What the latest UK Budget means for business owners and SMEs

The Chancellor’s latest Budget introduces a series of tax, investment and skills measures that will directly affect business owners across the UK. While many announcements appear supportive of SMEs, the full implications won’t be clear until the detailed legislation is published.

This article breaks down the major measures as currently understood, and what they may mean for business owners, sellers, buyers and investors.

Minimum wage rises: increased pressure on labour-heavy businesses

The rise in the National and National Living Wage will increase costs for sectors such as hospitality, retail, care and services.

What this means for owners:

• Short-term margins may tighten.
• Buyers will adjust valuations to reflect “normalised” earnings.
• Forecasting and cash-flow planning will be critical for exit readiness.

Expanded entrepreneurial investment schemes to support growth

The Government has signalled an expansion of incentives to encourage investment into scale-ups and high-growth SMEs. These enhancements aim to unlock more private capital and stimulate innovation. These include staff share option schemes. 

Impact on business owners:

• Growth-stage and technology-led firms may benefit from increased investor appetite.
• Potential uplift in valuations for qualifying businesses.
• Stronger environment for equity-backed expansions and buy-and-build strategies.
• Locking in key employees.

Corporate tax stability and 40% first year allowance for main rate assets

The Budget confirms a stable corporate tax environment, including the 40% first year capital allowance for qualifying investments.

What this means for SMEs:

• Asset-heavy sectors gain greater certainty.
• Modernisation and equipment investment remain tax efficient.
• Sellers can present future tax benefits as upside for buyers.

Apprenticeships for under-25s to become free for SMEs

A major boost for smaller employers and apprenticeship providers: apprenticeships for employees aged under 25 will be fully funded.

Benefits for businesses:

• Reduced cost of bringing in and developing young talent.
• Improved succession planning, strengthening exit readiness.
• More structured workforce development, appealing to potential buyers.

Reduction in EOT tax relief: major shift in exit planning

Tax relief for sales to Employee Ownership Trusts (EOTs) will drop from 100% to 50% which represents a significant change for owners considering this route.

Implications:

• EOTs become less financially advantageous.
• Many owners may shift back toward trade sales, management buy-outs or phased buy-ins.
• Early modelling is essential for those mid way through EOT planning.

Business rates reform to support high streets and hospitality

The Budget includes permanent lower business rates for many high-street, leisure and hospitality businesses, alongside higher rates for larger commercial properties valued at more than £500,000.

Headline impact:

• The relief supports bricks-and-mortar operators under cost pressure.
• Improved affordability could bolster valuations in these sectors.
• Larger property-intensive operations may face increased liabilities.

Customs duty on parcels

A new customs duty will apply to all imported parcels, regardless of value. This is designed to level the playing field between online imports and UK retailers.

Implications for business owners:

• E-commerce firms relying on small-value imports may face higher costs.
• Domestic retailers may see a marginal competitiveness improvement.
• Supply chain planning and pricing strategies may need review.

New per-mile duty on electric and hybrid vehicles

Electric and hybrid vehicles will face a new excise duty:

• 3p per mile for electric vehicles.
• 1.5p per mile for hybrids.

Impact:

• Fleet operators may experience increased running costs.
• Capital planning for vehicle replacement should be reviewed.

Changes to gambling duties

The Budget includes sharp increases in remote gaming and online betting duties, alongside the abolition of bingo tax.

Sector impact:

• Online operators will face margin compression.
• Bingo and certain leisure venues may benefit.

Stability on VAT, pensions and wider tax rates

The Government confirmed no changes to VAT, core pension tax relief or corporation tax. Apart from the future salary-sacrifice cap already announced, no major new personal tax rises were introduced.

This provides:

• Predictability for business planning.
• Stability for remuneration strategies.
• A more certain environment for valuation and exit modelling.

This Budget sends a clear message: investment, skills and small business activity are being supported, but with notable tightening in certain key areas, especially Employee Ownership Trusts.

For business owners, the priorities now are to:

• Review financial forecasts in light of wage and cost pressures.
• Reassess exit strategies, particularly if exploring an EOT.
• Leverage investment allowances and apprenticeship funding where possible.
• Monitor the detailed legislation closely as the full rules emerge.