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The 2025 Budget brought major shifts for SMEs and business owners. Tax thresholds are frozen until 2030–31, meaning more people will drift into higher tax bands as wages rise. Dividend, savings and rental income tax rates are set to increase, reducing the benefits of the classic “low salary + dividends” strategy used by many directors and contractors. Overall, SMEs face higher tax burdens, increased payroll costs, and reduced incentives for traditional profit-extraction methods. Now is the time for business owners and contractors to reassess remuneration, pension planning and business structure.
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The routine services you would expect us to provide are listed below but it’s the important ongoing professional advice that really helps our clients.
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HMRC has increased its efforts against cryptocurrency investors as the crypto market has seen a huge surge in prices over the last year. Bitcoin has gone up by more than 150% in the past year. Crypto investors might get a letter from HMRC requesting them to submit documents that show their crypto transactions and earnings from their crypto assets.
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The government announced that two existing R&D schemes will be combined, with the purpose of simplifying the incentive and preventing it from abuse. The new merged scheme will cover both, - the existing incentive for small and medium-sized enterprises (SMEs) and the research and development expenditure credit (RDEC) for larger businesses. Accountants will keep playing a crucial role in making sure their clients are informed of the changes and helping them to prepare.
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HMRC is focusing on undeclared dividends via reaching out to company owners, asking to declare dividend income. Company owners now have to either disclose any previously undeclared dividends or inform HMRC if nothing to be declared.
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The revamp of R&D relief will commence from April 2024, combining the two systems and lowering the intensity threshold from 40% to 30% for SMEs with a soft landing. The Chancellor has decided to eliminate Class 2 National Insurance contributions for self-employed individuals and reduce the rate of Class 4 NICs. The Chancellor has announced that full expensing, a tax break for investments in IT equipment, plant, and machinery, will now be a permanent fixture, eliminating the previous uncertainty caused by its three-year limit. Another announcement was in relation to a 2% reduction in the employee National Insurance rate, bringing it down to 10% starting in January. This change will decrease the total tax for basic rate taxpayers to 30%. In addition a £4.3bn support package for small businesses over the next five years has been announced. This includes freezing the small business multiplier at 49.9p for the fourth consecutive year, while the standard multiplier will be increased to 54.6p by September. The small rate multiplier will also be adjusted to match the Consumer Price Index (CPI) inflation.
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