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The recent Budget, brought with it a mix of tax and regulatory changes. And, as always there’s a lot of detail within the Budget documents which don’t necessarily make the headlines but that will still have a significant impact on businesses.
So, whilst there weren’t any big hikes in business taxes, there are still some important updates that could affect you as a business owner.
To help you stay ahead and mitigate the changes wherever possible, Chris George, Tax Advisory Partner looks at five practical actions to consider to keep your business compliant, tax-efficient, and ready for the future.
1. Rethink your Capital Allowances strategy
Flying mostly under the radar of the main headlines, there were a couple of impactful changes to Capital Allowances.
Firstly, from April 2026, the main writing down allowance (a type of capital allowance that allows you to deduct a percentage of the value of certain items from your profits each year) for plant and machinery drops from 18% to 14%.
Therefore, any assets which sit in this pool as they did not benefit from 100% write off in their year of acquisition, will generate smaller annual allowances moving forward.
However, there was one silver lining, starting in January 2026, a new 40% first-year allowance will apply to main pool additions. This is especially useful for assets that don’t qualify for full expensing such as leased equipment.
The Annual Investment Allowance (AIA) stays at £1 million, so businesses will still benefit from 100% relief on qualifying spend up to that limit.
What to do now:
- If you’re planning major investments in plant, machinery, or equipment, think about timing. You might want to accelerate purchases to benefit from the current 18% rate or plan ahead to use the new 40% allowance.
- For property investment companies and businesses leasing assets, this could be a great opportunity to boost tax efficiency, so start the conversation with your tax adviser.
2. Review how you extract earnings from your business
One of the headline changes announced was that dividend tax rates are increasing from April 2026.
The basic, higher, and additional rates will each rise by 1.25%, making them 10.1%, 34.85%, and 40.35% respectively. So, if you take profits as dividends, this will reduce the net benefit compared to salary or bonuses.
What to do now:
- Take a fresh look at your remuneration strategy. It might make sense to bring forward dividend payments before the new rates kick in.
- It’s also worth reviewing your mix of salary, bonus, and dividends, factoring in National Insurance and Corporation Tax.
- For some, boosting pension contributions or exploring other profit extraction methods could be smarter. So, a tailored review is key.
3. Get ready for changes to salary sacrifice pensions
From April 2029, National Insurance relief on salary sacrifice pension contributions will be capped at £2,000 per employee per year.
This means anything above that will attract both employer and employee NICs.
The measure will mainly affect higher earners and businesses with generous pension schemes, but for those affected it could have a significant impact.
What to do now:
- Review the current arrangements of your business and model the impact of the cap.
- Start thinking about communicating any changes to staff early and check if contracts or scheme documents need updating.
- Look at any tweaks to payroll systems that may be needed to handle any changes correctly.
4. Take a fresh look at your exit strategy
All business owners should be thinking about the future.
What are your plans for the next 3, 5 and 10 years?
It could be expansion of the business, but it could also be looking at either succession of or exiting from the business. And substantial changes to various taxes across both the 2024 and 2025 Budgets could impact these plans.
Capital Gains Tax rates have increased over the past 12 months with another increase due to come in from April 2026, meaning an increase in tax on a potential sale of the business. And the halving of the Capital Gains Tax relief on disposals to Employee Ownership Trusts will impact those wanting to pass their business down to the next layer of management.
However, on the plus side, the expanding of the limits to share options under the EMI scheme will allow a higher proportion of the company to be passed to key employees in a tax efficient way.
The much-publicised changes to Inheritance Tax relief for farmers equally applies to the majority of business owners too. So, with no further changes announced, passing on a business to the next generation may now result in a weighty Inheritance Tax bill.
What to do now:
- Explore EOTs: Check if selling your business to an Employee Ownership Trust could work for you under the updated rules.
- Check Inheritance Tax Relief: Shares in qualifying trading businesses can often be exempt from inheritance tax, but only if certain conditions are met and only up to certain limits.
- Plan for CGT Changes: Timing matters. Think carefully about when and how you structure a sale or succession plan.
Getting this right can make a huge difference to your financial outcome and your legacy. A detailed review is vital here.
5. Understand the new business rates system
A new banded multiplier system for business rates starts in April 2026.
This is good news for retail, hospitality, and leisure businesses with properties under £500,000 rateable value as those businesses will pay less.
However, larger properties like warehouses and big offices will see higher rates. Although transitional relief will help ease the shift.
What to do now:
- Check property portfolios and the new rateable values.
- Make sure as a business, you are claiming any reliefs that the organisation qualifies for.
- If large properties are owned, budget for higher costs and consider whether restructuring is appropriate.
We’re here to help
After so many rumours and near constant leaks about proposed changes, it might feel like there weren’t any major changes to worry about after the Chancellor’s speech.
However, the multitude of alterations and tweaks made could have a significant impact on many aspects of businesses.
The key to mitigating the effect of these changes on your business will be to plan ahead and to take professional, personalised advice.
To discuss any of the issues raised in this article, speak to Chris or one of our Tax team by calling 0330 058 6559 or email hello@scruttonbland.co.uk
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