14-minute read
Written by
Zach Hayward-Jones
Reviewed by
Catriona Fuller
Chancellor Rachel Reeves is facing significant pressure to raise taxes to address a large government deficit. And the Autumn Budget is where the country gets to hear the government’s spending plans for the year ahead and the UK’s economic outlook. But what can small business owners and the self-employed expect to see?
The date for the Autumn Budget 2025 is on Wednesday 26 November. This is uncharacteristically late, with most Budgets happening around late October to early November.
The Budget is a time for the government to outline their approach to spending and borrowing over the coming year as well as providing tax updates. And it follows the Prime Minister’s Questions just after midday.
While it was previously speculated that the chancellor would raise income tax in order to help with the government’s financial deficit, this will no longer happen. This is largely due to a better-than-expected economic forecast from the Office for Budget Responsibility.
Instead, in order to reduce the deficit, Reeves could look to:
But despite this positive forecast, things could still change, as the Office for Budget Responsibility will deliver a final forecast on public finances on the same day as the Autumn Budget.
If tax changes are on the way, what could this mean for your business and finances?
Small business owner Nima Alale, of Sèreality Studios, says: “Running a small business today means adapting constantly, and any steps to simplify taxes or reduce uncertainty would go a long way in helping us focus on what we do best – creating meaningful work and experiences for our customers.”
The chancellor has promised a Budget of “fairness and opportunity” amid speculation that big tax rises are on the way. A move that could see Labour break its manifesto pledge not to raise income tax, VAT, and National Insurance.
In a pre-Budget speech on 4 November, Reeves was focused on “setting the context of the Budget”. She set out three key priorities for the upcoming Budget: cutting NHS waiting lists, reducing national debt, and tackling the cost of living.
The trading allowance means you don’t need to report or pay tax on any earnings up to £1,000 each year, which can be instrumental for small business owners and side hustlers.
The trading allowance has been set at £1,000 since 2017 and hasn’t risen with inflation. But a collection of marketplaces and businesses groups (including eBay, Vinted, Etsy, and the Federation of Small Businesses) are campaigning for this threshold to increase to £3,000.
Simply Business similarly supported increasing the trading allowance, as part of our Generation Entrepreneur Report.
With pressure on the government from the campaign’s popularity, there’s a possibility that this could be a hot topic for the Autumn Budget. However, with income tax thresholds frozen in place for so long, the government could still be unwilling to raise the threshold.
A reform of the current business rates system is on the cards, according to an interim report published by the government.
It’s hoped reforms will incentivise investment and growth, support the high street to thrive, and help businesses succeed. Their intention to make the system fairer was first outlined at Autumn Budget 2024 – and a further update is due in this year’s Budget.
The chancellor will confirm new rates for retail, hospitality, and leisure businesses with rateable values under £500,000 in November, with the new rates coming in April 2026.
A key concern is how the 2026 revaluation of properties is going to affect small business owners. Details about a transitional relief package to protect businesses from high bill increases will be confirmed at the Autumn Budget 2025.
The latest SME Insights Report from Simply Business found that an unpredictable economy is one of the biggest challenges for 16 per cent of businesses and over a quarter (27 per cent) want a simpler tax system.
A host of other measures are being considered to help remove barriers to investment and reduce uncertainty for businesses. Small business rates relief, how rates are calculated, and enhancing the improvement relief package are just some of the other areas the government is exploring.
The government is under pressure to help reduce household living costs and may look to energy bills in the upcoming Budget.
Energy Secretary Ed Miliband hinted at a reduction in VAT for household energy bills when interviewed for the BBC’s Sunday with Laura Kuenssberg programme. He didn’t rule anything out when asked about cutting the current five per cent VAT rate on energy bills, so it could well be something the chancellor is looking into.
While this doesn’t directly tackle challenges for small businesses, any measure to reduce daily costs for people may be welcome news.
