With the Autumn Budget just around the corner, small and medium-sized enterprises (SMEs) should brace themselves. The Chancellor of the Exchequer, Rachel Reeves, has some difficult choices ahead. The economy is sluggish, inflation isn’t easing, and business confidence has reached a new low.
We won’t know the full picture until 26th November, but early signs point to several key reforms being seriously discussed. Here’s what SMEs can expect in the Autumn Budget.
Key Policy Areas to Watch for SMEs
The Autumn Budget could bring some important changes for UK businesses. Will the government provide practical support for SMEs? These are potential areas where changes might be on the way:
1. Business Rates
Business rates reform is shaping up to be one of the headline features of this year’s Budget. In its Transforming Business Rates Interim Report, the government confirms several committed and exploratory changes.
Among them:
- Permanent lower rates for retail, hospitality, and leisure (RHL) premises with rateable values (RV) under £500,000, delivering promises made in 2024.
- A new “high-value” rate for larger properties (over £500,000 RV) to help fund the discount for RHLs.
- Transitional relief measures to soften the blow for businesses that would otherwise face steep rate increases.
- A possible move from a “slab” to a “slice” system, where properties are taxed in value bands (slices) rather than one flat rate (slab).
- An updated Small Business Rates Relief (SBRR) scheme to smooth out sharp cut-offs and give more support to businesses that operate from multiple sites.
- Expanded improvement relief to reward businesses that invest in upgrading or improving their premises.
Importantly, the report makes it clear that more frequent revaluations aren’t happening anytime soon. And that’s quite a relief for business owners.
As always, it’s all a waiting game. How much of this the government can actually make happen will depend on the ongoing discussions and consultations.
If you rent or own business premises, take special note. This is the area that’s most likely to affect your bottom line in 2026 and beyond.
2. VAT and Trading Allowance
A main VAT rate increase looks unlikely. Labour has been clear about not touching VAT, income tax, or National Insurance for working people. That said, the thresholds might be where the action is.
Potential changes being floated include:
- Lowering the VAT registration threshold, pulling more small businesses into the VAT net.
- Reclassifying certain goods or services, potentially moving some items from reduced or zero rates up to the standard rate (an easy way for the Treasury to bring in more cash).
- Raising the trading allowance (currently £1,000, to possibly £3,000)
The last point would be a huge win for the small players. That’s more tax-free income for micro-businesses, freelancers, and gig workers. It could also encourage more people to make their side income official and trade with confidence.
All this makes it a good moment to check your books. If your business sits near the VAT threshold, start crunching the numbers now! A bit of forward planning could seriously change how much money you end up keeping.
3. Capital Gains Tax, Dividend Tax, and Business Exits
Thinking of selling or restructuring your business? Pay close attention. There could be big changes around Capital Gains Tax (CGT) and Business Asset Disposal Relief (BADR), both of which can impact your final takeaway from a sale.
Right now, the talk is that the Chancellor might:
- Bring CGT rates closer to income tax levels (people who pay higher income tax could also pay more when they sell their business or other assets).
- Make it harder to qualify for BADR by either lowering the total amount you can claim or requiring longer business ownership before selling.
- Change how dividends are taxed, possibly by raising the tax rate or cutting the current £500 tax-free allowance.2. National Insurance and Payroll Costs
SMEs employ nearly 60% of the UK workforce; it’s no shock they’re feeling the pinch from rising employment costs. Wages, pensions, and compliance costs have all crept up in recent years. For smaller firms, these increases sting a lot more than they do for big corporations.
To make things worse, April 2025 brought a double whammy on the tax front. The employer National Insurance Contribution (NIC) rate rose from 13.8% to 15%, and the threshold (the point where employers start paying NICs) dropped from £9,100 to £5,000 a year.
We probably shouldn’t be holding our breath for that to be reversed anytime soon. What’s more realistic is that the government will continue to freeze those NIC thresholds. The sneaky part? Even though the percentage rate stays the same, the thresholds don’t rise with inflation.
That means as wages go up, more of your payroll falls into the contribution bracket. You still end up paying more without any official tax hike. A stealth cost increase, essentially.
There could, however, be a glimmer of hope. The government might look into new targeted reliefs for businesses that hire apprentices or long-term unemployed individuals. A small win-win, if you ask us, as firms are able to plug skills gaps while getting people back into jobs.
4. Corporation Tax and Incentives for Investment
The main Corporation Tax rate (currently 25% for companies earning £250,000 or more in profit) is likely to stay put. To incentivise investment, the Treasury may fine-tune allowances.
Full expensing already lets you write off 100% of the cost of new equipment, machinery, or tech straight away. It was made permanent in 2023.
There could be better news ahead. The government has promised to extend full expensing to leased plant and machinery as soon as the finances allow. This Autumn Budget might be when that finally happens.
Another area to watch is support for green investments. The government can’t ignore its clean energy targets (not with the 2030 net-zero deadlines looming), but the Chancellor’s promise of “no new taxes” leaves little room for big spending.
So, instead of new grant schemes, we’re likely to see targeted tax breaks to push businesses toward eco-friendly choices.
Finally, R&D-focused SMEs might get some long-awaited clarity. The current system is notoriously tricky to navigate, especially for smaller firms. The Autumn Budget could bring reforms to make it clearer, faster, and easier to claim back a slice of what you spend on innovation.
5. Alternative Levies, Wealth Taxes, and Stealth Taxation
The government boxed itself in when it pledged not to raise core rates of income tax, VAT, or NIC for individuals. That means if it needs more money (and it does), it has to look elsewhere.
Large financial institutions could take a huge hit if the government introduces new or higher bank levies or windfall taxes.
Remember that this is a sector that continues to make solid profits even when the economy is shaky. If your business relies on bank financing, borrowing could be more expensive as those extra taxes get passed down to you.
Another possible target is personal wealth. There’s growing pressure to introduce or expand wealth-based taxation, particularly on high-net-worth individuals. That could mean:
- Changes to non-dom rules (for UK residents who pay tax only on UK income).
- A broader wealth tax (taxes on assets like property, shares, or investments rather than income).
That probably won’t affect most small business owners directly, but it could have ripple effects. For asset-rich family businesses, succession planning or selling up might suddenly become more complicated or expensive.
Perhaps the most likely move is a freeze on tax thresholds. Income tax bands and personal allowances are already frozen until 2028, and there’s talk of extending that further.
Get ready for the squeeze; this could hurt your personal income. Your staff will naturally want pay raises to keep pace with inflation, but since the tax bands aren’t moving, a bigger portion of those raises ends up going straight to HMRC.
The Big Picture: Opportunities and Risks
For growing SMEs, the Autumn Budget presents both disruption and possibility.
We could finally get a better deal on business rates. And if the government decides to tax wealth and capital more than workers and consumers, that could actually help balance the playing field for small firms, provided it’s done carefully.
That said, the risks are real. For businesses operating on tight margins, even small changes in tax rates or thresholds can eat into profits.
Our advice? Use the time before 26th November to plan, quantify, and future-proof your business for whatever changes come down the pipe.
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