The 2025 Autumn budget has finally been announced. Now we know what’s changing (and what’s not), we can start to plan!

The things for you to be aware of as a business owner are:

2% increase in tax on dividends, savings and property income from April 26

£2k cap on salary sacrifice pension contributions from April 29

Loss of income tax homeworking deduction for employees

Changes to the EMI scheme thresholds and time limits

Reduced capital gains tax relief on exit via Employee Owned Trusts (EOT) from 100% to 50% effective immediately.

Free apprenticeship training for small and medium companies for employees under 25

Income tax thresholds

Income tax thresholds will not be increased for a further 3 years to April 2031. The amounts have been frozen since April 2021. 

Due to inflation, the impact of this freeze is that most taxpayers will end up paying more income tax. For context, had the personal allowance been adjusted in line with inflation, it would be at £15,480 for the 2025/26 tax year (compared to £12,570 where it is now).

Income tax rate increases

From April 26, the dividend tax increases by 2% for basic and higher rate taxpayers. Interestingly, there is no increase to the additional rate for taxpayers earning over £125k.

From April 27, tax on savings and property income will also increase by 2% (this time the additional rate will also increase).

 

Salary Sacrifice Pensions

At the moment, you and your employees can save National Insurance by paying pension contributions through salary sacrifice.

This is not going to change until April 2029. But from then on, National Insurance will be charged on salary-sacrificed pension contributions over £2k a year. Employees will still be able to make pension contributions above this cap, but they’d be subject to both employer and employee National Insurance.

Pension contributions from a company directly into a personal pension are unaffected by this change, so if you include pension contributions as part of your remuneration planning, you should be able to continue to do so.

Homeworking Allowance

From the 2026/27 tax year onwards, employees won’t be able to claim the £6 per week working from home allowance through their personal tax return. Employers can, however, continue to pay up to £6 per week. This would be tax-deductible for the company and wouldn’t incur any income tax or national insurance for the employee or employer.

Enterprise Management Incentives (EMIs)

Some good news from the budget – the eligibility for EMI schemes has been extended from April 26:

Employee limit will increase to 500, 

Gross assets test increases to £120m, the company share option limit to £6m and the holding period will increase to 15 years in respect of existing EMI contracts. The requirement to notify EMI grants to HMRC will be removed from April 2027, reducing the admin burden of setting up an EMI scheme.

 

Employee Ownership Trusts (EOT)

Effective immediately, the Capital Gains Tax relief on exits via an EOT will reduce from 100% to 50%. If you were planning on exiting via this route, it is still worth considering, but review your options first.

 

Free training for apprentices under 25

Small and medium companies will be supported in effectively offering free training to apprentices under 25.

 

Other Announcements

It’s also worth mentioning these other announcements in the budget:

The penalty for late filing of a Corporation Tax Return will double from 1st April 26.

The 2-child benefit cap will be removed

A duty of around £240 per year is being introduced for electric vehicles from April 2028.

From April 28, a high-value council tax surcharge has been introduced for properties worth more than £2 million. The charge will start at £2500, increasing to £7500 for properties valued at £5m or more.

 

Actions you can take now

 

Review your 2026/27 tax planning

Revisit your tax planning for the 2026/27 tax year to see if the split of salary and dividend is still the most effective for optimising your tax liabilities.

When looking collectively at all taxes (corporation tax, income tax and national insurance), there will be a tipping point for higher earners where it makes more sense to take all your income from your business as salary rather than dividends.

 

Consider bringing forward dividends

If you are a basic or higher rate taxpayer, it may be worth bringing forward dividends to the 2025/26 tax year. This may not be suitable for everyone, so please consider seeking advice before taking action.

 

Pension Contributions

If you are using pensions as part of your remuneration planning, consider moving away from salary sacrifice pension contributions to making payments directly from the company 

Employees can consider making additional pension contributions in the tax years ahead of the salary sacrifice cap coming in April 2029

 

Homeworking allowance

If you don’t already reimburse your employees £6 per week for homeworking costs, consider introducing this from the new tax year

 

How we can help

Remuneration and tax planning for 2025/26 and beyond

Advising on the changes to EMI schemes, as well as setting up new schemes

Review pension arrangements so they remain tax-efficient