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How the Autumn Budget Update will impact SMBs in 2025: An overview

Jan 2025 ⋅ 3 min read

If we were to summarise the UK population’s immediate thoughts on the 2024 Budget Update, 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 from the New Year, leaving small businesses struggling to cope with the real impact.

However, because of this and more changes, many announcements affect employers. From minimum wage and National Insurance contribution (NIC) increases to contract restrictions and Employee Allowance, the rising costs from the 2024 Budget Update are a natural worry for small businesses.

But what changes in the Budget Update (good and bad!) will specifically impact SMBs this year? Here’s a quick overview.

Key updates that could affect small businesses

National Minimum and Living Wage Increase

From April 2025, the National Minimum Wage will change according to the below age groups:

21+: Up from £11.44/hr to £12.21/hr
18-20: Up from £8.60/hr to £10/hr - a massive 16.3% increase!
16-17 & apprentices: Increase from £6.40/hr to £7.55/hr

According to a government press release, this is a “significant move towards delivering a genuine living wage”. For SMBs, this will be a major bump in operating costs.

National Insurance

While National Insurance payments stay put for employees, employers will see a:

Increase to 15% contributions (a 1.2% increase)
Lower threshold: Employers will now pay NICs on salaries above £5000 (instead of £9,100) from 6th April 2025

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)

From April 2025, the Business Asset Disposal Relief (BADR) will rise from 10% to 14%, then 18% in 2026, meaning small business owners will pay more when they sell. With rising costs already squeezing margins, this adds a big challenge to those looking to sell.

Draft beer duty cut

A daft beer duty cut is welcome news but not a game-changer. Rising costs still pose a bigger threat to many hospitality SMBs. SMBs must explore other ways to protect their margins and keep business flowing.

Business rates relief

Retail, leisure and hospitality businesses can look forward to a 40% relief in 2025, capped at £110,000. On top of this, the Small Business Rates Relief ensures one-third of businesses won’t pay any rates at all, saving around £2.4 billion over the next five years.

This addition is great for small businesses but not a long-term fix. Unfortunately, not everyone qualifies and issues like high rent and rising operational costs remain a concern. Businesses should think about where to cut costs and boost efficiency.

A woman holding a mug to her cheek and leaning into it, bored.

So, what does the Budget Update really mean for small businesses? How can they prepare?

For small businesses (labour-heavy sectors like hospitality, healthcare and retail, in particular), the looming threat of increasing NICs, tax, and staff wages alone will make up a large portion of expenses. SMBs and managers need to be looking past the Small Business Rates Relief and Employee Allowance support and already be planning how to save costs - which will most likely fall to staffing.

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.

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.

We encourage small businesses to investigate the government’s offered support where necessary and explore other aspects of their businesses that they can improve to save costs.

The more efficient a business operates, the more money it saves. How can you do that? Well, we have some useful tools for just that.