The Budget 2025: 12 measures that will have an impact on your small business

Today’s Budget is fiscally tight and revenue- raising – the Chancellor is working hard to balance the books.

Aaron Asadi, CEO of Enterprise Nation, points out that there are no easy answers:

“Most entrepreneurs will still feel the tax screw tightening, with higher taxes on dividends, property and savings, and new National Insurance charges on salary-sacrifice pensions all raising the effective burden on small business owners.”

We’ve been through the Budget and summarised the key changes for small business owners.

12 Budget policies that affect small business owners

There are few instant Budget giveaways, but there are important changes small business owners need to plan around from 2026 onwards.

Chancellor Rachel Reeves mentioned founders in the first part of her speech, when talking about British ambition:

"Because growth doesn’t just appear out of thin air. It is built – patiently, and stubbornly, by the people who take risks. By founders who bet their savings on an idea. By firms breaking into new markets, developing new technologies, creating new jobs and new opportunities."

You can read the Chancellor's Budget speech, and fact sheets on supporting business, supporting growth and supporting cost of living from the Treasury.

1. Dividend tax increased

The tax on dividends will increase by 2%, raising the basic rate to 10.75% and the higher rate to 35.75%.

Introducing the measure, Chancellor Rachel Reeves said “it’s not fair that the tax system treats different types of income differently”.

Dividends are an important part of the way business owners are taxed because their income often comes from a mix of PAYE and dividends.

2. Increase to the National Minimum Wage

The Chancellor announced the following increases from 1 April 2026:

• The National Living Wage will increase by 4.1% to £12.71 per hour.

• The National Minimum Wage for people aged 18 to 20 will increase by 8.5% to £10.85 per hour.

• The National Minimum Wage for people aged 16 and 17 and apprentices will increase by 6.0% to £8 per hour.

The changes will increase the cost of employing staff and come on the back of increases to employers' National Insurance contributions in April 2025.

3. Funding for apprenticeships

The Youth Guarantee offers six-month paid work placements for eligible young people.

The Budget increases the support for small businesses who take part in the initiative:

“This includes £725 million for the Growth and Skills Levy to help support apprenticeships for young people, including a change to fully fund SME apprenticeships for eligible people under 25.”

4. Attracting global talent

Visa rules will shift further towards attracting global talent. The High Potential Individual route will expand to graduates from the world’s top 100 universities.

International students will be able to move more easily from study into entrepreneurship through a streamlined Innovator Founder route.

These moves matter most in sectors with acute skills shortages, but they underline a wider intent to keep the UK open to entrepreneurial talent.

5. EMI schemes available to larger businesses

The size of companies that will be able to benefit from Enterprise Management Incentives (EMIs) will increase from 250 full-time employees to 500 from April 2026.

EMI allows employers to offer share options to employees in a tax efficient way, so they can attract, retain, and motivate key employees.

6. Business rates

Business rates in England will be updated to reflect changes in property values that have happened since 2023 on 1 April 2026, causing the majority of bills to increase.

The Budget announces a three-year, £4.3 billion package to support businesses during this transition. The cap sets the following rates:

• Up to £20,000 (£28,000 in London): 5% in 2026/2027, 10% (plus inflation) in 2027/2028, 25% (plus inflation) in 2028/2029.

• £20,001 (£28,001 in London) to £100,000: 15% in 2026/2027, 25% (plus inflation) in 2027/2028, 40% (plus inflation) in 2028/2029.

• Over £100,000: 30% in 2026/2027, 25% in 2027/28 (plus inflation), 25% (plus inflation) in 2028/2029.

The Budget also outlines long-term support for the high street by targeting retail, hospitality and leisure (RHL) businesses:

“From 1 April 2026, the government is introducing two permanently lower business rates multipliers for eligible RHL properties with rateable values below £500,000.”

Over 750,000 RHL properties, including shops and pubs, are expected to benefit.

7. Ending the customs duty relief for low-value imports

In an effort to “support Britain’s businesses and high streets”, the government is ending the customs duty relief for low-value imports.

“To support fair competition between high street businesses and online retailers, following the recent rapid growth in low-value imports, the government will remove the customs duty relief for low-value imports.”

Low-value imports are goods valued at £135 or less. This is likely to make these imports more expensive, increasing the competitiveness of UK firms.

The measure is expected to be in place by March 2029 at the latest.

8. Salary sacrifice schemes

Salary-sacrificed pension contributions above £2,000 will no longer be exempt from National Insurance contributions from April 2029, the Office for Budget Responsibility (OBR) notes:

“This means that salary-sacrificed pension contributions above £2,000 will be treated as ordinary employee pension contributions in the tax system and therefore be subject to both employer and employee NICs.”

The policy is expected to raise £4.7 billion in 2029/2030 and £2.6 billion in 2030/2031.

Ordinary employer pension contributions will remain exempt from NICs.

9. UK listings relief

The Chancellor sought to incentivise companies to list on UK stock markets, the Budget says:

“Taking effect from 27 November, transfers of a company’s securities will be subject to relief from the 0.5% Stamp Duty Reserve Tax charge for three years from the point the company lists on a UK regulated market.”

It’s common for businesses based in the UK to list in other countries to have access to a greater volume of capital and other incentives.

10. A third of Start Up Loans expected to be written off

Talking about public sector financial liabilities, the OBR’s document notes:

“Start Up Loans are extended by the British Business Bank with the expectation that around 30% of new loans will eventually be written off.”

These are personal loans, meaning the director who borrows the money is liable even if the company becomes insolvent.

11. Tax administration

There are no major cuts to headline tax rates, but there are important changes to how businesses file and pay.

The government will invest £59 million in technology, so that from April 2027 for value added tax (VAT) and April 2028 for corporation tax, approved software can provide real-time prompts and checks as returns are filed.

The Budget also confirms changes to Making Tax Digital (MTD) and the penalty regime. A very small group of taxpayers will be fully exempt from MTD. Some other small groups will see their MTD start dates pushed back to April 2027.

12. A tougher enforcement stance on the high street

The Budget confirms a tougher approach to non-compliance, particularly for a minority of bad operators on the high street.

A new small business evasion and enforcement team will be created within HMRC, supported by 350 new criminal investigators focused on serious fraud and evasion by small businesses.

A cross-government high-street taskforce will build a clearer picture of organised crime in sectors such as mini-markets, barbers, vape shops, nail bars and car washes, and will co-ordinate enforcement.

For compliant firms, this should reduce the unfair advantage enjoyed by rogue operators.

Reeves seeks sustainable "headroom"

The chancellor’s goal was to build fiscal "headroom". This is the amount of money available for additional spending or tax while staying within the government's self-imposed Budget rules.

The Budget documents show the UK will have £22 billion in fiscal headroom in five years' time and the Chancellor's speech noted that “borrowing as a share of GDP will fall in every year of this forecast”.

The OBR’s report shows that UK’s GDP forecast is higher than expected for the current year, but has been reduced after that:

• 2025: 1.5%, up from the 1% forecast in the Spring Statement

• 2026: 1.4%, down from 1.9%

• 2027: 1.5%, down from 1.8%

Run-up to the Budget called a "shambles"

Prime Minister Keir Starmer drew criticism from Kemi Badenoch, the leader of the opposition, who called the run-up to the Budget a “shambles”.

In the hours before Rachel Reeves’ speech, the Office for Budget Responsibility accidentally released the Economic and fiscal outlook, effectively sharing the contents of the Budget early.

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• What small business owners told us about the Budget