Autumn Budget Overview: What It Really Means for UK Business Owners

The Autumn Budget often brings a wave of headlines, political noise and technical language—but behind it all are real changes that directly affect how UK business owners plan, invest and operate. Whether you run a small local company or manage a growing enterprise, understanding what’s actually important (and what isn’t) can make a meaningful difference to your cash flow, tax position and future strategy.

In this overview, we break down the key announcements from the Autumn Budget in plain English—highlighting the measures that matter most to business owners, the potential challenges ahead, and where new opportunities may emerge.

1. Dividend Taxes Are Increasing

From April 2026, all dividend tax bands will rise by two percentage points. Combined with frozen allowances in recent years, this continues a gradual erosion of the long-established “salary plus dividends” approach commonly used in owner-managed companies.

Impact on business owners:

• Net income will reduce for director-shareholders who extract profit through dividends.

• The effect multiplies where there are several shareholders.

• Owners may need to reassess remuneration, including salaries, pensions, benefits and timing of dividends.

• Retaining profits or reinvesting may become more attractive than taking them out.

Impact for buyers:

• Businesses with heavy dividend extraction may deliver a lower post-tax return to future owners.

• When valuing, profit available for extraction after tax should be modelled more conservatively.

  
  

2. Salary-Sacrifice Pensions to Attract National Insurance

A quiet but important change: salary-sacrifice pension contributions will now be subject to National Insurance. For many businesses, this reduces the cost-saving benefits of using pension sacrifice for directors and high earners.

Implications:

• Directors using salary sacrifice schemes will face an additional NI cost.

• Employers running attractive pension arrangements could see increased payroll costs.

• Accountants are likely to recommend restructuring remuneration before the rate kicks in.

Next steps:

• Review existing sacrifice agreements.

• Recalculate employment benefit costs beyond 2026.

• If selling, adjust normalised EBITDA to account for additional NI on remuneration packages.

3. EOT Capital Gains Relief Halved

In a major shift for succession planning, capital gains tax relief on sales to Employee Ownership Trusts (EOTs) is being reduced from 100% to 50%. While EOTs remain viable, they’re no longer the zero-tax option they once were.

Key takeaways:

• Sellers will now pay CGT on half of their gain.

• Modelling sale proceeds has become essential; expected outcomes will differ materially from previous assumptions.

• For some owners, a trade sale, MBO, or partial sale may now deliver better net value.

Market consequences:

• More business owners may opt for conventional sale routes instead of EOTs.

• Expect increased supply from sectors where EOTs have been particularly popular.

• Buyers may see more opportunities come back to market.

4. Business Asset Disposal Relief (BADR) Unchanged, But Still Rising

There were no new changes in the Budget, but BADR is still increasing from 14% to 18% next April. This reduces the benefit of the 10% rate on the first £1m in lifetime gains.

Implications:

• Those planning an exit should factor the higher 18% rate into their timing.

• In some cases, accelerating a sale could be financially beneficial.

5. Slower Tax Relief on Capital Investment

Writing-Down Allowances (WDAs) on capital expenditure will be reduced. The main pool allowance falls from 18% to 15%, and the special rate pool drops from 6% to 4%. These changes will slow the rate at which businesses can offset investment costs against tax.

Who’s affected?Manufacturers, engineering firms, fleet-based businesses, logistics operators, construction, and other capital-intensive sectors.

Valuation impact:

• Future tax liabilities rise.

• Buyers may apply lower multiples to asset-heavy businesses.

• Sellers must ensure CAPEX forecasts reflect slower tax relief.

6. OBR Forecasts Lower Business Profitability

The OBR expects business profits to fall in 2025, with a slow recovery thereafter. Returns on capital are forecast to decline, reflecting wage pressures, weak productivity, high financing costs and persistent inflation.

What this means for owners:

• Margins are likely to remain tight.

• Industries with limited pricing power will face difficult choices.

• Labour-heavy sectors will feel the strain as wage floors continue to rise.

What this means for buyers:

• Risk-adjusted valuations will become more cautious.

• Deal structures involving deferred consideration or earn-outs are likely to increase.

7. Business Investment Expectations Cut Again

Borrowing remains expensive and confidence is subdued, prompting another downgrade in business investment forecasts. Ageing assets and delayed capital expenditure could become barriers to growth and due-diligence red flags in transactions.

8. Frozen Tax Thresholds Continue to Squeeze Spending

Freezing tax thresholds will push millions into higher tax bands over time — a form of “stealth taxation” that reduces disposable income and raises employment costs.

SME effects:

• Reduced consumer spending power.

• Continued wage pressure.

• Directors drawing PAYE will pay more tax.

• Sectors reliant on discretionary spending will recover slowly.

9. Rising Pressure on Business Rates

Business rates didn’t change this time, but increasing local authority costs mean upward pressure is likely in the near term. Some support for small high-street, leisure or hospitality operators may emerge, but overall liabilities could still climb.

What Business Owners Should Be Doing Now

The Budget subtly reshapes how profit is extracted, how businesses invest, and how succession is taxed. Owners should:

• Re-forecast to account for reduced net returns and rising extraction costs.

• Re-examine remuneration and dividend strategies.

• Reassess CAPEX plans with more scrutiny.

• If considering a sale, evaluate timing and expected net proceeds.

EOTs remain an option, but no longer enjoy blanket CGT exemption, so financial modelling is essential before making a decision.

Final Thoughts & Support for Business Owners

These changes do not make headlines, but they reshape the financial landscape for business owners over the next five years. Extraction taxes are rising, investment incentives are shrinking, profitability forecasts are softening, and selling a business will become more expensive from a tax perspective.

Disclaimer

This summary is for general information only and should not be treated as tax, financial, legal, or investment advice. Tax consequences depend on individual circumstances and may change. Business owners should obtain advice tailored to their situation before acting.