Autumn Budget 2025: What it really means for small businesses

Kettle on. Cake at the ready. This Autumn Budget was a big one, and surprise, surprise, small businesses have quietly been volunteered. Again.

Rachel Reeves has gone hard on tax and "fairness". On the surface, it sounds pro worker and pro growth. Underneath, if you run a small business, you're looking at higher wage bills, higher NI, more compliance, and a bit of sugar sprinkled on top to help the medicine go down.

Let's skip the waffle and get straight into what actually hits you if you're a small employer.

1. Minimum and living wage – good for people, heavy for your payroll

From April 2026, the National Living Wage for adults goes up to £12.71 an hour, with the younger age bands and apprentice rates going up too.

If you're in hospitality, care, retail, cleaning, or anything labour heavy, this lands straight in your costs. Wages go up. Holiday pay goes up. Pension and NI go up. The whole lot.

And let's be honest. With costs going up, if the minimum wage had stayed where it was, we'd be in a much bigger mess. People simply wouldn't cope. I don't disagree with Rachel on that bit. But it is very "give with one hand, take with the other". You get a pay rise on one side, then frozen tax thresholds and higher business costs on the other. It softens the blow in the headlines, but a fair chunk of that extra pay heads straight back to the Treasury.

What to do now:

Re run your 2026 wage budget with the new rates and all the on costs.
Look at pay gaps between new starters and supervisors before resentment starts.
Decide what gives. Prices, margins, headcount, hours. Hoping it'll somehow just work out is not a plan.

2. Frozen tax thresholds – the quiet squeeze that no one sees coming

Income tax and National Insurance thresholds are now frozen out to 2031.

In plain English, every time you give someone a pay rise, more of it disappears in tax, or they get dragged into a higher band. Staff feel like they're running hard and staying in the same place.

For small businesses, that means:

More people asking for "a bit more" because their take home doesn't match the headline rise.
More awkward talks about net pay, and "why has my tax gone up when my salary only went up a little?"

You can't change government tax policy, but you can be clear. Use simple payslip explanations, and be honest that some of the pain is coming from frozen thresholds, not from you being tight.

3. Apprenticeships – one of the few real wins for SMEs

Finally, some good news.

Training for under-25 apprentices in SMEs will be fully funded by the government. That means no training bill for small and medium employers where the apprentice is under 25.

On top of that, there's the Youth Guarantee, which puts money into getting 18 to 21 year olds into college, apprenticeships, or paid work instead of letting them drift.

Done properly, this is a real chance to build a pipeline of home grown talent without blowing the budget.

What I would put in place:

Work out where apprentices actually fit. Not "general dogsbody". Real roles.
Set up a basic structure. A clear job description, proper induction, a named mentor, a simple route to progress.
Train line managers on how to manage early careers. They're not mini adults with ten years' experience.

Use this well and you get loyal staff who know your business. Use it badly and you get cheap extra hands who leave as soon as they can.

4. Salary sacrifice cap – the end of a handy little safety valve

From April 2029, the NI saving on pension salary sacrifice will be capped at the first £2,000 of sacrificed pay per person, per year. Anything above that and normal NI will apply.

This has been sold as "making the rich pay their fair share". In reality, it also closes down one of the few sensible ways small businesses have had to balance rising costs at the top end. It's been a way to give directors and senior staff a decent pension set-up without hiking salaries to silly levels.

For most small businesses:

Lower-paid staff won't notice. They're nowhere near the £2,000 sacrifice mark.
Owner-managers and senior hires will see pension planning become more expensive.
You lose one of the few tools you had to build a competitive package without pushing base pay even higher.

On its own, it doesn't kill jobs. Add it to wage rises, rent, insurance, energy, and tax freezes, and it's yet another extra weight on the bar.

What to do:

Pull a report on who's using salary sacrifice and how much they're sacrificing.
Start talking now about how director and senior packages will look post 2029.
Shift the benefits conversation away from clever tax tricks and towards things that help everyone: flexibility, skills, childcare help, real wellbeing support.

