Nevertheless, there will be a 2% increase to dividend tax which effectively means that business owners who keep their income below the higher rate of tax have seen an increase in their effective tax rates, when taking their companies and their dividends combined, from 26% three years ago to 36% plus next year.

We will be looking at strategies of how to extract profits from companies which once again will need to be revised for the 26/27 tax year in due course.

There are also likely to be changes to private landlords’ strategy in relation to residential property, either by an increase in rent to reflect the additional tax or perhaps an increase in the use of small companies to shelter residential portfolios.

There is a lot of small detail to digest within the full analysis and we have not had time to assimilate all of it yet but, if you have any queries as to how changes in legislation might affect you, please do not hesitate to contact us.

BUDGET 26 November 2025 – key points

Overview
• Many possible changes were the subject of speculation leading up to the Budget: this list includes things that have been ruled out, as well as changes that the Chancellor announced

• These key points include measures that were announced previously but are about to come into force

• Measures which will not take effect until future dates are listed separately below

Implemented immediately
• 100% CGT relief for disposals of shares to Employee Ownership Trusts is restricted to 50% from 26 November 2025

From January 2026
• New 40% First Year Allowance for most ‘main rate expenditure’ which does not already qualify for ‘full expensing’ or the £1 million Annual Investment Allowance (e.g. assets for leasing and assets above £1 million bought by unincorporated businesses)

• A new Advance Clearance Service to provide certainty for some R&D claims is to be introduced ‘in Spring 2026’ following consultation

From April 2026
• Income tax thresholds and bands frozen (and continue to be frozen until April 2031)

• Income tax rates on dividend income rise from 8.75% to 10.75% (basic rate) and from 33.75% to 35.75% (higher rate); additional rate remains 39.35%

• The same increase will apply to corporation tax payable on loans to close company participators which are not repaid to the company within 9 months of its year end

• The basis for company car benefit charges increases by one percentage point for 2026/27

• Benefit charges for company vans and private fuel in company vehicles increased

• Employers’ NIC threshold frozen at £5,000, and NIC Upper Earnings Limit remains £50,270 (also frozen until 2031)

• NIC Lower Earnings Limit and Small Profits Threshold increased by 3.8%

• Confirmation of the introduction of Making Tax Digital for Income Tax Self-Assessment from April 2026, with easements for the first year in relation to filing penalties

• Writing down allowances on main rate expenditure cut from 18% to 14%, and on special rate expenditure from 6% to 3%, from 1 April 2026 (companies) or 6 April 2026 (unincorporated trades)

• Extension until March 2027 of the 100% first year allowance for qualifying expenditure on zero-emission cars and charging points for electric vehicles

• Corporation Tax late filing penalties doubled from 1 April 2026

• CGT rate on disposals qualifying for Business Asset Disposal Relief increased from 14% to 18%

• CGT relief on incorporation to be claimed from 6 April 2026, rather than applying automatically

• ‘Carried interest’ moved to the income tax regime, with a discount for certain qualifying disposals

• IHT Agricultural Property Relief and Business Property Relief at 100% will only apply to the first £1 million of combined value; above that limit, the maximum relief will be 50%; the £1 million will be transferable between spouses and civil partners

• IHT Business Property Relief restricted to 50% for all ‘unlisted’ shares which are quoted on recognised stock exchanges such as the Alternative Investment Market

• VAT rules changed to prevent private hire vehicle operators using the ‘Tour Operators Margin Scheme’ to pay VAT only on their profit margin

• From July 2026, the Motability scheme will be reformed to reduce the relief available on high-end cars

• Fuel duty remains frozen, and the temporary 5p cut announced in March 2024 will be extended to 31 August 2026

• Increases in online gambling taxes from April 2026

• Increases in National Living Wage and State pension in line with the September 2025 inflation figure (3.8%)

• The ‘two-child benefit cap’ for Universal Credit is removed, increasing the available benefits for claimants with more than two children

From April 2027
• Income tax rates on property and savings income rise from 20% to 22% (basic rate), from 40% to 42% (higher rate), and from 45% to 47% (additional rate)

• For under-65s, no more than £12,000 of the annual £20,000 ISA investment limit can be invested in a cash ISA; the other £8,000 will have to be in stocks and shares

No change, or later
• High Value Council Tax Surcharge to be introduced on properties worth more than £2 million (in 2026) to apply from April 2028: £2,500 for properties over £2 million rising to £7,500 for properties over £5 million

• New mileage based e-Vehicle Excise Duty payable on use of electric and hybrid cars from April 2028

• From April 2029, salary sacrifice schemes putting more than £2,000 into an employee’s pension will be charged to NIC as if cash salary was paid

• All VAT invoices to be electronic from April 2029

• All low value import consignments to be subject to customs duties from April 2029

• Company car tax rates were announced last year for 2028-29 and 2029-30, to provide long-term certainty; the incentives for purchasing electric vehicles will be maintained

• Plan 2 Student Loan repayment thresholds frozen until April 2030

We know that a lot of our clients keep their savings with any one bank or building society to the £85,000 limit, which will be refunded if the bank or building society fails.
 
