be said that this measure will mostly affect people with highly paid staff.
Corporation Tax
The rates of Corporation Tax will remain unchanged i.e. 25% for companies with profits over £250,000, 19% for companies with profits of £50,000 or less. Companies who make profits between £50,001 and £250,000 will pay tax at the main rate reduced by marginal relief. Importantly, the penalty for submitting a late Corporate Tax return will double for returns with a filing date on or after 1st April 2026.
What you need to do now:
It’s good that businesses at least have some stability with regards to corporation tax and this is still a low tax rate compared to many other countries.
Once again, there is no silver bullet to save tax, but we can make sure you take advantage of all of the reliefs and allowances to which you are entitled.
Capital Allowances
The Annual Investment Allowance enables all businesses (unincorporated and incorporated) to claim 100% of the cost upfront on certain types of plant and machinery. The Chancellor announced that the limit will stay at £1 million.
The government will continue the 100% full expensing for qualifying expenditure on most new plant and machinery. This means that if your limited company buys new equipment, machinery, computers, vans or similar business assets (excluding cars), you can deduct 100% of the cost from your profits straight away in the year you buy it. This reduces your corporate tax bill immediately rather than spreading the deduction over many years.
For expenditure after 1st January 2026, a new 40% First-Year Allowance (FYA) will be introduced to let businesses write off more of their investment cost immediately. The new 40% FYA is particularly aimed at assets that previously didn’t qualify for full expensing, including leased equipment and unincorporated businesses’ assets, which helps SMEs that rent equipment or operate as sole traders.
The Government also announced that they will reduce the main rate Writing Down Allowance (WDA) from 18% to 14%. For Corporate Tax purposes, this will take effect from 1st April 2026. For income tax purposes, this will take effect from 6th April 2026.
What you need to do now:
If you are planning capital expenditures then consider timing your purchases to take advantage of the new capital allowances. If you are planning a large capital expenditure, speak to us about how this can be included in your strategic financial planning. We’re also happy to speak with you about different funding options and which you could use for your business.
We can also help to create and update your cashflow forecast to make sure that the expenditure is costed into your plans and if necessary, make sure your funders have the necessary forecasting and management information they need to finance your project.
Finally, we know we sound like a broken record but make sure you are claiming all of the allowances and reliefs you’re entitled to. We can help you. It surprises us how many business owners don’t take advantage of allowances or reliefs that they could be claiming.
R&D Tax Credits – Advance Assurance Service
In recent years, the R&D tax credit scheme has been scrutinised by HMRC to stop dubious claims being made. This has created some uncertainty around what is and isn’t a legitimate R&D claim.
From April 2026, the government will pilot a targeted advance assurance service to help SMEs to get upfront clarity on their R&D claims before they are submitted to HMRC. This should particularly help startups to plan R&D investments without fear of HMRC later rejecting their claim.
What you need to do now:
R&D tax relief is an area that requires specialist advice, especially with the recent crack down on dubious claims by HMRC.
It’s also important to note that R&D tax credits are not just for businesses who employ scientists in white coats!
If you are unsure whether your innovation project qualifies for R&D tax credits, speak to us and we will be happy to support you.
Expansion of Enterprise Investment Scheme (EIS) and Venture Capital Trusts (VCT)
From 6th April 2026, there will be significant changes to the limits applied to the EIS and VCT schemes which should give more funding to start ups.
Previously, a company had to be relatively small to qualify for these schemes, limited to £15m of gross assets before the issue of shares, and £16m of assets after investment.
From 6th April 2026, these limits are doubling to £30 million before the issue of the shares, and to £35 million immediately after the issue. This means that larger, more established companies can now use EIS and VCTs as a way to raise money.
And the amount of capital that can be raised will also increase. The annual investment limit will increase from £5 million to £10 million. For knowledge intensive companies this will increase from £10 million to £20 million. The lifetime investment limit will increase to £24 million (£40 million for knowledge intensive companies).
However, the income tax relief that can be claimed by individuals investing in VCTs will decrease from 30% to 20%. The EIS relief will remain unchanged.
What you need to do now:
The widening of this scheme will be welcomed by start-up businesses and businesses looking to scale up. The changes should make investing more attractive to venture funds and angel investors. As the higher thresholds take effect in April 2026, you may want to delay raising funding until the higher caps kick in.
Increased limits to Enterprise Management Incentives Scheme
The EMI scheme is a way for companies to reward employees with share options in a relatively tax-efficient way.
The scheme is being widened so that more companies (and employees) qualify.
For EMI contracts granted on or after 6th April 2026, the limit will double from 250 employees to 500 employees, and the gross assets test will increase to £120 million. The company share option limit will also double from £3 million to £6 million. The limit on the exercise period will also increase to 15 years.
What you need to do now:
The new EMI criteria might mean that you can grant tax-advantaged stock options to employees if you were previously ineligible. This is also a good option for businesses who want to compete for top talent, without straining cash flow.
Inheritance Tax Changes
The Budget announced some important changes to unused pension funds, agricultural property relief & business property relief which could have significant effects, particularly for those with pension funds.
What you need to do now:
Inheritance tax rules can be complex, and we are happy to recommend you to an inheritance tax specialist.