The chancellor may be considering cutting the tax-free limit on cash ISAs, according to a report in the Financial Times. Currently savers can benefit from putting up to £20,000 in a cash ISA without being taxed on it, but rumours suggest Rachel Reeves might cut that allowance in half to £10,000.
Rather than penalising savers, it’s a move Reeves hopes will incentivise people to invest in a stocks and shares ISA instead and stimulate the economy. Whether this is an avenue she’s prepared to go down will be made clear on 26 November.
The state pension is likely to rise by 4.7 per cent in April 2026, according to the latest figures from the Office for National Statistics (ONS).
As a result, pensioners drawing their new state pension could see an increase of more than £500 a year from April. The new flat-rate pension (for pensioners retiring after 2016) is currently £230.25 a week and is expected to increase to £241.05 a week.
The UK’s triple-lock system means rates are set against inflation, the average increase in wages, or a 2.5 per cent rate – whichever is highest.
Figures from the ONS show average earnings growth was 4.7 per cent for May to July this year, and this is expected to be the figure state pension rates will increase by.
State pension rates are usually confirmed in Budget announcements, so details of flat-rate and basic state pension rates will be revealed in November.
Our ultimate guide to different business taxes you might be liable for explains it all.
There are reports that the chancellor is considering introducing a charge for limited liability partnerships (LLPs), which could affect firms such as solicitors and accountants. Currently LLPs aren’t subject to employers’ National Insurance but the government might add an equivalent charge to help raise public finances.
On 25 September 2025, the government announced their new Pride in Place programme – which aims to revitalise the high street by giving people the power to buy derelict high street buildings.
This includes boarded up shops and abandoned buildings, with the aim that they could become independent businesses, local pubs, libraries, or more.
The new programme will provide funding for over 330 overlooked communities.
With this recent announcement, could more initiatives to support the high street be announced as part of the Budget?
The government’s focus on not raising taxes on ‘working people’ has led some economic commentators to believe that the tax burden on businesses could increase. But the government’s manifesto pledges not to raise VAT or corporation tax, which means that finding funds won’t be as simple as raising taxes.
The chancellor also promised that day-to-day government costs won’t be covered by borrowing, but by income tax. Niesr insists in their report that taxes must rise for the chancellor to meet these self-imposed borrowing rules.
One recommendation Niesr gives to the government is to consider changing the scope of VAT.
It’s also been rumoured that the government could extend the current freeze on income tax thresholds, which is due to end in 2028. This means that as people’s salaries rise and the thresholds remain the same, the tax burden is increased on workers over time.
While the government has pledged to not change the rate of VAT (currently 20 per cent), they could change the scope of VAT.
The most obvious tweak the government could make is changing the VAT threshold –if they lower the threshold then more businesses might need to pay VAT.
Alternatively, the government could move items between the current rates. There’s the standard rate of VAT (20 per cent), the reduced rate (five per cent), and the zero-rate (zero per cent). The government could move goods or services from one category to another.
For example, the government could:
Or the government could change what’s considered exempt or outside the scope of VAT. Certain services, like education, healthcare, and financial services, are currently exempt from VAT.
The government could amend legislation so some of those services are no longer exempt. This is distinct from zero-rated, as businesses with exempt supplies can’t reclaim VAT on their own costs.
The threshold for business asset disposal relief increased to 19 per cent in April. But with growing pressure on the Labour party to tax the most wealthy people in the UK, we could see capital gains tax (CGT) change further.
There are a few different ways the government could tweak capital gains tax to increase tax revenue, for example:
In the 2024 Autumn Budget, the chancellor committed to extending the current rate of fuel duty (52.95 pence a litre) until March 2026. But with the government’s finances getting tighter, and fuel duty frozen since 2011, some changes could be on the way.
Jonathan Portes, professor of economics and public policy at King’s College London, said “it is long past time to raise fuel duty”, suggesting it should move more in line with inflation.
But it’s a balancing act for the government when deciding how much to raise it by. Raise fuel duty too much and fuel costs spike, risking higher inflation, and leaving everyone paying more at the pumps.
