On Wednesday 28 October, the Chancellor, John Healey, delivered his first Budget. We’re summarising what this means for you and your small business so you can cut through the overwhelm and noise.
We've focused on the points we think will affect owner-managed limited companies most, so it doesn't cover every measure. Most of what was announced isn't law yet either so more detail will follow over the coming months!
1. What didn’t change
Let's start with what stays the same:
Income tax rates on employment income and National Insurance
Corporation tax: 19% on profits under £50,000 and 25% over £250,000, with marginal relief in between
VAT rates and the VAT registration threshold of £90,000.
Dividend tax rates remain at 26/27 rates.
The Cash ISA limit will remain at £20,000 as the planned reduction to £12k was scrapped.
Most tax thresholds also stay frozen until 2030/31. This doesn’t sound newsworthy but this has a huge effect, as you may need to take more money out of your business to keep up with the cost of living. More of your income then falls into higher rates of tax - which means your take-home pay struggles to keep up with rising costs.
Your dividend/salary planning may not need to be directly changed but you should always review how you pay yourself every tax year as your business profits, personal circumstances and financial goals change.
2. emPLOYER COSTS
The National Living Wage rises by 3.9% to £13.21 an hour from 1 April 2027. If you employ staff, build it into your budget now and consider reviewing your pricing. Remember that an increase in wages affects your Employer National Insurance and pension costs too. Even if your employees are paid more than minimum wage, you may find you need to review all pay levels so the gaps between roles feel fair.
As a side note, from 6 April 2027, company cars, vans, fuel and medical cover must be reported through payroll, with other benefits following in April 2028. If you provide any of these, April will roll around soon so plan ahead!
3. personal tax bills are changing
From April 2029, Self Assessment payments on account will become smaller, more regular payments through the year instead of your twice a year payments on account in January and July. This will affect your cash flow. It’s a while off but this is a reminder to get into good habits and put your tax savings aside every month if you don’t already.
4. business mileage
If you use your own car or van for work, the 55p rate for your first 10,000 business miles brought in this tax year is now permanent. Above 10,000 miles, the rate rises from 25p to 35p from 6 April 2027.
You can also reimburse your employees this rate tax-free, when they travel for work purposes and use their own car.
5. thinking of selling?
From 6 April 2027, the lifetime limit for Business Asset Disposal Relief halves from £1 million to £500,000 for eligible businesses. The rate is currently 18%.
For a higher rate taxpayer with a £1 million gain, that means £500,000 taxed at 18% and the other £500,000 at 24%. That's around £30,000 more tax next tax year than it is today.
The newly announced Founders’ Relief at 10% is not going to save the day for most of us unfortunately as the conditions (still under consultation) are very narrow and will only benefit a tiny club of highly innovative, high-growth businesses.
6. renting your property?
If you have a rental property in your own name (rather than held by a limited company), from 6 April 2027, tax on rental profits is four percentage points higher than in 2026/27. The basic rate goes from 20% to 24%, and the higher rate from 40% to 44%.
This could really squeeze you as a landlord, particularly if you have a mortgage. Mortgage interest isn't deducted in full when calculating taxable rental profits. Instead, HMRC provides relief through a basic-rate tax reduction.
This can already create a situation where your taxable rental profits are considerably higher than the cash profit you're actually left with after mortgage payments.
Higher property income tax rates could put further pressure on that cash flow so profitability and cash flow are worth a review.
7. savings outside an isa
Tax on savings interest rises by the same four percentage points from 6 April 2027, to 24%, 44% and 49%. Remember that your Personal Savings Allowance still covers the first £1,000 of interest a year for basic rate taxpayers and £500 for higher rate taxpayers.
If you hold larger cash balances and the interest on your savings is more than your Personal Savings Allowance, it’s worth making sure you’re fully using your £20,000 ISA allowance each year.
Need support?
If you'd like to talk through what the Budget means for your business, we work with female business owners running UK limited companies and help them feel calm and confident about their numbers. Get in touch here to book a chat.
