Last month, Chancellor Rachel Reeves confirmed the Autumn budget will take place on Wednesday 26th November and made a statement saying ‘Bills are high. Getting ahead feels tougher. You put more in, get less out. That has to change.’
The government has said there will be no increases to VAT, National Insurance or income tax for ‘working people’, but what about the impact on small and medium businesses. With under two months until the Autumn budget, we’re giving our predictions on what might happen and how it could affect you.
Will taxes increase for your business?
With the current inflation rate at 3.8%, above the Bank of England’s 2% target, it seems highly likely some taxes will increase. The Chancellor may feel the need to hike taxes to meet her fiscal rules for the budget. The government is reportedly facing pressure to plug what some estimate to be a £50 billion gap in public finances.
The Chancellor’s recent statement about high bills and the need for change appears to be preparing the public for difficult decisions ahead. We’ve broken down the changes that may be coming.
VAT threshold changes
One of the most unpopular areas for small businesses is a rumoured change to the VAT threshold, potentially forcing more to register for VAT. This would increase costs for small businesses and could even raise prices for customers. Some businesses may consider reducing their operations to stay below the new threshold.
At £90,000, the UK currently has a higher VAT registration threshold than any EU country, so it may be perceived as a more acceptable and reasonable change.
Although this is currently speculation, If you’re trading close to the current limit, it might be a good idea to model how VAT registration would affect your business.
Capital Gains Tax
Capital gains tax rates increased significantly in October 2024 and it seems like more changes are coming for business owners selling their companies.
Business Asset Disposal Relief (BADR) currently offers a reduced capital gains tax rate of 14% when selling a business, up to a £1 million lifetime allowance. However, this preferential rate currently looks set to increase to 18% from April 2026. This may affect business sales and disposals making it more expensive to exit a business. The staged implementation gives business owners time to plan, but those considering selling may want to act before rates rise further.
Business rates reform
The Chancellor has pledged to permanently reduce business rates for retail, hospitality and leisure properties valued below £500,000 from 2026. While this helps qualifying small businesses, it doesn’t address broader challenges like high rent and rising operational costs. Businesses in these sectors should focus on identifying cost savings and improving efficiency to manage ongoing financial pressures.
National insurance on rental profits
The Chancellor is reportedly considering extending National Insurance to rental income, which could raise £2 billion. This would directly hit landlords’ profitability, particularly those with multiple properties. Such changes could reduce rental supply and drive up prices across the sector.
Currently, rental income is subject to income tax but not National Insurance contributions, creating a disparity with employment income. If implemented, this change would align rental profits with other forms of business income, though it would represent a significant cost increase for property investors who haven’t factored NI into their calculations.
How to prepare now
Business owners should evaluate the coming changes carefully given the potential effect they may have in the near future. Monitoring Treasury announcements for early signals will help keep yourself updated before the budget on 26th November.
Pre-budget statements and parliamentary questions often provide hints, making it worthwhile to follow political and financial news closely in the weeks leading up to the budget.
How Warr & Co can help
For small businesses we offer a comprehensive range of accounting services, including auditing and book keeping. To find out more about how our expertise and experience can help you to make the most of your money, get in touch with our team today, or request a free consultation.
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