Editor's Note: This post was originally published in January 2025, covering the 2024 Autumn Budget, and updated in December 2025 following the 2025 Autumn Budget.
A lot has come from the two years of Budget Updates. And, if we were to summarise the UK population’s immediate thoughts on both the 2024 and 2025 Budget Updates, it’s safe to say it would be: rising costs.
From wage increases and public service reforms to rising Stamp Duty and Capital Gains Tax, the good, the bad, and the (slightly) helpful have been topics of conversation (and concern) for many - especially as some changes began to roll out over 2025 and continue through 2026, leaving small-to-medium businesses struggling to cope with the real impact.
Due to these and other changes, many announcements impact employers. From minimum wage and National Insurance contribution (NIC) increases to contract restrictions and Employee Allowance, the rising costs from the Budget Update are a natural worry for small businesses.
But what changes from the last two years in the Budget Update (good and bad!) specifically impact SMBs? Here’s a quick overview.
Jump ahead
National Minimum and Living Wage Increase
Business Asset Disposal Relief (BADR)
Salary-sacrifice pension schemes
Key updates that could affect small businesses
National Minimum and Living Wage Increase
April 2025 saw the National Minimum Wage drastically increase as, according to a 2024 government press release, a “significant move towards delivering a genuine living wage”. This even included a significant 16.3% rise for the 18-20 year old bracket.
For SMBs, this has been a major bump in operating costs.
However, as announced in the 2025 Budget Update, the National Minimum Wage will again change from April 2026 to the following:
- 21+: £12.71/hr (following the £11.44/hr to £12.21/hr increase in 2025)
- 18-20: £10.85/hr (following the £8.60/hr to £10/hr increase in 2025)
- 16-17 & apprentices: £8.00/hr (following the £6.40/hr to £7.55/hr increase in 2025)
National Insurance
In 2025, National Insurance payments stayed put for employees, but employers have had:
- Increased contributions to 15% (a 1.2% increase)
- A lower threshold: From 6th April 2025, employers now pay NICs on salaries above £5000 (instead of £9,100).
However, smaller businesses will be protected by the Employment Allowance increase from £5,000 to £10,500. The £100,000 cap will also be removed, allowing all eligible employers “to employ up to four National Living Wage workers full time without paying employer National Insurance on their wages.”
Business Asset Disposal Relief (BADR)
As of April 2025, the Business Asset Disposal Relief (BADR) has risen from 10% to 14%, and will again in 2026 to 18%. This means small business owners will pay more when they sell. Rising costs are already squeezing margins, so this adds a big challenge to those looking to sell.
Draft beer duty cut
A draft beer duty cut, knocking 1p off a pint, is welcome news but not a game-changer. Rising costs still pose a bigger threat to many small hospitality businesses. Businesses must explore other ways to protect their margins and keep business flowing.
Taxes, taxes, taxes
The 2025 Budget Update has brought a freeze on core income tax thresholds (your Personal Allowances, basic rates, higher rates, and additional rates) up until 2031. Despite them not going down, we'll happily take them not going up!
However, owner-managed companies that rely on dividends rather than salaries will find dividend tax rates increase by two percentage points from April 2026. Savings income and property income tax rates are also set to increase from April 2027. Not the most welcome news there.
Business rates
For once, there are lower costs in SMBs' futures!
The 2025 Budget introduced a reform to business rates to permanently lower business rates multipliers for retail, leisure and hospitality properties, looking to start from April 2026. This includes the "small business multiplier", reducing from 49.9p to 43.2p in 2026 or 2027.
On top of this, the Small Business Rates Relief (SBRR) announced in 2024 ensures one-third of businesses won’t pay any rates at all in a year, saving around £2.4 billion over the next five years.
Following the 2025 Budget Update, this grace period has extended to three years for companies expanding into their second property, supporting growing businesses.
Salary-sacrifice pension schemes
The 2025 Budget Update introduced changes to pension salary-sacrifice schemes. From April 2029, the first £2,000 per year of salary-sacrifice contributions will be exempt from NIC, meaning any contributions above the £2,000 cap will not experience NIC relief.
This will mark a profound structural change to businesses, introducing a limit, and will make the salary-sacrifice pension schemes less inviting for higher-earners.
Enterprise Management Incentives (EMI)
The 2025 Budget Update annouced better eligibility for enterprise management incentives (EMI) schemes. Start-ups and scale-ups will be able to access these from April 2026, costing approximately £700 per year by 2030/31.
Access to these enterprise investment schemes could be the boost scale-ups or fast-growing businesses need to take off running.
Increased compliance & admin
Tighter rules from HMRC, potential new VAT e-invoicing requirements, and a general increase in stricter record-keeping further down the line call for SMB owners and managers to review accounting systems, and maybe integrate with compliance-friendly digital tools to adapt more smoothly.
So, what does the Budget Update really mean for you? How can SMBs prepare?
For small businesses (particularly those in labour-heavy sectors like hospitality, healthcare, and retail), the looming threat of increasing taxes and staff wages alone will account for a large portion of expenses.
This could look like -
- Higher overall payroll costs, even for part-time and seasonal staff
- Reduced flexibility, as smaller budgets restrict hiring
- Increased admin navigating and updating systems with changes to NICs, minimum wages etc. (a process that, when manual, costs you more than you realise!)
Issues like high rent and rising operational costs remain a concern. Businesses should consider where to cut costs and boost efficiency. SMBs and managers need to look past the Small Business Rates Relief and Employee Allowance support and already be planning how to save costs.
However, cutting staff shouldn't always be the go-to cost-saving solution. There are many ways to cut costs without compromising on quality or service.
Next steps? We encourage small businesses to:
- Investigate the government’s offered support where necessary.
- Explore aspects of your business that you can improve to save costs.
- Review your budgets and how you forecast costs, as well as your salary-sacrifice pension schemes.
- Be sure your accounting operations are ready for increased compliance and stricter record-keeping expectations. Consider using software like RotaCloud with accounting integrations (and more) to help you stay ahead and plan accurately.
The more efficiently a business operates, the more money it saves. How can you do that? Well, we have some useful tools for just that.
Read next ➤
5 ways to cut operating costs for SMBs
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