How the 2025 Autumn Budget Affects Business Owners Across the UK

The Autumn Budget 2025 summary is particularly important for business owners, as it sets out the tax environment, investment conditions and cost pressures that will shape the coming years. This overview explains the changes most relevant to business owners, based on the official Budget documents and the latest analysis from the Office for Budget Responsibility (OBR).

For reference, you can read the full Budget documents here: Government Autumn Budget

And the OBR’s full Economic and Fiscal Outlook here: OBR Fiscal Outlook

The Economic Backdrop for Business Owners

The OBR forecasts UK economic growth to average around 1.5% over the next few years. Productivity remains subdued, inflation stays higher for longer, and interest rates fall only gradually. For business owners, this creates a mixed environment:

• demand is steady but fragile

• cost pressures remain elevated

• financing costs stay higher than the low-rate years after 2008

Inflation is expected to be 3.5% in 2025 and 2.5% in 2026 before returning to the Bank of England’s 2% target in 2027.

Corporate Taxes and Allowances

Several measures in the Autumn Budget affect the tax position of companies and owner-managers.

Reduction in Capital Allowances

Writing down allowances on plant, machinery and equipment are reduced, increasing taxable profits for many businesses. The OBR estimates this will raise around £1.5 billion a year by 2029–30.

Dividend Tax and Owner-Managed Companies

Dividend tax rates increase by 2 percentage points, and the dividend allowance remains frozen. For business owners who extract profit through dividends, overall tax liabilities rise as a result.

Personal Threshold Freezes and Company Directors

The freeze to personal income tax thresholds until 2028–29 means more directors are pulled into higher tax bands, particularly those combining salary and dividend remuneration.

Full details can be found in the OBR’s receipts analysis.

Salary Sacrifice and Employer Costs

National Insurance will now apply to salary-sacrificed pension contributions. Many business owners use salary sacrifice as part of their remuneration strategy for themselves and employees. This change increases employer NI liabilities and affects the overall cost of reward packages.

Companies using pension salary sacrifice arrangements may need to reassess benefit structures and timing of contributions.

Labour Market and Wage Pressures

The OBR expects wage growth to remain firm in the short term before easing after 2026. For business owners, this means:

• wage expectations may stay elevated in 2025

• recruitment challenges may continue, especially for technical roles

• margins could feel tighter if output prices cannot increase at the same pace

Unemployment remains around 5% until 2027, limiting the availability of skilled labour in certain sectors.

Business Investment Conditions

The combination of reduced capital allowances, higher long-term interest rates and lower projected profit growth creates a more cautious investment environment. According to the OBR:

• business investment is forecast to grow more slowly than previously expected

• returns on capital fall through 2026 before beginning to recover

• gilt yields remain comparatively high, raising borrowing costs for businesses

This may lead some companies to delay or phase investment until conditions become clearer.

Regulatory and Sector Pressures

Several broader policy decisions influence businesses indirectly:

• rising local authority pressures, especially around SEND, may translate into higher local charges or slower service delivery

• the planned digital ID card rollout may create compliance requirements for certain firms

• renewable energy support changes may affect energy-intensive businesses or those making sustainability investments

Business owners using electric vehicles should note the introduction of a mileage-based charge for EVs from 2028, replacing foregone fuel duty revenue.

Cashflow, Borrowing and Long-Term Planning

Borrowing costs remain high by historical standards, and public finances are under strain. For business owners, this means:

• banks may remain cautious with lending

• refinancing arrangements could be more expensive

• higher personal and corporate taxes may reduce net cashflow

Debt is forecast to peak at 97% of GDP in 2028–29, which the OBR highlights as a long-term structural challenge.

Why the Budget Matters for Business Owners

This Autumn Budget 2025 summary shows that business owners face a period shaped by higher taxes, slower investment growth and persistent cost pressures. While there are no extreme changes to business taxation, the cumulative effect of threshold freezes, dividend tax rises, NI changes and reduced investment allowances creates a more demanding environment for many companies.

If you would like to read more general insights and updates, our news and resources section is here: News and Resources

This article is for general information only and does not constitute financial advice. If you require guidance tailored to your personal or business circumstances, please speak with a regulated adviser.