27/11/2025
Key Budget Changes for Ltd Directors & Sole Traders — Here’s What You Need to Know
Evening all,
Following yesterday’s Budget announcement (deep joy), we want to share the key points that could impact you as a sole trader, director or limited company owner -
• Freeze on income tax & NIC thresholds extended until 2031
The thresholds at which people start paying income tax (and higher-rate tax) and National Insurance contributions will remain frozen.
→ Meaning: as profits/salaries rise (due to business growth or inflation), you may be dragged into higher tax bands — even if tax rates don’t change.
• Tax on dividends, savings, property (and investment) income increased
Dividend income tax rates will go up by 2 percentage points from April 2026.
Similarly, from April 2027 savings interest and property/rental income will also face higher tax rates.
→ If you draw profits from your company via dividends or have rental or investment income alongside business income — your effective tax bill on that extra income will increase.
• Pension salary-sacrifice schemes will be restricted (from April 2029)
The tax-efficient route of salary-sacrifice pension contributions will be limited — income above £2,000 per year will become subject to National Insurance.
→ For directors or contractors using salary-sacrifice via their company to boost pension savings with lower NICs — this reduces some of the benefit of that strategy.
• Other tax/levy changes affecting assets & wealth (relevant for business owners with property/assets)
A “mansion tax” (a surcharge on high-value properties over £2 million) is being introduced from April 2028.
Also, tax on passive income (not just business profits) is rising — meaning overall wealth-holding and investment returns may be less tax-efficient.
As always, we’re here to help. If you have any questions just reach out.
