After months of debate and speculation, chancellor Rachel Reeves has unveiled her 2025 Budget.
Read a guide to the measures here and see reaction from entrepreneurs and experts below.
Freezing of income tax and National Insurance thresholds
Clare Eve, private client director at Affinia:
“The decision to extend the freeze on income tax and NIC thresholds for another three years, five years in total, means more people will be pulled into higher tax bands through fiscal drag. It’s not a headline hike, but the net effect is a heavier tax burden for millions.
“Combined with changes to pension fund inheritance rules, the reduction in salary sacrifice relief, and rising dividend tax rates, this Budget will likely change the way people think about saving, spending and structuring income in retirement.”
Charlotte Dean, managing director of P3 People Management:
“I would urge SME owners not to take any drastic action on their headcount following the extended freeze on income tax and the rise to the national living wage. Redundancy is not easy and is very costly for small businesses. There are other ways to protect your people and continue to drive profit in your business so I would urge leaders to take a step back and fully consider their options, including their long-term people management strategy.”
Seb Maley, Qdos CEO:
“Extending the freeze on personal tax thresholds is a tax rise in all but name. Millions will be dragged into higher tax bands as a direct result. This sleight of hand from the government will eat into the take-home pay of people just as much as a literal tax rise – whether you’re working as an employee, a temp or a sole trader.”
Bonnie Jackson, corporate and commercial solicitor at Gardner Leader:
“It is likely that SMEs will share the pain of freezing income tax brackets. With pressure on both the demand side and a need to pay higher wages, margins will shrink and some will become targets for opportunistic local competitors or trade buyers. The latter have a track record of mopping up in fragmented markets – in the same way as we have seen with vets and accountancy firms in recent years.”
“This will no doubt focus the mind of SME owners contemplating an exit. They may be inclined to bring forward a sale or consider a partial release of equity (such as selling a minority portion of the business).”
Increased dividend tax
Jason Hollands, managing director at Evelyn Partners:
“The last thing the UK really needs right now is more tax on investment and entrepreneurship.
“These hikes seem to be aimed mainly at extracting more cash from the UK’s small business owners, who don’t have the option of owning their company shares in a tax efficient Individual Savings Account. It will be felt by entrepreneurs as a kick in the teeth, as it takes guts to set up a small business and cash-flow can be uneven and profits uncertain, especially in the current environment where the economy is struggling.
“Given these uncertain profit streams, many business owners chose to pay themselves only a limited fixed salary and instead opt to pay themselves varying amounts via dividends from profits, and in some cases that makes up the majority of their income.
“Headline dividend tax rates have long been lower than their corresponding income tax bands. While some may regard this as an anomaly in the tax system, this arrangement has been there for a very good reason: dividends are paid out of profits that have already been subject to corporation tax.
“This is levied at 19% for companies with profits under £50k and 25% for companies with profits over £250k, with marginal relief between those bands. So, comparing headline dividend and income tax rates is a very partial picture, and these hikes mean that in many cases the Treasury will be milking the same income stream twice. With the rewards for entrepreneurship and risk-taking suffering a number of blows recently – rising National Insurance and capital gains tax burdens among them – it is no wonder many business owners will feel despondent about the increasingly hostile tax environment.
“The OBR has today confirmed that growth will be lower than even the modest levels previously expected for the rest of this parliament. This is symptomatic of the growing tax burden put on businesses by this government in the form of higher National Insurance costs and a big hike in the minimum wage. But the doom loop in which rising taxes hamper growth will also hammer many small and medium sized enterprises – especially in lower margin sectors like retail, leisure and hospitality – with all the predictable consequences for jobs.
“And that is before employment rights legislation is enacted that could further damage businesses and jobs by raising the risks of employing staff and reducing labour market flexibility.
“While business owners may be the main target, the hike in dividend tax rates will also impact anyone owning income generating shares or funds outside of ISA and pension tax wrappers, especially now that the annual dividend exemption is a pitiful £500 a year, having been cut aggressively by the previous Conservative government. As recently as 2017/18 it was as high as £5,000, so it is now frankly a token amount.”
Seb Maley, Qdos CEO:
“Hiking the rate of dividend tax is a hammer blow to self-employed and small business owners. It’s short-sighted, knee-jerk and completely at odds with the government’s rhetoric around building a nation of entrepreneurs.
“Take a company director who pays themselves just over £50,000 a year, through a mix of salary and dividends. Raising the basic rate of dividend tax from 8.75% to 10.75% could cost them around £600 more in tax every year. Meanwhile, someone with an income of £100,000 a year is likely to pay another £1,400 in light of changes to the higher rate.”
Fred Hicks, head of policy at IPSE:
“THE Budget is a double whammy for the 1.2 million people running our very smallest companies. Not only will their personal allowance stay frozen for longer, but their dividend income – the money they earn from working on their business – is being raided once again. This loads yet more pressure onto company owners and risks disincentivising entrepreneurship when we need it most.”