With effect from 1 December 2025, that £85,000 will rise to £120,000 under the Financial Services Compensation Scheme.

One of the measures is to remove the need for companies to submit directors’ reports to Companies House.
 
The associated savings for companies is quoted at £230m.
 
Unfortunately, the removal of the directors’ reports from accounts will lead to no savings for our clients, as there is no cost attached to producing them in the first place, as they are part of our accountancy software suite and they are produced automatically, with no additional cost.
 
Medium sized companies will no longer have to submit strategic reports, which we do welcome,  and for medium companies, there will be a small commensurate saving, but we are struggling to see where the Chancellor has got her figures of £230m!

There are no additional changes to the tax rates for the forthcoming year. However, there were a number of announcements relating to administration of tax, including increases in penalties and interest on overdue tax.
 
There have also been announcements about Making Tax Digital for Self-Assessment with effect from April 2026.
 
All of this will place an additional burden on HMRC and in our recent experience, this organisation is now even more incompetent than ever before, so it is in our view likely that all of these changes will lead to more mistakes and wasted time for all concerned.
 
We are clearly living in difficult times but it is difficult to conclude that any recent announcements are going to help small and medium businesses, and even taxpayers, whose only requirement to file a tax return relating to let income.
 
But, in common parlance, it is what it is!
 
If you have any queries relating to these announcements, please do not hesitate to contact us.

In this free guide, we cover:
 
· Changes to employment legislation in 2025
· The true cost of hiring and onboarding
· When outsourcing specialist roles makes financial sense
· Case Studies showing outsourced success
 
Whether you’re looking to cut overheads, improve compliance or free up your time, this guide will help you make the right decisions for your business.
 
If you have any questions or would like tailored advice, our team is here to help.

In particular, they increased the rate of Employer’s National Insurance from 13.8% to 15%. However, and more importantly, they reduced the starting point from which Employer’s National Insurance becomes payable.
 
In return, they have increased the Employer’s Allowance, which is the amount of National Insurance which the Government effectively waive, to £10,500.
 
I have heard many Ministers state recently that 50% of small businesses will be better off as a result of this change.
 
We consider this to be a gross exaggeration. It is true that one or two of our clients will be better off, but only those with a small number of employees, and we consider that the amount of companies that will be better off is nearer 5% than 50%.
 
All business owners of limited companies have a certain flexibility in how to pay themselves. This can either be through salary, dividends, sometimes interest, if they have lent money to their company, or a combination of all three.
 
The difficulty we face in giving advice this year is that there is no “one size fits all”. Everybody’s circumstances are different and this means that we have to look at every single client company’s profile to come up with the best solution.
 
We give below a summary of the changes.
 
In previous years it has been recommended to pay optimum salaries up to the secondary threshold. However, in 2025/26 this threshold is only £5,000 (it was £9,100 in tax year 2024/25). While paying up to £5,000 avoids PAYE, Employee NI and Employer NI, such a low salary does not save enough in corporation tax to match the National Insurance saving.
 
For 2025/26, Directors with no other income, should look to pay themselves the optimum Directors salary of £12,570 per annum, which equates to £1,047 per month or £241 per week. Any additional income should be paid as dividends.
 
This is the most tax efficient amount for the majority of Directors to pay themselves.
 
Why?
 
The lower earnings limit for NI in 2025/26 is £6,500 per annum. A salary over this amount will count as a qualifying year for your future state pension.
 
The primary earnings limit for NI in 2025/26 is £12,570 per annum. If the annual salary exceeds this amount, then the Director will incur employee National Insurance starting at 8%.
 
The secondary earnings limit for NI in 2025/26 is £5,000 per annum. If the annual salary exceeds this amount, then the employer will need to pay NI contributions at 15%.
 
With the annual personal allowance threshold also at £12,570, on the basis that this is the main source of employment income for the Director, then there should in most cases be no PAYE incurred by the Directors on their salaries.
 
The optimum salary of £12,570 ensures that the Director qualifies for the state pension but does not need to pay any National Insurance employee contributions and PAYE.
 
Other benefits of this salary
 
A salary paid is a tax-deductible expense. With corporation rates at 19%, 25% and 26.5%, on a salary of £12,570 per Director, the company will save corporation tax of anywhere between £2,388 and £3,331. There is no such saving if dividends are paid.
 
When would a salary of £12,570 not be advisable?
 
• Where the Director has other income such as pension income, another salary, rental income, it may be advisable to pay a £nil salary.
• Where the Director has already reached the number of qualifying years for state pension.
 
Why not pay higher salaries?
 
When income exceeds £12,570 per annum, both National Insurance (employee and employer) and PAYE are applied and those combined are higher than the dividend tax rate. Even when accounting for the corporation tax reduction on the salaries, paying dividends is still more tax efficient.
 
When a higher salary than £12,570 may be appropriate
 
•  Where Directors have a contract of service, they must legally be paid the National Minimum Hourly Wage which would be higher than £12,570 per annum.
•  Dividends can only be paid out if the company has profit and loss reserves. If the company has made losses in the past, it may not be possible to pay dividends. Higher salaries may be