UK Budget - How does this impact businesses?

This month I’ve decided to write my monthly blog on the budget that was announced by the government last week and how this impacts small businesses going forward. I will include the changes that impact individuals at the end of my blog but won’t go into as much detail.

What are the Changes to Businesses of the Government Budget and what do they mean?

Changes to business from the Government Budget	What does this change mean?
From April 2026, the writing down allowance (WDA) main rate will be reduced from 18% to 14%, alongside a new 40% first-year allowance from January 2026.	Currently, when you purchase a qualifying asset (e.g. plant and machinery, vehicles or office equipment) you get tax relief on qualifying purchases each year at 18% on a reducing balance method. From April 2026, you can reduce the cost of the asset by 40% in the first year and then 14% on a reducing balance method from year 2 onwards.
From November 2025, Capital gains tax relief on disposals to employee ownership trusts (EOT) will be reduced from 100% to 50%.	If business is selling to an employee ownership trust, you will now pay tax on 50% of the capital gains whereas before you would receive 100% tax relief.
Business rates will be reduced for 750,000 retail, hospitality and leisure properties, which will be funded by an increase on premises worth more than £500,000.	Small business multiplier will fall from 49.9p in 2025/26 to 43.2p in 2026/27. Standard business multiplier will fall from 55.5p in 2025/26 to 48p from 1st April 2026. For businesses in the retail, hospitality and leisure (RHL) sector with properties of rateable value below £500,000, Small-business multiplier will be 38.2p and Standard multiplier will be 43p from 1st April 2026.
Training for apprentices under-25 free at SME’s	The government will fully fund apprenticeship training/assessment costs for apprentices under the age of 25 at SMEs. Also, as part of the New Youth Guarantee 18- to 21-year-olds will have access to an apprenticeship, college place or job support.
From April 2026, increasing the basic and higher income tax rates on dividends by 2%. From April 2027, a 2% increase to the basic, higher and additional rates of saving and property income tax.	From April 2026, dividends tax rates will increase to 10.75% for basic rate, 35.75% rate for upper rate and 39.35 for additional rate. From April 2027, the new savings tax rates will be 22% for basic rate, 42% for higher rate, 47% for additional rate. The new property income tax bands will be 22% for basic rate, 42% for higher rate and 47% for additional rate.
Salary-sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from NICs from April 2029.	Currently, pension contributions made through salary sacrifice are exempt from NICs (both employee and employer), though pension-contribution income tax relief remains subject to the usual pension-relief limits. From April 2029, the government intends to limit the NIC-free portion of salary-sacrificed pension contributions to £2,000. This means that any amount above that will be treated like normal salary for NICs. Income-tax relief rules remain unchanged.
From April 2026, the national living wage, the national minimum wage rate for 16-17 and 18-20 year olds will increase.	From next April, the national living wage will rise by 50p to £12.71 an hour for eligible workers aged 21 and over. The national minimum wage rate for 18 to 20-year-olds will increase by 85p to £10.85 an hour. For 16 to 17-year-olds and those on apprenticeships, the national minimum wage will increase by £1.60 to £8 an hour.
From April 2026, there will be an increase in remote gaming duty from 21% to 40%, abolition of bingo duty from its current 10 % rate. From April 2027, a new rate of general betting duty for remote betting will be introduced at 25%, excluding self-service betting terminals, spread betting, pool bets and horseracing. The Government has also announced a freeze in casino gaming duty bands in 2026-27 with the usual retail price index increase from 2027-2028 onwards.	This will increase prices for Gambling businesses in which the government are expected that 90% of additional costs from this law will be passed over to the customer by increasing prices which will discourage online gambling where it is easier to place a bet.

My Thoughts

The budget includes some positive changes for business such as the introduction of government funded apprenticeships and reduced business rates for retail, leisure and hospitality businesses with properties under £500k rateable value.

Overall, I believe they increase cost pressures for bigger and small companies in the UK. Larger businesses with high-value properties face higher rates and rising staff costs from the national living and minimum wage increases, which they may pass on to consumers through higher prices. SMEs, with less ability to raise prices, may be forced to cut costs elsewhere. They may reduce staff thereby lowering disposable income. These risks could intensify if taxes continue to rise in coming years.

Impacts to Individuals of the Government Budget

• Freezing of income tax and employer National Insurance contributions (NICs) thresholds for an extra three years starting from April 2028-March 2031.

• Rail fares will be frozen for the first time in 30 years, with passengers not paying any more for season tickets, peak return and off-peak return tickets between major cities.

• From April 2028, battery electric cars will pay £0.03 per mile and plug-in hybrid cars will pay £0.015 per mile in Vehicle tax, with the rate per mile increasing annually with consumer price index. The average driver of a battery electric car in 2028-29 driving 8,500 miles is therefore expected to be charged £255 in this year.

• In April 2026, there will be an increase to the expensive car supplement (ECS) threshold for battery electric cars, from £40,000 to £50,000. ECS is an additional VED charge which is spread over five years, commencing a year after the vehicle is first registered. The Government has also expanded the electric car grant between 2025-26 and 2029-30.

• From April 2028, owners of properties identified as being valued at over £2 million by the Valuation Office (in 2026 prices) will be liable for a recurring annual charge which will be additional to existing council tax liability. There will be four price bands with the surcharge rising from £2,500 for a property valued in the lowest £2 million to £2.5 million band to £7,500 for a property valued in the highest band of £5 million or more, all uprated by consumer price index each year.

• There will be a freeze to fuel duty for a further five months followed by staged increases from September 2026 at which point it states that the five pence cut first introduced in 2022 will be reversed through a staggered approach. From April 2027, the Government has stated that the fuel duty rates will then be increased annually by retail price index.

• The Government has removed the two-child limit within UC from April 2026.

• For three years starting from 2027-28, there will be a freeze to the repayments and interest rate thresholds for Plan 2 student loan repayments.

• From Aril 2027, savers will only be able to put up to £12,000 into cash ISAs tax-free each year with the remaining £8,000 of the current annual tax-free £20,000 ISA allowance reserved for investment ISAs. Over 65s can retain the full £20,000 allowance.

• A change to inheritance tax will allow the transfer of 100% relief allowance between spouses.

• The average annual energy bill will be cut by £150 from April by reducing levies. The Energy Company Obligation (ECO) scheme, which is designed to tackle fuel poverty and help reduce carbon emissions, will be scrapped.