After an unprecedented Autumn Budget 2025, including an erroneous early release from the Office for Budget Responsibility (OBR), Rachel Reeves delivered her long-awaited Budget for 2025–26.

With economic forecasts shifting, operational costs rising and new tax measures on the horizon, many business owners will now be asking: “What does this mean for my business?”

Below, we break down the key announcements and explore what they mean for UK SMEs.

Corporation Tax: Allowance & Relief Reductions

One of the most immediate areas of change for SMEs is corporation tax. Several reforms were confirmed, resulting in reduced tax relief and higher tax exposure for many businesses.

Reduction in the Writing Down Allowance

This change is expected to raise £1.5bn, meaning businesses will receive less tax relief when deducting depreciation on qualifying plant and machinery.

Implications for SMEs

• Higher tax bills for businesses with significant capital expenditure

• Increased pressure on purchasing or upgrading vehicles, machinery and equipment

• Potential need to explore asset finance or refinancing to preserve cashflow

Business Rates Reform: “Permanently Lower Tax Rates” for Retail, Hospitality & Leisure

A major announcement for high street businesses came as Rachel Reeves confirmed “permanently lower tax rates” for more than 750,000 retail, hospitality and leisure properties.

These sectors have faced sustained pressure from rising costs, reduced consumer spending and the ongoing shift to online retail. The Government states that this reform is designed to provide long-term stability and support bricks-and-mortar businesses.

How this reform is funded

The reduction in business rates for customer-facing businesses will be funded by increasing rates on higher-value commercial properties, particularly:

• Properties valued over £500,000

• Large industrial units and warehouses

• Premises used by online retail giants and large distribution centres

This effectively shifts part of the business rates burden away from high street SMEs and toward large-scale logistics and e-commerce operators.

Implications for SMEs

For retail, hospitality and leisure businesses:

• Long-term certainty over lower business rates

• Reduced fixed costs and improved ability to plan ahead

• Potential breathing room for investment in staffing, refurbishment, or expansion

• Increased competitiveness against large online retailers

For businesses operating large warehouses or high-value commercial premises:

• Higher business rates liabilities expected from 2026

• Potential need to revisit occupancy costs and warehouse strategy

• Greater relevance of leasing vs buying decisions and commercial mortgage planning

Broader impact on SMEs

This reform aims to:

• Support local high streets and independent businesses

• Stimulate footfall-driven sectors

• Rebalance costs between traditional and online retail models

Businesses in affected sectors should consider how this long-term reduction in rates can support cashflow, investment planning and future growth initiatives.

Inflation Forecast Raised: Higher Costs for Longer

The OBR confirmed that inflation will remain higher than previously expected:

• 2025 inflation now forecast at 3.5% (up from 3.2%)

• 2026 inflation revised to 2.5% (up from 2.1%)

• Inflation expected to stabilise at 2% from 2027 onwards

Implications for SMEs

Higher inflation means:

• Rising supplier, energy and material costs

• Wage pressure as employees respond to living costs

• Higher financing costs and tighter cashflow

• Reduced consumer spending affecting retail, hospitality and B2C sectors

SMEs should reassess cashflow plans, pricing models, and working capital reserves to navigate prolonged cost pressures.

EV mileage-based tax from April 2028

Electric and plug-in hybrid vehicles will be taxed on a mileage basis from April 2028, at around half the rate of petrol fuel duty.

The measure is expected to raise £1.4bn per year by 2029–30.

Implications for SMEs

• Higher long-term costs for EV and hybrid fleets

• Narrowing cost advantages between EVs and petrol/diesel vehicles

• Fleet leasing and asset finance strategies may need adjusting

• High-mileage industries (transport and logistics, trades, delivery services) will feel the impact most

This represents a structural shift as Government begins replacing lost fuel duty revenue from the rise in EV adoption.

Fuel Duty: Freeze Now, Staged Increases from 2026

Rachel Reeves confirmed that:

• Fuel duty remains frozen until September 2026

• Staged increases will begin from 2026, costing £2.4bn next year

• Annual increased revenue of £0.9bn expected thereafter

Implications for SMEs

Businesses should prepare for:

• Higher fuel and transport costs from late 2026

• Reduced margins for delivery, logistics, construction and field service businesses

• A need to revisit fleet financing and efficiency planning

• Potential volatility in running costs over the medium term

Growth Mission Fund & AI Growth Zones

The Budget reaffirmed commitments to local and national growth initiatives, including:

Growth Mission Fund - Designed to drive skills, investment and regional economic development, including £240 million of capital from 2026/27.

AI Growth Zones - Targeted at building technology clusters, driving innovation and creating new jobs.

Potential Impacts for SMEs

• Access to grants, regional investment and innovation funding

• Greater opportunities for high-growth sectors, particularly tech and manufacturing

• Increased local employment opportunities

• Rising demand for equipment and technology finance

More detail is expected in 2026, but SMEs should monitor opportunities emerging from these growth missions.

Salary Sacrifice Pension Contributions to Be Taxed Above £2,000

From April 2029, National Insurance will be charged on salary-sacrificed pension contributions over £2,000 per year. This reform is expected to raise £4.7bn.

What is Salary Sacrifice?

Salary sacrifice allows employees to exchange part of their pre-tax salary for benefits such as:

• Pension contributions

• Company cars

• Cycle-to-work schemes

• Childcare vouchers

• Healthcare benefits

Because the salary is reduced before tax, both the employer and employee pay less National Insurance.

Implications for SMEs

• Increased employer NI costs for generous pension schemes

• Reduced attractiveness of salary sacrifice as a recruitment tool

• Higher payroll costs for some businesses

• Potential need to review and adjust benefits packages

SMEs should begin modelling the cost impact for 2029 and beyond.

What This Budget Means for SMEs Overall

Taken together, the Autumn Budget 2025 signals a challenging but navigable landscape for SMEs:

Rising cost pressures

From inflation, tax changes and reduced reliefs.

A short-term reprieve on fuel

But higher transport costs from 2026 onwards.

Greater tax exposure across assets, payroll and ownership

Reducing long-standing tax efficiencies previously used by SMEs.

Long-term shifts in fleet economics

EV operating costs will rise through new taxation.

A growing need for flexible, predictable finance

To manage cashflow, investment and tax obligations effectively.

How Millbrook Business Finance Can Support You Through These Changes

With operating costs rising and tax reliefs tightening, many SMEs will benefit from reviewing their funding options now rather than later.

Millbrook can help with:

• Working capital & business loans

• VAT, Self-Assessment and Corporation Tax funding

• Asset finance for machinery and equipment

• Refinancing to reduce monthly costs

• Flexible commercial vehicle finance solutions

Our specialists work with businesses across all sectors to provide quick, competitive and tailored funding solutions.

Speak to a Business Finance Specialist Today

If you're unsure how these Budget changes could affect your business - or if you need support with cashflow or investment planning - we’re here to help.

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