What the 2025 Budget means for Business Owners (and what to do next)
- Jamie Flook
- Dec 2
- 4 min read
The 2025 budget, delivered on 26 November, didn’t unleash a sweeping revolution, but it introduced a mix of tax, reliefs and investment-incentive changes that business owners should understand.
As a Financial Planner focussed on owner-managed businesses and entrepreneurs, here’s how I see the key announcements, and the practical implications, for your financial planning.
2025 Budget for Business Owners - What’s stayed the same (phew)
Corporation tax remains competitive.
The government has kept the headline corporation tax rate at 25%. This starts at 19% on profits of £50,000 or less and moves upwards, depending on your profit levels.
The tax regime for profits retained within companies hasn’t taken a hit.
That’s positive for businesses that plan to reinvest rather than extract profits immediately.
The ability to make large employer pension contributions.
You may have seen the headlines that pension salary sacrifice is being reduced in 2029, to no more than £2,000 a year.
This only affects employees who contribute to pensions via salary sacrifice.
Whilst you are technically an employee of the company if you run a Limited company, as a director you are treated differently.
Choosing to make large employer contributions instead of salary or dividends, is not classed as 'salary sacrifice' in the sense of what the announcements are getting at. As such, if you make large pension contributions, you will still be able to do so, before and after 2029.
What has changed and may affect you personally
Higher personal tax on dividends
From April 2026, ordinary and upper-rate dividend tax rates rise by 2 percent.
You get a £500 dividend allowance, but thereafter all dividends are taxable.
The new headline rates are:
Basic rate - 10.75%
Higher rate (dividends in excess of the higher rate threshold of £50,270) - 35.75%
Additional rate (dividends in excess of the additional rate threshold of £125,000) - 39.35%
If your current plan involves extracting profits via dividends, expect your personal tax bill to rise.
That means future profit-extraction planning (timing and amounts) demands more careful thought.
It may also mean a change to taking salary instead of the classic £12,500 salary and rest in dividends makes more sense for you and your business.
Analysis from the treasury shows how the after-tax take gap on these two approaches has tightened, as a result of this Budget:
Higher personal tax on savings & rental income
From April 2027, taxes on property and savings income also climb. Many business owners we advise have property, savings and investments.
The good news is that CGT rates and most taxes impacting stocks and shares based investments are unchanged.
However, the following changes affect Property rental income and savings income i.e. savings held outside of ISA which provides interest.
The savings basic rate and basic-rate tax property income tax will rise from 20% to 22%.
The savings higher rate and higher-rate property income tax will rise from 40% to 42%.
The savings additional rate and additional-rate property income tax will rise from 45% to 47%.
What this means in practice
Reduced Take-Home Pay
Business owners who pay themselves primarily through dividends will see a reduction in their net income. The higher tax rates mean that a larger portion of their dividend income will be paid to the government in taxes.
Re-evaluation of Remuneration Strategies Business owners may need to re-evaluate their remuneration strategies to mitigate the impact of the increased dividend tax rates. This could involve adjusting the balance between salary and dividends, exploring alternative compensation methods, or making changes to their business structure.
Re-evaluation of Personal Savings and Investment Strategies
For savers: interest on cash savings (outside ISAs and Premium Bonds) will be taxed more heavily after April 2027. That means a higher “drag” on real returns from bank interest.
For landlords: rental profits will attract higher tax once these new rates apply, reducing net yield, and making some rental investments less attractive once tax efficiency, financing costs and other expenses are taken into account.
What you can do now with personal savings and investments
Tax changes can affect behaviour, sometimes for the better, sometimes not.
Remember that diversifying your assets and risk away from your business is generally a good thing to do and something we encourage our clients to do (if you'd like to understand why, just ask us).
Given you will now be more heavily taxed on property and savings you own, this makes the following alternatives potentially more attractive:
Cash ISAs and Premium Bonds (both tax-free homes that provide interest) for savings.
Investments holding stocks and shares-based portfolios, ideally in an ISA, as a tax-efficient shelter for your money and invested in companies around the world, spreading the risk away from your company.
Investing via a new limited company. This could either be a newly-created company which you and your family hold shares in, allowing you to draw from it flexibly and remain in control of when tax is paid.
Alternatively, if there is free capital in your business not earmarked for anything, but you simply don't need to withdraw it and pay the tax, the business could invest in a portfolio of stocks and shares-based assets. This provides a tax-efficent route to long-term capital growth, which you could withdraw at a later date when needed and when your tax position may be different, or when you want to wind the company up and potentially benefit from Business Asset Disposal Relief.
Jamie is Lab Financial Planning Managing Director, and a Certified Financial Planner™. He advises business owners and makes sure that their money, life and business are aligned in working towards their goals.
If you feel like you need help with your financial planning, why not get in touch to see if we can help?
Remember, there are no stupid questions. Everyone has a different level of knowledge about money and planning their finances.
We speak in plain English to help take away the fear and empower you to use your money well.
You can drop Jamie an e-mail: jamie@labfp.co.uk
Or, you can book in a free introductory call, to discuss your situation, here: https://calendly.com/labfp/intromeeting
