Every government budget has its impact on small businesses, and this was no exception. All eyes were on tax rises, having been on the horizon for some time.
While Chancellor Rachel Reeves stuck to Labour’s promise not to raise income tax, the continued freeze on thresholds means more people will start paying it for the first time, and many will move into higher tax brackets.
Here are some of the key changes for small businesses in Peterborough and beyond.
Increase to Minimum Wage
Rachel Reeves had already revealed that the National Minimum Wage will rise in April 2026. The rise is significant for employees on lower pay – but could cause concern for employers already facing rising costs.
From April 2026, the new minimum wage rates will be:
- Over 21s: £12.71 per hour (up from £12.21)
- 18–20-year-olds: £10.85 per hour (up from £10.00)
- 16–17-year-olds and apprentices: £8.00 per hour (up from £7.55)
Ahead of the Autumn Budget, small business owners had already shared their worries about meeting increased wage costs in an economy that’s already under pressure.
For businesses still managing the cost-of-living crisis and sluggish economic growth, it’s another financial strain.
Could the increase mean reduced recruitment, or even job losses for companies struggling to balance rising overheads?
Income Tax & National Insurance
Rumours of an Income Tax rise were disproved, although the Chancellor confirmed a freeze on Income Tax and National Insurance thresholds until 2030–31. This is an extension to the previous deadline of 2028–29.
The thresholds remain the same:
| Band | Taxable Income | Rate |
| Personal Allowance | Up to £12,570 | 0% |
| Basic Rate | £12,571–£50,270 | 20% |
| Higher Rate | £50,271–£125,140 | 40% |
| Additional Rate | Over £125,140 | 45% |
While this doesn’t directly increase business tax bills, it will affect the workforce. With wages rising and thresholds staying still, more employees will be pushed into basic, higher or additional tax bands.
According to the OBR, the extended freeze could generate around £8 billion by pushing workers into paying more tax.
If you’re an employer, consider how to educate your people about this. Staff may be confused or concerned about changes to their take-home pay. Inviting open conversations and offering guidance will help them feel supported.
Limits on Salary Sacrifice
Another key announcement was the introduction of salary sacrifice limits for pension contributions. Currently, employees can sacrifice as much of their salary as they like, to grow their pension and reduce their tax and NI liability.
Under the new rules, any salary sacrifice above £2,000 per tax year will be open to National Insurance charges. This closes a loophole that previously allowed large savings to NI.
You may have team members close to retirement who are paying large amounts into their pensions each month. These changes will have an impact to them. From 2029, not all their sacrificed salary will reach their pension intact, with some now be deducted as NI.
Communicating this to your staff will help them plan their retirement contributions effectively.
Youth Employment Guarantee
The Chancellor also launched the Youth Employment Guarantee, focused on young people who’ve been out of work for 18 months or more. They’ll be offered paid placements to help them back into employment.
A positive change for SMEs is that apprenticeships for under 25s will become completely free for smaller businesses. This removes a major cost barrier and opens up opportunities for SMEs to invest in the next generation of talent.
Personal impacts
This Budget touched every corner of the economy – from business operations to household finances.
Many changes will affect you and your employees personally, including future per-mile taxes on electric vehicles, new charges for properties worth over £2m and the removal of the two-child benefit cap.
The cash amount under 65s can pay into an ISA has also been reduced to £12,000 a year.
Economy forecasts
An increase to UK GDP has been forecast for this year by the OBR. GDP will grow by 1.5% in 2025, above 1% expected.
But from then on, the outlook is downgraded. There are still predictions for growth, but at a slower rate than previously believed.
Summing up
Overall, the Budget is being described is less severe than expected, but still it will have implications for both businesses and individuals.
If you would like to explore how best to manage the changes your business is facing, just get in touch and we’d be glad to help.