Autumn Budget: what it means for your money and your business

A range of tax changes that could affect small businesses and the self-employed were revealed in the Autumn Budget 2025.

Chancellor Rachel Reeves delivered her Autumn Budget on 26 November shortly after 1230pm. As the cost of living pressures continue to bite and many businesses are struggling without cash reserves, the country eagerly awaited updates on the government’s financial plans for the year ahead.

The Office for Budget Responsibility (OBR) also shared its forecasts for the UK’s economy. 

In an announcement that promises to “cut NHS waiting lists, cut national debt, and cut the cost of living,” here’s what tax changes and financial plans the chancellor revealed.

Alongside the chancellor’s announcement, the OBR has upgraded Britain’s growth this year from one per cent to 1.5 per cent. 

Tax thresholds frozen for 3 more years

The chancellor has confirmed that there won’t be a rise to income tax, and the current freeze on income tax rates will be extended until 2031. 

This means the personal allowance will remain £12,570 and the higher rate threshold will be £50,270 until April 2031. 

Small business owner Nima Alale, of Sèreality Studios, says: “Running a small business today means adapting constantly, and any steps to simplify taxes or reduce uncertainty would go a long way in helping us focus on what we do best – creating meaningful work and experiences for our customers.”

Business rates reforms

Lower rates for high street businesses

The government is going to introduce “permanent lower tax rates” for retail, hospitality, and leisure businesses (RHL). 

These rates will be 5p lower than the national multipliers, making the small business RHL multiplier 38.2p in 2026-27 and the standard RHL multiplier 43p in 2026-27.

This is being funded through higher rate taxes for business properties worth £500,000 or more, such as warehouses and online retailers. 

It’s hoped reforms will incentivise investment and growth, support the high street to thrive, and help businesses succeed. 

Transitional relief and a cap on bills 

The 2026 business rates revaluation of properties is a key concern for many small business owners. So a new transitional relief package has been introduced to protect businesses from high bill increases. 

There’s also going to be a cap on bill increases for the smallest businesses set to lose business rates relief or rural rate relief. Bill increases will be capped at £800 or the relevant transitional relief caps from 1 April 2026 – whichever is higher. 

The government has also expanded the 2026 supporting small business scheme to those losing the RHL relief. This will apply from 1 April 2026 for three years. 

The latest SME Insights Report from Simply Business found that an unpredictable economy is one of the biggest challenges for 16 per cent of businesses and over a quarter (27 per cent) want a simpler tax system.

National minimum wage increase

The government has confirmed a rise to the national minimum wage next April. 

Those over 21 will be legally entitled to £12.71 an hour from 1 April 2026 – an increase of 50p. This is known as the national living wage. 

For workers aged 18 to 20 the new rate will be £10.85, while under 18s and apprentices will get a 45p rise to £8 an hour. 

While this is positive news for workers, we know from our SME Insights report earlier this year that 22 per cent of small businesses were holding off on expanding or hiring staff to cope with current economic challenges.  

Relaxed start for Making Tax Digital penalties

It was confirmed in the Budget that Making Tax Digital (MTD) penalties for income tax won’t be applied for late submission of quarterly updates during the 2026-27 tax year. 

And a new penalty regime for late submission and late payment will apply to all other Self Assessment taxpayers not due to join MTD from 6 April 2027. It was also announced that penalties for late payment of income tax and VAT will increase from 1 April 2027.

Fuel duty freeze extended 

Fuel duty will be frozen at its current rate (52.95 pence a litre) until September 2026.

It had been frozen until March 2026 but this will now extend a further five months until September. 

And a new fuel finder scheme will help drivers compare fuel prices more easily and encourage competitive pricing among garage forecourts. This measure will be introduced from spring 2026 and hopes to “call out rip-offs” on fuel. 

A cut to household energy bills  

New measures to cut the average household energy bill by £150 will come in from April next year. 

This comes as the government seeks to ease the cost of living for people across the country by taking “money off bills and in the pockets of working people”.

While this doesn’t directly tackle challenges for small businesses, any measure to reduce daily costs for people may be welcome news.

New tax on electric vehicles – and funding for EV grants

There will be a new mileage charge for people driving electric vehicles from April 2028. This charge for electric and plug-in hybrid cars is an extra charge on top of the existing vehicle excise duty. 

And there will be an additional £1.3 billion funding for the electric car grant up until 2029-30. 

ISA system reforms 

Rachel Reeves has revealed changes to the ISA rules to encourage more investment while still allowing people to earn tax-free. 

The £20,000 Individual Savings Accounts (ISA) allowance will remain, but £8,000 of this will be specifically for use in stocks and shares ISA for investment from 2027. The remaining £12,000 can be used in cash ISAs.

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State pension set to rise

The state pension will rise by 4.8 per cent in April 2026, meaning that:

• the basic state pension will go up by £440 a year
• the new state pension will increase by £575 a year

For those on the new state pension scheme, this will bring their annual state pension amount to £12,548 – meaning it could be the last year that it falls within the personal allowance threshold of £12,570.

This means that, from the following tax year, state pensions could be subject to income tax.

Sugar tax expansion 

From 1 January 2028, producers of pre-packaged milk-based drinks with added sugar will be subject to the soft drink industry levy if the total sugars are over the threshold. 

Known as the sugar tax, the threshold for when it’s applied has been lowered slightly.

The new threshold means soft drinks with 4.5g of total sugar per 100ml (rather than 5g) will have the sugar tax applied.  

Milk-based drinks and milk substitute drinks like bottled milkshakes and pre-packaged coffee drinks with milk will also be subject to the sugar tax under these new rules. 

Consulting on timely tax payments

If you have income through both pay as you earn (PAYE) and self-employed income to declare through Self Assessment, the government is consulting on how to encourage more timely payments.

They want more Self Assessment taxpayers to pay income tax during the same tax year the income was earned. A consultation will be published in early 2026 on how to approach this change, with a plan to introduce this in April 2029. 

They will also be consulting on how to get VAT and PAYE tax paid on time, for example requiring more tax payments by Direct Debit. 

More guides for small business owners

• Is business insurance a legal requirement?
• How much will Making Tax Digital cost?
• HMRC tax refund: what to do if you’ve paid too much tax?
• HMRC issues scam warning with Self Assessment on the horizon