The Autumn Budget 2025 marks a turning point for UK businesses. While some measures provide stability, others introduce new complexities that will shape decision-making well into 2026. For values-led firms like ours, this is about more than interpreting tax tables – it’s about helping businesses align their aspirations with a shifting regulatory and economic landscape.
Key changes and their impact
1.Employee Ownership Trusts (EOT) – still a viable succession plan
CGT relief on transfers of a controlling interest in a qualifying company into an EOT still applies but this has been reduced from 100% to 50% (broadly an effective rate of 12% depending on individual circumstances).
Implication: Whilst the tax break is less generous than prior to 26 November, there is still a significant incentive to transition to an EOT as part of longer-term succession planning.
2. Capital Gains Tax (CGT) and Reliefs – timing Is critical
CGT increases remain, and further hikes to Business Asset Disposal Relief (BADR) and Investors’ Relief will reshape deal-making. BADR will rise to 18% by April 2026, and lifetime limits for Investors’ Relief have been cut dramatically.
Implication: Expect accelerated M&A activity before these thresholds take effect. Businesses considering disposals or succession planning should act early to make the most of existing rates.
3. Inheritance Tax Reform – a wake-up call for rural and family businesses
Capping full Inheritance Tax (IHT) relief at £1 million for business and agricultural property is a significant shift. For asset-heavy enterprises, this could create liquidity challenges during succession. The announcement that the £1m relief can be transferred between spouses is welcome but does not change the need to plan ahead.
Implication: Proactive estate planning is essential. Explore trust structures, insurance solutions, and phased transfers to mitigate exposure.
Autumn Budget: What Does it Mean?
As a values-driven law firm, we work alongside businesses to anticipate change and make informed decisions. The latest budget introduces important updates to business taxation and investment – building on previous measures and adding new policies that will influence strategy in the years ahead. Our role is to help you understand what these changes mean for your business and how to respond effectively.
Main Changes Impacting Business Owners:
Employee Ownership Trusts (EOTs):
The CGT relief available to those making the transition to EOTs has been reduced from 100% to 50% with immediate effect. However, it’s worth bearing in mind that it remains a more attractive proposition than the 24% higher rate of CGT.
Business owners should still consider EOTs alongside other more traditional forms of exit planning such as trade sales and management buy outs. While a transition to an EOT should not be made for tax reasons, there is still a significant tax incentive for business owners to consider this route.
Capital Gains Tax (CGT):
With the previous budget increasing CGT rates, seeing the main rate rising from 10% to 18% and the higher rate from 20% to 24%, the status quo remains in terms of headline rates but previously announced changes in Business Asset Disposal Relief will still take place in April 2026.
- Business Asset Disposal Relief (BADR): On 6 April 2025, the CGT rate for BADR (available for certain disposals by employees and directors in unlisted companies) rose from 10% to 14%, with a further increase to 18% effective from 6 April 2026. This change will likely affect M&A activity with an increase in deal volumes anticipated ahead of the implementation date in April 2026.
- Investors’ Relief: Rates for Investors’ Relief will increase in parallel with BADR, and the lifetime relief limit has decreased from £10 million to £1 million for disposals after the end of last year. This limits the financial benefits of the relief, potentially impacting investment in higher-risk ventures and startups.
Inheritance Tax (IHT) Changes for Business and Agricultural Property:
Effective from 6 April 2026, changes to Agricultural Property Relief (APR) and Business Property Relief (BPR) will cap full IHT relief at the first £1 million in relation to both business and agricultural property assets. Assets with a value in excess of this threshold may qualify for a reduced 50% relief, making IHT planning essential for rural and family businesses. This change was announced in the autumn 2024 budget, but the chancellor has now confirmed that any unused allowance will be transferable after death between spouses and civil partners.
Corporation Tax Rates:
The corporation tax rate remains capped at 25%, with a 19% small profits rate set to come into force on 1 April 2026.
EMI Options and Dividend Rates
The budget significantly widened access to Enterprise Management Incentives (EMI) by increasing eligibility thresholds from April 2026, with the gross assets cap rising from £30 million to £120 million, the employee headcount limit doubling from 250 to 500, and the overall company option limit increasing from £3 million to £6 million. This expansion makes EMI a more powerful tool for succession planning, as more businesses can now use tax-advantaged share options to align employees with ownership goals and facilitate smoother transitions. At the same time, dividend tax rates will rise by two percentage points, the basic rate from 8.75% to 10.75% and the higher rate from 33.75% to 35.75% from April 2026. For business owners, this reduces the attractiveness of extracting profits via dividends, potentially shifting focus toward capital gains strategies on exit. In practice, this means EMI schemes become even more valuable for incentivising employees and structuring succession, while owners may need to reconsider dividend-heavy remuneration models and plan exits with greater emphasis on capital gains reliefs. Overall, the Budget tilts the balance toward equity-based succession planning and away from dividend-driven income strategies.
Business Rates and Incentives:
Retail, hospitality, and leisure sectors will continue to receive rate relief, albeit at a reduced rate of 40% instead of the previous 75%. Additionally, green investment incentives remain, including allowances for zero-emission vehicle infrastructure and specific audiovisual projects. However, there are concerns that other tax burdens introduced in the Budget may limit businesses’ ability to fund sustainable investments.
Employer National Insurance Contributions
The rate of national Insurance contributions has been frozen for a further three years, having increased from 13.8% to 15% which, coupled with rises in national minimum wage, has already placed significant pressure on owners managed businesses. The secondary threshold for when employer National Insurance contributions begin will remain at £5,000.
National Living Wage
The National Living Wage is set to increase to £12.71 from 1 April 2026, a 4.1% increase for adults over 21. The rate for adults between 18-20 will also increase to £10.85, an 8.5% increase, in line with the aim set out by the Labour Government to close the gap between the age bands set out in the minimum wage.
Practical Steps for 2026 and Beyond
- Accelerate strategic transactions: Act before April 2026 to benefit from current CGT reliefs.
- Plan succession early: Engage in holistic estate planning to manage IHT exposure.
- Invest in efficiency: Rising labour costs make automation and digital transformation critical.
Our Role as Trusted Advisors
As a values-driven law firm, we help businesses anticipate change, align decisions with long-term goals, and navigate complexity with confidence. Whether structuring deals, planning succession, or embedding sustainability into strategy, we partner with you to turn challenges into opportunities.
Now is the time to act. The window for optimising tax reliefs and structuring deals before April 2026 is narrowing. If you want to safeguard your business’s future and position for growth, contact our team for a strategic review today. Together, we’ll help you navigate change and build resilience for the years ahead.
If you have any questions about the implications of the Budget, please contact the Stephens Scown Corporate team at corporate@stephens-scown.co.uk.