Autumn Budget 2025: What Business Owners Need to Know
The Autumn Budget introduced several changes that will affect how business owners take income, save for the future and extract profits. Hargreaves Owen will provide the technical tax guidance, so this overview focuses on the practical planning steps that can help you stay efficient over the coming years.
Dividend tax is rising
From April 2026, dividend tax will increase by 2 percentage points for basic and higher rate taxpayers. With income tax thresholds frozen until 2031, many business owners will gradually move into higher bands even if their income remains the same.
What you can do:
• Review your salary and dividend mix to stay tax efficient.
• Make use of your annual ISA allowance to protect future investment income.
• Consider whether keeping profits in the company may be more beneficial than withdrawing them in full.
Pension contributions from your company remain extremely tax efficient
Although National Insurance savings through salary sacrifice will be capped from April 2029, employer pension contributions themselves are not affected. They continue to offer major advantages because:
• they receive corporation tax relief
• no income tax, dividend tax or employee NI applies
• the money grows tax free in the pension
If you are not restricted by the annual allowance, company pension contributions remain one of the most tax-efficient ways to extract profit and reduce both company and personal tax.
What you can do:
• Review how much your company could contribute for you this year.
• Make the most of the remaining years where full salary sacrifice benefits still apply.
• Ensure you claim all additional tax relief if you’re a higher-rate taxpayer making personal contributions.
ISAs still play an important role
Even though the Cash ISA limit for under-65s will reduce from 2027, the £20,000 ISA allowance remains in place. ISAs are still a simple and flexible way to shelter money from rising taxes on dividends and savings.
A LISA, or Lifetime Individual Savings Account, is a UK government savings scheme designed to help people aged 18 to 39 save for their first home or for retirement. It offers a 25% government bonus on contributions up to £4,000 per year, which is a maximum of £1,000 annually.
If someone is buying a property in the near future, using the LISA still makes sense due to the government contribution. However if they are going to buy in the long term then the LISA doesn’t make as much sense due to limitations on contributions. As the replacement option is unknown there is no guarantee it will be better. For those using it for retirement, it’s a good idea to keep contributing.
Property income will also face higher tax
From 2027/28, rental income will be taxed at 22%, 42% and 47%. For business owners who also hold property personally, this is likely to increase annual tax bills.
What you can do:
• Review how property is owned between partners.
• Consider whether pension contributions can widen your basic rate band.
• Reassess whether keeping or selling rental property fits your longer-term goals.
Planning ahead matters
The Budget indicates a period where taxes increase gradually through both higher rates and frozen thresholds. The good news is that the most effective planning tools for business owners remain available. Pensions, ISAs and thoughtful profit extraction strategies can all help keep your overall tax burden under control.
If you would like support reviewing your financial planning options alongside Hargreaves Owen’s tax advice, I’d be very happy to help.
This article is kindly provided by Samantha Kmieciak, Chartered Financial Planner.
Disclaimer
This blog provides general information only and does not constitute personal financial advice. Tax rules and allowances may change, and their impact depends on individual circumstances. Clients should speak to Hargreaves Owen or a regulated financial adviser before taking action.