The following is a summary of some of the key takeaways for businesses arising from the 2025 Budget:
Corporation Tax
There were no changes to the main rate of corporation tax (for companies with profits over £250,000) which remains at 25% and the small profits rate remains at 19% (for companies with profits under £50,000).
Income Tax and NIC Thresholds
The existing freeze on income tax thresholds and NICs thresholds for employees and self-employed individuals will be extended for a further three years from April 2028 to April 2031.
Current rates of income tax:
- Personal allowance: up to £12,750 tax free.
- Basic rate: 20% (£12,751- £50,270).
- Higher rate: 40% (£50,271- £125,140).
- Additional rate: 45% (over £125,140).
NIC thresholds for employees and the self-employed:
- Primary Threshold and Lower Profits Limit is maintained at £12,570.
- The Upper Earnings Limit and Upper Profits Limit will be maintained at £50,270.
NIC thresholds for employers:
Per-employee threshold of £5,000 maintained at which employers become liable to pay NIC.
Changes to Tax on Dividends
From 6 April 2026, basic rate income tax on dividends will increase from 8.75% to 10.75% and the higher rate will rise from 33.75% to 35.75%.
Business Asset Disposal Relief
From 6 April 2026, the Capital Gains Tax rate for Business Asset Disposal Relief and Investors’ Relief will increase from 14% to match the main lower rate at 18%.
Capital Allowances: Writing-Down Allowances
From 1 January 2026, a new 40% First Year Allowance for main rate expenditure is being introduced, which will include most expenditure on assets for leasing and expenditure by unincorporated businesses.
Business Rates
Properties get revalued in business rates every 3 years. April 2026 is when the next values take effect and will be based on property values in 2024, independently assessed by the Valuation Office Agency. From 1 April 2026, the government is introducing two lower business rate multipliers in respect of retail, hospitality and leisure (“RHL”) properties with a ratable value of below £500,000. The high-value multiplier is being increased for properties with rateable values of £500,000 and above. These rates will be as follows:
- Small business RHL multiplier: 38.2p.
- Standard RHL multiplier: 43.0p.
- High-value properties: 50.8p.
For non-RHL businesses: small and standard multipliers are also adjusted from 1 April 2026 as follows:
- small business non-RHL multiplier becomes 43.2p,
- standard non-RHL multiplier becomes 48.0p.
For those who see increases, Transitional Relief caps will be available as follows for properties with a rateable value of:
- up to £20,000 (£28,000 in London): in 2026-27 – 5%, in 2027-28 – 10% (plus inflation), in 2028-29 – 25% (plus inflation);
- £20,001 (£28,001 in London) to £100,000: in 2026-27 – 15%, in 2027-28 – 25% (plus inflation), in 2028-29 – 40% (plus inflation); or
- over £100,000: in 2026-27 – 30%, in 2027-28 – 25% (plus inflation), in 2028-29 – 25% (plus inflation).
Small business rates relief will also be provided for an additional two years (instead of one year) for businesses expanding into a second property.
Employee Ownership Trusts
The Capital Gains Tax relief available on qualifying disposals to Employee Ownership Trusts is going to be reduced from 100% of the gain to 50%. This will be legislated for in Finance Bill 2025-26 and take effect from 26 November 2025.
EMI Company Eligibility Expansion
For eligible companies, the changes that will apply to EMI contracts granted on or after 6 April 2026 are:
- the company share option limit will be increased from £3 million to £6 million;
- the gross assets limit will be increased from £30 million to £120 million; and
- the number of employees limit will be increased from 250 employees to 500 employees.
For eligible companies, for EMI contracts granted on or after 6 April 2026, the limit on the option exercise period will be increased from 10 years to 15 years. Interestingly, the change to the exercise time period can also apply retrospectively to existing EMI contracts which have not already expired or been exercised. These existing contracts can be amended without losing the tax advantages that the schemes offer, provided this is done so in line with the legislation.
Plan with These Changes in Mind
With many changes across a wide range of taxes and business set-ups, now is the time to ensure your business finances are in order. HK Law and HKFAS work together to provide comprehensive financial planning, making sure to implement effective strategies that take these new thresholds, limits and changes into account.
For more information about the changes announced in the 2025 Budget, download our in-depth budget summary.
If you aren’t sure how some of these changes impact you, your business and your financial planning, book a call with our corporate and commercial experts today.