Individual Savings Accounts
For 2026/27, the following limits apply and will stay frozen until 5th April 2031.
Junior ISAs £9,000
Individual Savings Accounts (ISAs) £20,000
Lifetime ISAs £4,000 (excluding government bonus)
Child Trust Funds £9,000
In an important change, from 6th April 2027, the annual ISA cash limit will be set at £12,000.
The remaining £8,000 will be designated for stocks and shares ISA investment. This restriction will not apply for people aged over 65.
What you need to do now:
If you need support with your financial planning, please speak to us and we’d be happy to help.
High Value Council Tax Surcharge
From April 2028, properties valued at over £2 million will be liable to a new High Value Council Tax Surcharge (HVCTS) that will be collected alongside Council Tax.
This HVCTS will increase as the value of the property increases.
Over £2 million, annual charge = £2,500.
£2.5 – £3.5 million, annual charge = £3,500
£3.5 – £5 million, annual charge = £5,000
In excess of £5 million = £7,500
Electric Vehicle Excise Duty
The government is losing fuel duty and tax revenue as more people move to electric cars, and thanks to the incentives of owning an electric car, some fuel/petrol car drivers might now perceive an unfair imbalance.
From April 2028, the government is introducing a new mileage charge for electric and plug-in hybrid cars called Electric Vehicle Excise Duty (eVED). This will be paid alongside current Vehicle Excise Duty and is anticipated to be around £240 year.
The tax paid by electric vehicle owners will be roughly 50% of the fuel duty rate paid by the average petrol/diesel driver. This will be slightly reduced for plug-in hybrid drivers.
Business Rates Cuts for Retail, Hospitality & Leisure
The Chancellor announced permanently lower business rates for an estimated 750,000 properties in the retail, hospitality, and leisure sectors. Starting in April 2026, these smaller bricks-and-mortar businesses will benefit from a lower rates multiplier for properties with a rateable value under £500k.
New Banded Multiplier System
But to offset this reduction in business rates, larger commercial sites over £500k value, such as big logistics warehouses typically used by online retailers and large offices, will pay higher rates via a new banded multiplier system.
Industry groups have expressed concern that the higher rates for large properties, such as major distribution warehouses, could lead to increased costs that might be passed on to consumers as higher prices.
Levelling the Field with Online Competitors
Previously, if a low value parcel (£135 or less) was imported into the UK, you would not normally need to pay customs duty. Going forward, even inexpensive parcels from abroad will face duties so that online sellers can’t undercut UK shops. By March 2029 at the latest, customs duty will apply to all parcels entering the UK, regardless of value.
What you need to do now:
Ecommerce and traditional retail businesses should prepare for this change now. If you import products or materials in small consignments, then you will be facing slightly higher costs and more customs paperwork. You might want to consider adjusting your pricing or supply chain strategy.
Apprenticeships Fully Funded for SMEs – Co-Investment ends for under 25s
The government confirmed they will be allocating an additional £725m to the Growth and Skills Levy over the spending review period to support apprenticeships for young people.
This includes a change to fully fund SME apprenticeships for eligible people under 25.
This means that if you’re an SME taking on an apprentice under 25, you will no longer need to contribute the 5% training co-investment. Previously, SMEs would have to make a co-investment payment of 5% for those apprentices aged 22-24.
We have yet to see implementation details as to when this change will take effect. It’s also unclear how this change will affect businesses in Wales.
The Chancellor also announced she was providing £820 million over the next three years for the youth guarantee.
Landfill Tax
In some welcome news for construction and house building firms who were concerned about changes to the Landfill Tax, the government rejected the proposal to move to a single rate by 2030.
Instead, the annual lower rate price increase will now match the increase of the standard rate. This will prevent the gap between the rates getting wider.
Green light to Flintshire and Wrexham Investment Zone
In a positive development for North Wales, the Budget gave final approval of the Flintshire and Wrexham (North Wales) Investment Zone, the first Investment Zone outside England to enter delivery.
The investment zone will be backed by £160 million government funding over 10 years, focusing on advanced manufacturing. It will connect people to over 5.5 million square feet of manufacturing floor space, with skills interventions to support local people to take advantage of over 6,000 new high-quality jobs.
As a business based in Wrexham, this is a very positive development for our region.
AI Initiatives and AI Growth Zones
Wales will host two of the UK’s flagship AI Growth Zones, one in the south and one in the north. The AI Growth Zone in North Wales will be anchored around Anglesey (Prosperity Parc) and Trawsfynydd in Gwynedd, and is predicted to create around 3,400 jobs in the region.
The Budget has set out to make the UK a leader in Artificial Intelligence and innovation including a £500m “Sovereign AI Unit” fund to scale up British AI startups and AI ambassadors” from industry to champion AI adoption.
Any Questions
If you have any questions about how the Budget 2025 affects you or your business, please get in touch with our expert accounting team and we would be happy to help you. Email: support@theuncommonpractice.com or submit your question here.
IMPORTANT DISCLAIMER: This material is published for information only. 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. No responsibility for loss occasioned by any person acting or refraining from action as a result of the material can be accepted by The Uncommon Practice.
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