Chancellor Rachel Reeves delivered the Autumn Budget today, unveiling a wave of tax changes and policy reforms that will shape the financial outlook for business owners.
From new rules on capital allowances, dividends, savings and rental income, and changes to EIS, EMI and EOTs, the Budget introduces measures that will influence profitability, investment planning and long-term strategy.
With today’s announcements, business owners will need to reassess their cost base, cash flow and growth plans. As always, understanding how these developments interact with your own circumstances is key to turning new challenges into opportunities.
In this blog, we summarise the key announcements and how they may affect you and your business.
Corporation tax and capital allowances
The main rate of corporation tax remains unchanged. However, several adjustments have been announced relating to capital allowances.
- Full expensing continues, allowing businesses to claim 100% relief on qualifying plant and machinery.
- A new first-year allowance will allow companies to deduct 40% of the cost of certain main rate assets in the first year.
- From April 2026, writing down allowances on main rate assets will be reduced by 4%, slowing relief on the remaining expenditure.
The overall effect is that more tax relief will be available in the early years of an investment, but less over time.
Property, dividend and savings income
Taxes on income from assets are set to rise. Dividend, rental and savings income tax rates will increase by 2% from April 2026.
A new structure for taxing rental profits will come into effect from April 2027, with property income taxed at:
- 22% for basic rate taxpayers
- 42% for higher-rate taxpayers
- 47% for additional rate taxpayers
Landlords and investors may need to review portfolio profitability and consider tax-efficient structuring.
Capital Gains Tax and Employee Ownership Trusts (EOTs)
The current 100% CGT exemption for qualifying sales to an Employee Ownership Trust will reduce from November 2025.
Under the revised rules:
- 50% of the gain will remain exempt.
- 50%will be subject to CGT at the seller’s applicable rate.
Enterprise Investment Scheme and the Enterprise Management Incentive Scheme
The government has indicated that changes to the Enterprise Investment Scheme and Venture Capital Trusts may be forthcoming, although no detailed reforms were announced in today’s Budget. Given the ongoing scrutiny of EIS, future adjustments could be significant.
Plans to enhance the Enterprise Management Incentive Scheme have also been signalled, including higher limits on employee share options, but further detail is still awaited.
We will continue to monitor developments in both areas.
Mansion tax on high-value homes
A new annual charge will apply to residential properties valued at £2 million or more from April 2028.
Charges will begin at £2,500 per year for properties valued at £2m or over and will rise to £7,500 for homes valued at £5m or more.
This will increase ongoing ownership costs for homeowners, landlords and property investors and reduce net yields for investors and landlords with premium property portfolios.
Income tax, National Insurance and salary sacrifice
The Chancellor confirmed that income tax and National Insurance thresholds will remain frozen until April 2031. This prolonged freeze means more individuals will gradually move into higher tax brackets.
From April 2029, the tax advantage of using salary sacrifice for pension contributions will be capped. Any contributions above 2,000 pounds per year made through salary sacrifice will be subject to National Insurance for both employers and employees.
This may result in increased NI costs for higher pension contributions and more employees entering higher tax bands, which could influence payroll planning.
National Minimum Wage and National Living Wage
Before today’s Budget, statutory wage rate increases from April 2026 were announced.
| Age / Worker type | Hourly rate from April 2025 | Hourly rate from April 2026 |
| 21 and over (NLW) | £12.21 | £12.71 |
| 18–20 years old | £10.00 | £10.85 |
| 16–17 years old / Apprentices* | £7.55 | £8.00 |
* Apprentices and under-18s generally follow the “16-17 / apprentice” rate under the NMW rules.
These changes will increase staffing costs for many employers. However, improved pay can support staff retention and reduce the cost of recruitment and training.
Inheritance tax, business and agricultural relief
The previously announced caps on business property relief and agricultural property relief remain in place. Estates that depend on these reliefs should review their long-term succession planning, as full shelter from inheritance tax may be limited.
Electric vehicles and distance-based charging
From April 2028, a mileage-based tax will apply to drivers of electric and plug-in hybrid vehicles. The rates will be:
- 3p per mile for fully electric vehicles
- 1.5p per mile for plug-in hybrids
This charge will apply in addition to vehicle excise duty. The government reaffirmed its commitment to EV adoption, including grants and charging infrastructure.
Fuel duty
The existing 5p reduction in fuel duty will remain in place until September 2026. This extension offers continued cost stability for businesses operating vehicle fleets.
Changes to ISAs
The annual ISA allowance remains at £20,000, but the way individuals can invest in ISAs is changing.
For most investors, £12,000 can be invested in a cash ISA, with the remaining £8,000 allocated to investment products. Individuals aged 65 and over may still place the full £20,000 into a cash ISA if preferred.
Our view overall
This Budget reinforces the need for business owners to be proactive rather than reactive. With rising taxes on personal income and investment returns, but renewed support for scale-ups through improved EMI, EIS and VCT measures, the landscape is shifting. Those who plan ahead, whether for growth, succession, or profit extraction, will be best placed to turn these changes into strategic advantages.
What this means for business owners
This Budget marks a clear shift towards bringing more forms of wealth and investment income into the tax net. For business owners, the combination of frozen income tax thresholds, higher rates on dividends and rental income, and the cap on salary sacrifice from 2029 will increase the overall tax drag on profits extracted from a company. Even where corporation tax remains unchanged and full expensing continues, rising personal taxes mean owners should reconsider how they structure remuneration, dividends, pensions and investment portfolios over the next few years. Cashflow planning will become increasingly important—particularly for those who rely on rental income or who take significant dividends as part of their reward package.
