Important post-Budget considerations for business owners

The dust has settled after the 2025 Autumn Budget – but for business owners, much of the hard work is yet to come.

For individuals, the Chancellor extended several pre-existing tax threshold freezes, imposed a new tax on high value homes, and changed the rules around saving and investing into ISAs (among other measures). Landlords will also see their Income Tax bills rise by 2% from April 2027.

Read more – Budget update: Quiet headlines, big implications

Against the backdrop of stringent measures for individual consumers and landlords, here is an overview of what business owners can expect to see over the coming years.

The basic and higher rates of Dividend Tax will rise by 2% in April 2026

Dividends remain a tax-efficient way for business owners and shareholders to remunerate themselves.

That said, the basic and higher rates of Dividend Tax will increase by 2% in April 2026.

The Dividend Trust Rate also remains unchanged at 39.35%.

Compounded with the gradual reduction of the tax-efficient Dividend Allowance from £3,000 to £500 between 2022 and 2025, business owners’ income is becoming less tax-efficient overall.

The rising National Living Wage and National Minimum Wage put pressure on overheads

Although not unexpected, the Chancellor announced that the National Living Wage for over-21s and the National Minimum Wage for 18 to 20-year-olds will both rise in April, along with hourly wages for minors and apprentices.

These changes appear incremental, but, applied in conjunction with last year’s employer National Insurance (NI) hikes, could further squeeze UK businesses.

Legislation within the Employment Rights Bill comes into effect as soon as February 2026

According to ACAS, the Employment Rights Bill – which received Royal Assent in December 2025 and will become law as soon as February – will introduce amendments and additions to the Employment Rights Act 1996. [1]

Some key policies it will implement are:

• No more “minimum service levels” in relation to industrial action (December 2025).
• Dismissal for taking part in industrial action will become “automatically unfair” (February 2026).
• Paternity leave will become a day-one right. An employee will be able to give notice of leave on their first day of employment – currently, they must have worked for the business for a minimum of 26 weeks (April 2026).
• Ordinary parental leave also becomes a day-one right, when currently, the person must have worked for their employer for at least a year (April 2026).
• Statutory Sick Pay (SSP) will be paid from the first day of illness, not the fourth, and the lower earnings limit will be removed (April 2026).
• Employers will be required to devise action plans around the menopause and gender pay gaps – voluntarily from April 2026, and by law “at some time in 2027”.
• There will be restrictions on “fire and rehire” processes (October 2026).
• Employees will be able to claim unfair dismissal after six months with their employer, rather than the existing time frame of two years (January 2027).
• There will be a new right to bereavement leave, although it remains unclear whether this will be paid or unpaid (2027).
• Employers will be required to compensate workers for cancelled or rescheduled shifts (2027).
• Employers will need to legally justify a rejection of a flexible working request (2027).

The cost of these measures, and others, will be unique to your business. Nevertheless, it’s clear to see that while much of this legislation is designed to rightly protect workers from exploitation, it will simultaneously place a financial strain on employers.

Agricultural Property Relief and Business Relief U-turn

After confirming that the previously announced cap on Agricultural Property Relief (APR) and Business Relief (BR) would go ahead in the Budget, the Chancellor performed a U-turn over Christmas and raised the cap.

You can read about what happened in our breakdown of APR and BR rules as of January 2026.

Working with you to build wealth and remain in control

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Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article.

The Financial Conduct Authority does not regulate tax planning. IPS Capital does not provide tax or legal advice.

Sources

[1] 22.12.2025 Employment Rights Bill ACAS