5. Business rates – high street gets a biscuit, everyone else squints at the bill

Business rates are finally getting some attention.

Retail, hospitality, and leisure properties are set to get permanently lower business rates, paid for by higher rates on bigger, high value sites like large warehouses.

If you're on the high street in a shop, bar, café, salon, gym, or small venue, this may be the first time in years you see a business rates bill that doesn't make you swear. It won't change your life, but it might stop the bleeding a bit.

If you're in a light industrial unit, out-of-town office, or small warehouse, don't expect as much love. This is aimed squarely at the high street.

Next steps:

Check your draft bill as soon as it lands. Don't guess.
If you do get a saving, decide whether it keeps you standing still, or whether you can invest a bit back into staff, service, or tech.

6. Energy and fuel – tiny bit of relief, not a reset

On energy:

The government is taking some of the scheme costs off household bills, which should knock about £150 off the average bill. That's a help for your staff and for very small, home based businesses. It doesn't undo the last three years, but it's better than nothing.

On fuel:

The 5p cut in fuel duty stays in place, and duty is frozen until September 2026. After that, it starts creeping back up.

There's also a new road tax plan coming for electric and plug-in hybrid vehicles in future, so EVs will pay for road use too. Details will follow, but the direction is clear.

If you run company vehicles, 2026 and 2027 are decision years. Run the numbers properly on diesel versus EV, including fuel, maintenance, grants, future duty, and charging.

7. A few other bits that still matter

A few quick hits that are worth clocking:

Corporation tax stays where it is, with some tweaks to first year allowances to keep investment attractive.
Tax on dividends, savings, and property income is going up, which will make life more expensive for landlord owners and people who pay themselves in a blend of salary, rent, and dividends.
There's a "mansion style" council tax surcharge coming in for very high value homes. That will hit some owner managers in London and the South East, but not most small business owners day to day.

8. What I would do now if I ran your business

If I were in your shoes, this would be my list.

Over the next few weeks:

Re cost 2026 using the new wage rates, tax freezes, and any known rent, rates, and energy changes.
Map out your team. Who are your key roles? Where can work be redesigned rather than just cutting hours?
Decide your stance on apprenticeships. Are you in or out? If you're in, plan it properly, not as a last-minute panic.

Over the next quarter:

Refresh your pay and benefits story. Clear bands, plain language, no fluff.
Talk openly to staff about tax and thresholds. They'll feel the squeeze, so get ahead of the confusion.
Review salary sacrifice use at senior level and start phasing in whatever your post 2029 reward model looks like.

Small businesses will, as usual, adapt. You always do. But don't let this Budget wash over you. The small changes now are what stop the big shocks later.

9. The rest of the Budget in a nutshell

Very quick, big-picture view:

Biggest overall tax grab we've seen in years, mostly done quietly through frozen thresholds, caps on reliefs, and nudges on wealth and property.
The two child benefit cap is scrapped, which should lift a large number of children out of poverty. Morally, that's a good thing.
Higher taxes on online gambling, sugar, and, soon, vapes. Bingo gets a free pass. Of course it does.
ISAs get nudged towards investment rather than cash, and there's a big push to get more money flowing into UK assets.
Debt is forecast to slowly fall as a share of GDP towards the end of the forecast, thanks to all these extra taxes and tight spending plans.

10. What happens next

Over the next few weeks, I'll be breaking this Budget down in more detail and sharing practical things you can do now to get ahead of these changes — payroll, contracts, policies, all of it.

Because before we know it, the Employment Rights Bill will land as well, and the HR hat that small business owners already wear is going to stay on even longer. That means more time on people issues and paperwork, and less time on sales, service, and actually growing the business.

The Buzzing About HR podcast will also be giving you hints and tips on all of this in bite sized episodes you can listen to on the school run or between meetings. So why not subscribe now, so you don't miss a bee. ☕

Subscribe to the podcast or download the Budget Checklist — stay ahead:

Listen here → https://podcast.kateunderwoodhr.co.uk/
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