The Autumn Budget on 26 November 2025 left the main rate of corporation tax at 25%, raised dividend tax, extended the freeze on tax thresholds and slowed some relief on equipment. Here is what each change costs an owner-managed business, and what to do about it.

Each change below has applied since April 2026 unless another date is given.

What did the Budget change?

The Budget raises tax by about £26 billion a year by 2029-30, on the Office for Budget Responsibility’s figures. For an owner-managed business it lands in three places: what you pay yourself, what you spend on equipment and what it costs to employ people.

The main rate of corporation tax stays at 25%. The biggest single tax-raiser is the longer freeze on tax thresholds, but dividend tax rates rose too, and savings and property income rates follow in April 2027.

Which changes cost you money?

How much more tax on your dividends?

From 6 April 2026, dividend tax rose by 2 percentage points: the ordinary rate from 8.75% to 10.75% and the upper rate from 33.75% to 35.75%. The additional rate stayed at 39.35% and the £500 dividend allowance did not change. For example, a director on a £12,570 salary who takes £40,000 in dividends pays £790 more tax a year than at the old rates.

Dividends leave your bank without touching your profit, which is one reason your profit and your bank balance don’t match.

What it means for you:

  • The salary and dividend split you used last year may no longer be the cheapest.
  • If you pay yourself mainly in dividends, check the mix this tax year.
  • Agree the salary and dividend split before the next dividend is declared, not at the year end.

Does the capital allowance cut affect you?

From April 2026, the main writing-down allowance fell from 18% to 14% a year. For most owner-managed businesses that changes little: the Annual Investment Allowance still gives 100% relief on the first £1 million a year of plant and machinery, and companies can still claim full expensing on new equipment. The cut slows relief on spending those allowances do not cover and on balances already in the pool. A new 40% first-year allowance, from 1 January 2026, mainly helps sole traders, partnerships and leasing.

What it means for you:

  • Most equipment spending under £1 million a year still gets full relief in the year you buy it.
  • Time large purchases so the relief lands in the year you want it.
  • Put the slower relief into your cash flow forecast, so the tax bill is not a surprise.

Why frozen thresholds cost more each year

The Budget extended the freeze on income tax and National Insurance thresholds by three more years, to April 2031. The personal allowance stays at £12,570 and, outside Scotland, the higher-rate threshold at £50,270. As pay rises, more of it is taxed at the higher rate. This is fiscal drag, and it applies to your own salary as well as your staff’s.

What it means for you:

  • Your tax bill can rise in a year when no rate changes.
  • Pay rises push more of your team’s pay, and yours, into the higher rate.
  • Ask for an estimate of your personal tax before the year end, not after it.

What does it cost to employ people now?

Employer National Insurance went up in April 2025, a year before this Budget: the rate rose from 13.8% to 15%, charged on each employee’s pay above £5,000 a year instead of £9,100. The Employment Allowance rose to £10,500 at the same time (a company whose only paid employee is a director cannot claim it), so a small team can cost less than before: for example, five staff on £30,000 each cost £8,250 a year in employer National Insurance after the allowance, against £9,421 in 2024-25. This Budget’s change comes later: from April 2029, only the first £2,000 a year of pension contributions made through salary sacrifice will be free of National Insurance.

What it means for you:

  • Larger teams pay more than before; a small team may pay less.
  • Price the next hire with employer National Insurance included.

What should you do before your year end?

Three things: check your salary and dividend mix for this tax year, put any large equipment purchase into the forecast with the relief it will actually get, and price the next hire with National Insurance included.

Why do these changes belong in your forecast?

Thresholds and reliefs moved as well as rates, so last year’s plan may not hold this year. A forecast that already carries the new dividend rates, the slower relief and the cost of each hire tells you what you can take out of the business and when. Our CFO Advisory includes scenario modelling for changes like these.

Where does Ozria come in?

When tax rules change, this is the work we do:

  • Modelling the changes to see what they do to cash and profit
  • Updating forecasts and reports for the new allowances and reliefs
  • Advising on the salary and dividend split for directors and owner-managers
  • Building tax changes into the month-end routine, so they don’t disrupt the year-end close or the audit

For most owner-managers the cost to plan for is the dividend rise: £200 a year more for every £10,000 of dividends taxed at the basic or higher rate.

Ozria Consulting runs the outsourced finance function for ambitious businesses. If you are not sure what these changes mean for your own numbers, book a discovery call and we will tell you straight whether you need help.