Stephen Kenny, partner and head of private client at PKF Littlejohn:
“An increase of 2% on the tax rate for dividends is likely to see more clients considering a move from the UK, as non-residents can take dividends tax free. We’re already seeing an exodus of business owners from the UK; this is likely to make more consider a move. Rather than attracting investment into the UK which the chancellor is keen to push, it may see entrepreneurs leaving the UK.”
Apprenticeships, Youth Guarantee and skills
Robin Adda, CEO of SkillsAssess, said:
“The £13bn in funding for regional mayors to invest in skills, business support and infrastructure is welcome news in today’s announcement, particularly alongside the new £820m youth guarantee. But even with these measures, it doesn’t match the scale of the UK’s skills crisis – especially the digital one. Businesses and technologies are moving faster than policy, and without a more ambitious approach, the gap will continue to widen.
It’s clear from recent employment figures that businesses across every sector are feeling the strain, and as some roles change and others fade away due to emerging technologies, AI literacy is already essential.
Yet employers are struggling to find the capabilities they need internally. Entry-level roles are already suffering, and with the OBR downgrading economic growth forecasts from 2026 onwards, the pressure on growth, productivity and competitiveness with other nations will only intensify.
In short, today’s measures acknowledge the problem, but the government has missed an opportunity to really future-proof the UK economy – and the burden will now fall even more heavily on SMEs.”
Peter Cheese, chief executive of the CIPD:
“The announcement of additional support for SMEs to take on an apprenticeship through subsidising the cost of training is welcome and should encourage more small firms to take on an apprentice. The further support set out for the government’s Youth Guarantee is also a positive step.
“However, these measures are still not enough to address the collapse in apprenticeship provision for young people in recent years or tackle high and rising levels of young people not in employment, education or training. With long-term unemployment for young people at a 10-year high, we need bolder action on skills to prevent a lost generation.
“We need an apprenticeship guarantee for 16-24 -year-olds, backed by targeted hiring incentives for SMEs to reduce recruitment costs and unlock apprenticeship starts in small firms which have significantly fallen in recent years.”
Expansion of Enterprise Management Incentive (EMI) scheme
Guy Podjarny, founder and CEO of Tessl:
“Tessl was not even a year old when we exceeded the EMI caps, losing access to the very scheme meant to help us reward our earliest hires. It felt like we were being penalised for our success, rather than being able to celebrate the team that is leading the way. The EMI reform means future UK success stories won’t face the same barrier, they’ll have the support they need to keep building and growing right here in the UK.”
Tom Leathes, Co-founder & CEO of Motorway:
“Start-ups thrive when risk and reward are shared. For too long, outdated EMI thresholds excluded too many from that journey. The UK was falling behind global competitors, constrained by low caps and rigid rules. By implementing higher limits and greater flexibility through EMI reform, the UK government is at last matching action with its ambition to become a global tech powerhouse.”
Reduction in Capital Gain Tax relief for Employee Ownership Trusts (EOTs)
Jennifer Moore, Director at Leonard Curtis Legal
“The Budget marks a turning point for EOTs, drawing a clear line between purpose and tax advantage. In a dual shift of stronger governance (trustee independence and UK residency alongside arms length valuations) and partial re taxation (CGT relief halved) the government has made it clear that employee ownership must now be a genuine transfer of power, not merely a tax efficient release of wealth.
“By introducing real tax exposure on exit, the Budget has diluted one of the key incentives for business owners but simultaneously recalibrated EOTs towards a more balanced, sustainable employee ownership model. The strategic question now for boards and advisers is whether under this new, more rigorous regime EOTs still deliver the best overall succession value and only those prepared to cede real control in well structured, genuinely employee led businesses will likely find it truly rewarding.”
Tom Golding, partner at PKF Littlejohn:
“For business owners planning an exit from an Employee Ownership Trust, the Budget introduces a new reality that half the gain is now taxable. This makes timing and structure critical, and could push some to hold shares longer or explore alternative succession routes.”
David Alcock, partner and head of social business at Anthony Collins:
“It is surprising and disappointing to see the reduction in the Capital Gains Tax exemption for employee ownership trusts. This has been a success story over the last 11 years and has been a significant contributor to the overall growth in mutual models.
“The government risks disincentivising EOTs for a marginal financial gain, which given the manifesto commitment to double the size of the co-operative and mutual sector seems counterproductive.”
Ending of the de minimis customs duty threshold
Chris Clowes, executive director of SCALA:
“Phasing out the de minimis threshold marks an important step towards fairer competition for UK retailers and stronger accountability and product safety for consumers. While some ultra-low-cost imports, including those from major ecommerce platforms like Shein and Temu, may become more costly once the change eventually comes into force, the long-term outcome should be a more level playing field for compliant businesses across the UK.
“The reform is also likely to shift more stockholding and fulfilment activity into the UK, increasing demand for domestic warehousing and reducing reliance on direct-to-consumer air freight. This would enhance resilience within supply chains and support wider sustainability goals.
“However, with implementation not due until 2029, responsible UK retailers and logistics providers will continue to operate in an uneven marketplace in the meantime. A phased programme introduced sooner would give businesses greater certainty, encourage investment in UK-based distribution models, and limit avoidance behaviours. Earlier action would provide clarity for the market and reinforce consumer protection.”
