The UK Budget announced on November 26, 2025, introduces several important tax and policy changes that will directly affect small businesses, company directors, and e-commerce entrepreneurs. While corporation tax remains unchanged, a number of adjustments to personal taxation, business reliefs, employee benefits, and wage legislation mean business owners will need to reassess their financial planning.

This article breaks down the key changes and what they mean for your business in practical terms.

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1. Dividend Tax Rates Are Rising

From April 2026, dividend tax rates will increase:

• Basic rate: 8.75% → 10.75%
• Higher rate: 33.75% → 35.75%

For company directors who extract profits through dividends, this means a higher personal tax burden. Profit extraction strategies that worked well previously may no longer be optimal under the new rates.

What this means for you:
Review your mix of salary vs dividends, and consider whether retaining profits or investing back into the business may be more tax-efficient.

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2. Corporation Tax Remains the Same

Corporation tax rates stay unchanged, providing some stability for businesses.
However, because dividend tax is increasing, the overall cost of taking profits personally rises, even though the company tax rate does not.

What this means for you:
Stable corporation tax is positive, but you may need to rethink how much profit you distribute vs reinvest.

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3. Reduced Tax Relief for Employee Ownership Trusts (EOTs)

One of the biggest structural changes in the budget is the reduction of tax relief for sales to Employee Ownership Trusts (EOTs).

EOTs previously provided a highly tax-efficient way to sell or transfer a business. With relief now reduced, the incentive to use this route is significantly lower.

What this means for you:
If you were considering succession or exit planning through an EOT, you may now need to explore alternative strategies.

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4. Changes to Salary-Sacrifice and Pension-Based Remuneration

The budget includes restrictions on certain salary-sacrifice and pension-related benefits, reducing some of their previous tax advantages.

Employers who use these schemes to optimise tax for themselves or staff may need to review the structure.

What this means for you:
Check whether your benefit schemes or pension-based pay arrangements are still tax-efficient and compliant.

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5. Frozen Tax Thresholds Lead to Fiscal Drag

Instead of raising income tax rates, the government has chosen to freeze tax thresholds. Over time, as wages naturally rise, more individuals will drift into higher tax brackets.

This increases personal tax without official rate rises — often referred to as fiscal drag.

What this means for you:
Directors and employees may face higher personal tax bills even if their income hasn’t changed significantly. This may also affect take-home pay, planning, and household spending.

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6. National Living Wage and Minimum Wage Are Increasing

The budget confirms increases to the national living wage and minimum wage levels.

This is a positive step for workers but brings higher payroll costs for employers — especially those in hospitality, retail, health and social care, and other labour-intensive sectors.

What this means for you:
Update payroll budgets, cash flow projections, and staffing models to reflect higher wage obligations.

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How Businesses Should Respond Now

Here is a practical action plan for small businesses and company directors:

✔ Re-evaluate how you pay yourself

Rising dividend tax may mean shifting your salary/dividend balance or considering alternative extraction routes.

✔ Review exit and succession plans

If you had been planning to use an EOT, reassess the tax implications and compare other exit models.

✔ Update payroll forecasting

Factor in increases to the National Living Wage and minimum wage to manage cash flow effectively.

✔ Reassess employee benefits

Check whether existing salary-sacrifice or pension schemes remain worth keeping.

✔ Refresh your tax planning for 2025/26

Fiscal drag means higher personal tax for many people — advance planning can help reduce the impact.

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Conclusion

Although the 2025 UK Budget did not introduce large changes to corporation tax, it contains several smaller adjustments that collectively have a significant impact on business owners. Rising dividend taxes, reduced reliefs, frozen thresholds and higher wage costs mean profit extraction, remuneration structures and long-term planning all require a fresh look.

At Books 2 Balance, we believe in proactive planning. This budget underscores why it’s no longer enough to just “keep the ”books”—smart accounting and tax-aware planning must be integral to business strategy.