We’ve just had the Autumn 2025 Budget Update, but what does it mean for small businesses?
Lets start with the positives, Bingo levies are being abolished.
Self employed national insurance hasn’t increased, I was worried that would increase so that’s a treat!
The VAT threshold isn’t moving, the endless rumours around this were getting noisy so I am pleased to see this isn’t going to happen and upset so many lovely small businesses.
There’s other things around child benefits and what not which is good, but isn’t a world of tax I get involved in so I am not covering those.
The tax thresholds are remaining frozen until 2031, which in reality means we all pay more tax as they aren’t going up with inflation. At this point we’ve all got fairly used to them being frozen, so its not great but a bit blindly accepted in my camp at this point.
The real pain in the backside is the dividend and property tax increasing by 2%.
For landlords that own your properties personally there isn’t really any way around this short of selling the properties. There may be more complicated tax planning schemes that I am not aware of, but if you already own the property selling it into a limited company will cost you capital gains tax and stamp duty, so won’t be worth it.
Here your best bet is making sure you are keeping really solid records so we can claim every expense possible to help reduce your tax bill.
Limited company directors, my lovely people that apparently do not count as working people, getting done over again. Why does every government hate small businesses? I cannot answer that.
What can we do about this 2% dividend tax?
If you are a tiny business, I am talking profits of under £25k, it’s probably time to close the limited company and operate as a sole trader unless you have growth plans, or are tied to the limited company for a reason.
You can’t close your limited company if you’ve got bounceback loans, finance, or owe HMRC money.
We also have to factor in Making Tax Digital which is coming for the self employed from April 2026, and the increase cost in software, time and accounting support may overrule any tax savings there regardless.
If you have profits over £30k, it is still just about more tax efficient to stay as a limited company. It will cost you more in tax, obviously, there is little we can do to avoid that.
It will be worth taking more money out of your business in the next few months ahead of April 2026 to max out these lower dividend rates.
The tax efficiencies of being able to manage how much you pay yourself as a limited company remain, as do all the other perks.
I’ve updated our LTD co VS sole trader calculator for 26/27 which is available here. I have done this incredibly quickly so apologies if I’ve missed a number.
If you didn’t put someone on your payroll to avoid the employers national insurance increase, now might be the time to think about that again.
The wine at my local buzz bingo is very cheap and bad, so you know where to find me…
In all seriousness, we’ll keep crunching the numbers over the coming days and report back with anything we come up with.