Autumn Budget 2025: The impact for business

2 December 2025

Last updated: 17 December 2025

Katie Close CA
Director of Tax, ICAS

Katie Close looks at the measures introduced in the 2025 Autumn Budget affecting UK businesses.

Businesses hoping for Budget measures to boost growth, encourage investment, and provide long-term clarity were disappointed last week.

The government’s commitment to one annual fiscal event will hopefully create more certainty for the business community and reduce the flurry of speculation but other measures introduced as part of this Budget will need careful consideration by businesses across the UK.

Corporation Tax remains the same

The main rate of corporation tax will remain at 25%. This provides certainty for business when making long term decisions on investment and strategy, however some of that certainty will be undermined by the changes to the writing down allowances - especially in sectors that are capital asset heavy. The overall tax liability for those businesses may therefore increase as they’re unable to access the same level of capital allowance relief.

Writing down allowances

The reduction of the main rate of writing down allowance from 18% to 14% is supported by a new permanent 40% first year allowance which will be available for leasing (currently excluded). This will apply from April 2026 to both incorporated and unincorporated businesses.

The government is clearly trying to encourage new investment with the 40% first year allowance, but businesses that have already made their investments will be impacted the most. The reduction in the main rate of writing down allowance means that it will take longer to access the tax relief on existing capital assets. Consequently, this may mean that the long-term planning of the business is impacted.

Penalties for late filing of corporation tax returns

The fixed penalties for late filing have doubled. The new rates are below:

Return late £200
Return is more than 3 months late £400
Three successive failures, return late £1,000
Three successive failures, return is more than 3 months late £2,000

Minimum wage increase

From April 2026, the minimum wage will increase by 4.1% for workers over 21 to £12.71 per hour. For younger workers, aged 18-21, it will increase to £10.85 per hour, and to £8 per hour for those aged 16-17. Although a welcome boost for workers, there will be a cost impact for business, with increased payroll costs but also a higher employer national insurance cost, since employer contributions in most cases start at £5,000.

It’s also important to consider existing salaried employees and whether their salary meets the national minimum wage requirements for the hours worked. HMRC are carrying out checks in this area and underpayments for salaried workers could be costly.

Salary sacrifice for pensions

The introduction of the £2k cap for national insurance on pension contributions made through salary sacrifice will remove a valuable tax relief for businesses and employees alike.

After the introduction of the lower threshold and the increase in rate to 15% for employer NICs at the last budget, many businesses used salary sacrifice schemes to reduce their national insurance cost. Offering salary sacrifice schemes to employees also encouraged saving for retirement – a much-needed incentive at a time when private sector employees are not saving enough into their pensions. It also risks widening the gap between the pension savings of those in the private versus the public sector, who benefit from defined benefit schemes.

The introduction of the cap from 2029 will leave many businesses considering how to structure their pension schemes going forward. With rising costs of employing people, many businesses will be focusing on staff retention. Limiting the effectiveness of salary sacrifice schemes for pension contributions removes a valuable incentive for staff retention and may encourage businesses to reduce employer pension contributions.

Business rates

For those outside Scotland, business rates for retail, leisure and hospitality business will be permanently lower. Properties with a rateable value of £500,000 or more will see higher rates. A £4.3 billion support package is available for those most affected from April 2026.

The standard multiplier used for calculating business rate liabilities will decrease from 55.5p to 48p in 2026-27. The small business multiplier will also decrease from 49.9p to 43.2p in 2026-27.

In Scotland, the non-domestic rates apply and any changes to that will be announced in the Scottish Budget in January 2026.

Enterprise Management Incentive (EMI) Scheme

The increase in the limits of the EMI Scheme will offer additional help in rewarding and retaining employees. HMRC is acknowledging that businesses who are just past that start up stage should still have EMI available to them. This is a sensible move that will encourage growth and innovation.

From 6 April 2026 the limits will change as follows:

Company options will be increased from £3 million to £6 million.
Gross assets will be increased from £30 million to £120 million.
The number of employees will be increased from 250 employees to 500 employees.

Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT)

The increase in EIS and VCT investment limits from 6 April 2026 is welcome to help access to finance for new and early-stage businesses. VCT income tax relief is reducing from 30% to 20% as HMRC believes this is to better balance the amount of upfront tax relief compared to EIS and ensure they’re targeting the highest growth companies. However, reducing the income tax relief may discourage investment in VCTs and impact growth.

From 2026, the limits will be as follows:

The gross assets requirement will increase to £30 million (from £15 million) immediately before the issue of the shares or securities, and £35 million (from £16 million) immediately after the issue.
The annual investment limit that companies can raise will increase to £10 million (from £5 million) and for knowledge-intensive companies to £20 million (from £10 million).
The company’s lifetime investment limit will increase to £24 million (from £12 million) and for knowledge-intensive companies to £40 million (from £20 million).

Reduced Capital Gains Tax (CGT) relief on disposal to Employee Ownership Trusts

The CGT relief on qualifying disposals to Employee Ownership Trusts (EOT) is reduced from 100 per cent of the gain to 50 per cent. The gain will be deferred until the shares are disposed of by the trustees, thereby ensuring CGT is only due at that time. This takes effect from 26 November 2025.

Business Asset Disposal Relief won’t be available on the deferred gain where EOT relief is claimed.

For some business owners, the sale of their company to an EOT was a possible exit strategy, especially with the increase in CGT rates announced last year. It also offers the means to provide long term succession for the company in the hands of the employees. It can be an interesting way to support growth by encouraging employee engagement in the long term outcome of the business.

EOTs still offer considerable benefits, but this measure is an attempt by the government to tackle the CGT reliefs available and claim back some of the value from shareholders.