National Insurance relief cap on salary sacrifice pensions
Katherine Moon, tax director at Jerroms:
“Placing a £2,000 cap on salary sacrifices will put even more pressure on SMEs that are already dealing with significant tax headwinds and financial challenges. Salary sacrifice schemes have become a crucial tool for SME employers, enabling smaller firms to offer attractive pension and benefits packages without the cash flow implications of direct salary increases. Restricting salary sacrifices will disproportionately affect SMEs’ ability to retain skilled staff and compete for talent against larger companies.
“Following years of inflationary pressure, rising energy costs and increased regulatory compliance, many SMEs are operating on increasingly tight margins. With around 75% of businesses indicating that they won’t be able to absorb additional NI costs, the financial burden will fall on employees through reduced pension contributions or weaker benefits.
A salary sacrifice cap risks damaging confidence in workplace pensions at a time when we should be encouraging long-term saving. SMEs should seek professional advice now to understand potential impacts and explore alternative benefit structures before any changes take effect.”
Rena Magdani, national head of employment, pensions and immigration at Freeths:
“Due to the increase to Employers’ National Insurance Contributions that came into effect in April this year, a large number of employers have launched or been looking into salary sacrifice arrangements for employees because of the potential NIC savings.
“On the face of it, those employers might be re-considering their decision due to the announcement today that pension contributions over £2000 per year will not receive salary sacrifice protection and will be subject to NICs. However, these new rules will not come into effect until 2029, so there is plenty of opportunity for employers to consider the best approach.”
E-invoicing to be mandatory on VAT invoices
Aihedan Dimulati, global e-invoicing lead at Quadient:
“The confirmation in yesterday’s Autumn Statement that mandatory e-invoicing will apply to all VAT invoices from April 2029 is a huge and overdue milestone for UK business infrastructure. But outlining a mandate is only phase one. For e-invoicing to deliver real long-term value, businesses need clarity on standards, robust implementation guidance, and time to adapt their systems and processes.
“If the UK learns from what worked (and didn’t) in countries like Italy and Belgium (coming soon in Jan.2026), it can avoid fragmented rollouts and instead build a system that improves fraud prevention, cash flow visibility and global trading confidence. The priority now has to be interoperability and planning not just ticking a regulatory box.”
Increase in National Living Wage and National Minimum Wage
Graeme Donnelly, CEO and founder of 1st Formations:
“As a Real Living Wage Employer, we believe in fair pay. But it is simply not credible to suggest that a wage rise of this scale will have no consequences for employers, particularly when introduced without any form of transitional support. For sectors already under strain, like hospitality, this could be the final blow, triggering job losses, hiring freezes and closures into the new year.”
Marvin Rust, head of A&M Tax Europe:
“The significant increases to the National Living Wage and National Minimum Wage will disproportionately punish the hospitality industry. With margins already so tight, and the public still not through the cost-of-living crisis, this only makes things harder. The real impact could be closures of businesses, a body blow for the industry which has historically been a first employer for those entering the workforce.”
Vipul Sheth, managing director of Advancetrack:
“By raising National Minimum Wage levels, payroll costs for business owners will rise exponentially at a time when economic growth has already slumped – and these aren’t anonymous corporates with endless reserves; they’re individuals who often put their own homes and savings on the line to build companies that support thousands of families.”
Increasing business rates for properties over £500,000
Natasha Guerra, founder of Runway East:
“Once again Rachel Reeves has claimed to be on the side of start-ups – whilst revealing she doesn’t understand them. The decision to treat flexible and serviced offices as one large property rather than multiple smaller units means start-ups face higher costs. The business plans being written by aspiring founders across the UK just got more expensive.
“It’s simple – fast growing businesses choose flexible workspaces over traditional leases. But now changes to business rates mean they’ll no longer get Small Business Rates Relief if they work in a flexible space. Our spaces are not classed as individual offices, and we cannot apply small business rates relief for the businesses we host because our flexible workspace is treated as a single unit.
“We will have no choice but to pass this cost on, making flexible workspaces more expensive for SMEs to access – at the very time when getting people back into high-quality offices is critical for driving productivity.
“Access to flexible workspace, which is generally more affordable than committing to a single unit, has never been more important for SMEs, especially as the cost of space in our cities continues to soar and when business want to get people back into the office.
“I’d like to finish this quote by saying most of all I’m just glad this is over – and next time can we not spend half the year talking about the budget and creating uncertainty, please.”
New powers for England mayors to introduce a tourist tax
Marvin Rust, head of A&M Tax Europe:
“We’d recommend mayors in England think carefully before introducing any visitor levy on overnight accommodation. The industry simply cannot afford any actions that put people off our hotels.”
Reduced capital allowances writing-down allowance
Matt Abouzeid, co-founder of &together:
“The government has reduced the main writing-down allowance, meaning businesses will now take longer to deduct the cost of equipment and machinery from their taxable profits. The relief is still available, but it’s slower — effectively increasing near-term corporation tax bills. When founders pay more corporation tax, they pay themselves less. That’s the trade-off no one sees.”