And the potential knock-on effect of higher fuel costs could harm economic growth as people travel less and costs for goods and services soar.
But a small rise could increase tax revenue enough while not harming the economy.
Extending the freeze on income tax thresholds further could increase revenue without directly raising tax. If the thresholds are frozen, more people are dragged into higher tax brackets as wages rise – this is commonly called a ‘stealth tax’.
The chancellor said that income tax thresholds will rise in line with inflation from the 2028-29 tax year. But the Treasury could consider extending the freeze to raise more revenue.
This is particularly relevant to sole traders whose business profits are subject to income tax.
The chancellor is considering reforms to inheritance tax to help plug the UK deficit, according to a report in the Guardian.
Rules on gifting money and assets could be tightened to help the government raise revenue.
Currently gifts and assets given seven years before someone dies aren’t subject to inheritance tax. Will we see a change in this process announced on Budget day?
The need to raise other tax rates will be based on how significant the heavily rumoured bank and gambling levies are. With many publications reporting that taxes on the gambling industry look very likely.
Former Prime Minister Gordon Brown said “The government can fulfil today’s unmet needs by taxing an undertaxed sector (the gambling sector).” He’s pointed out that the UK taxes the industry far less than other European countries.
And to be consistent with not raising taxes for working people, some suggest the government considers a windfall tax on banks. Potentially raising up to £11 billion in tax revenue.
A levy on the banks could mean the government could raise tax revenue without harming public perceptions. These are potentially two big sources of tax revenue for the government and will dictate how strongly businesses are taxed in the upcoming Budget.
The government could be about to announce an end to the two-child benefit cap in the Autumn Budget, according to a report in the BBC.
Under the current policy, parents can access additional means-tested benefits (universal credit and child credit) for each child they have – but this is capped at two children. If Labour were to scrap or amend this policy, then low-income families would be able to claim more in benefits if eligible.
Simply Business UK CEO Julie Fisher says: “Amidst a plethora of rising costs, from energy bills to increased employers National Insurance contributions, small businesses are caught between a rock and a hard place. Research from the British Chamber of Commerce found labour costs to be the main cost pressure, cited by 72% of businesses, while higher energy bills were cited by 50%.
“As the cost of running a business increases, many will feel unable to pass these costs on, keeping prices static as they try to avoid losing customers. In fact, of the 74% of small businesses who expected to raise prices in spring this year, only 45% actually have. And more than half (51%) have kept prices unchanged, even as inflation persists. As a result, profits continue to shrink.
“In the face of mounting challenges small business owners are displaying an unwavering resilience – the number of SMEs in the UK grew to reach 5.64 million this year, and over half remain confident in their prospects over the next 12 months.
“But the current economic environment is unsustainable. Earlier this year, almost one in five (18%) small business owners said they would be forced out of business within a year if conditions don’t improve. Suggestions of a lower VAT threshold could very easily throw off the balance, with a significant impact on small businesses and our economy.
“The Chancellor has an opportunity in the Autumn Budget to address their challenges, reducing the cost of doing business, and providing the platform for growth. We know small business owners across the country will be hoping to hear a commitment to material support, as they call for the government to reduce Corporation Tax for small profits (15%), reverse or reduce employer NI increases (14%), and provide more support for energy bills (14%).”
This article was first published on 4 September and has been updated with some of the more likely predictions we’ve seen.
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Written by
Zach Hayward-Jones
Zach Hayward-Jones is a Copywriter at Simply Business, with seven years of writing experience across entertainment, insurance, and financial services. With a keen interest in issues affecting the hospitality and construction sector, Zach focuses on news relevant to small business owners. Covering industry updates, regulatory changes, and practical guides. Connect with Zach on LinkedIn.
This content is for general, informational purposes only and is not intended to provide legal, tax, accounting, or financial advice. Please obtain expert advice from industry-specific professionals who may better understand your business’s needs. Read our full disclaimer
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