A boost for scale-ups and growth businesses
For scale-ups, the Budget signals a more supportive environment for attracting and retaining talent. The planned increase in EMI option limits (although details are still to come) should give high-growth companies greater flexibility to offer meaningful equity participation to key employees. This is especially valuable at a time when cash salaries are under pressure from rising employment costs and when competition for skilled staff remains intense. More generous EMI headroom will help scaling businesses align long-term incentives with long-term growth, without creating the same tax exposure as unapproved options.
Strategic considerations for the next 12–24 months
For owners contemplating a business sale or succession event, the timeline has become more significant. Reductions to the CGT exemption for Employee Ownership Trust sales from November 2025, and the increase in BADR/Investors’ Relief rates from April 2026, mean that selling earlier may be financially advantageous. Likewise, changes to APR/BPR and the decision to bring unused pensions into the IHT net could materially reshape long-term estate and succession planning. Many of these measures shift value away from passive wealth and towards active business reinvestment, which means the next two years present both a challenge and an opportunity: owners who plan can still optimise outcomes, but those who “wait and see” may face a meaningfully higher tax bill.
Encouraging investment in innovative and fast-growing companies
The government’s intention to enhance EIS and VCT reliefs is also a welcome development for companies seeking external capital. Although full details were not released on Budget Day, any increase in relief rates or widening of qualifying criteria would strengthen the UK’s position as an attractive destination for early-stage and scale-up investment. For founders and CFOs, the key takeaway is to stay alert—refinements to these schemes could open new opportunities to raise funds on more favourable terms, particularly in sectors with high capital intensity or R&D spend. In short, while the broader tax landscape is tightening, the direction of travel for growth-oriented businesses is cautiously optimistic.
Key tax changes from the 2024 Autumn Budget: What’s still to come
A number of important tax measures announced in the 2024 Autumn Budget are due to take effect over the next couple of years. Below is a clear overview of the changes that may impact business owners, families, and individuals planning disposals or succession.
CGT, BPR. APR and IR
From 6 April 2026, significant reforms to Agricultural Property Relief (APR) and Business Property Relief (BPR) will come into effect in the UK, impacting Inheritance Tax (IHT) planning for landowners and business owners.
Capital Gains Tax (CGT) changes taking effect in April 2026 are an increase in the rate for gains qualifying for Business Asset Disposal Relief (BADR) and Investors’ Relief (IR), from 14% to 18%.
Additionally, the tax treatment of carried interest will be fundamentally reformed, moving it from the CGT framework to the income tax framework.
Specific changes from 6 April 2026
| Relief/Asset Type | Current Rate (2025/26) | Rate from April 2026 | Details |
| Business Asset Disposal Relief (BADR) | 14% | 18% | |
| Agricultural Property Relief (APR) | Up to 100% relief (100% for most qualifying agricultural property; 50% in limited cases) | Combined £1m cap shared with BPR, then 50% relief | APR and BPR will share a joint £1 million lifetime cap per individual. Any value above this cap will only receive 50% relief, resulting in an effective 20% IHT rate instead of full exemption. |
| Investors’ Relief (IR) | 14% | 18% | This rate applies to qualifying unlisted shares, up to a lifetime limit of £1 million. |
| Carried Interest | 32% (CGT rate) | Treated as trading profit | Will be subject to Income Tax and Class 4 National Insurance contributions (NICs) under a new regime, with an effective rate of around 34.075% for an additional rate taxpayer. |
Planning considerations
Business owners considering selling may choose to complete transactions before April 2026 to take advantage of the current lower BADR rate. Individuals disposing of other types of assets should also factor in the increased CGT cost when planning the timing of any sale.
General Inheritance Tax (IHT) changes
Beyond APR and BPR, the Budget also confirmed broader amendments to the IHT framework:
Unused pension funds will be brought within IHT from 6 April 2027.
The IHT Nil Rate Band (£325,000) and Residence Nil Rate Band (£175,000) remain frozen until April 2030.
These freezes mean more estates are likely to be caught by IHT in future years.
Pensions and Inheritance Tax
One of the most significant reforms takes effect on 6 April 2027, when:
Most unused pension pots and death-benefit payments will become part of the taxable estate for IHT purposes.
The personal representative of the estate will be responsible for valuing these pension benefits and paying any IHT due.
Transfers to a spouse, civil partner, or charity will continue to benefit from current exemptions.
For many business owners who use pension structures to secure long-term family wealth, this change may increase exposure to IHT and place additional administrative and cash-flow pressures on their successors. The process of valuing pension funds, engaging with scheme providers, and settling any tax liability may also prolong estate administration and complicate business succession.
Contact Edwards Chartered Accountants
The measures announced in this year’s Budget highlight just how important it is to stay proactive with your financial planning. With changes affecting a wide range of areas, the impact on individuals and organisations will vary widely.
If you want clarity on how these reforms affect you or if you’re looking for tailored strategies to minimise tax, protect your wealth and plan with confidence, our team at Edwards Chartered Accountants is ready to help.
Contact us today for expert, forward-thinking advice that ensures you stay ahead of the changes and make informed decisions for the year ahead.