Introduction
For limited companies, Budget 2025 is less about big changes to the headline corporation tax rate and more about the details that affect planning:
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Investment in equipment and assets
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How directors pay themselves
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How owners sell or pass on their companies
For full official details, please see the Budget 2025 information on GOV.UK:
https://www.gov.uk/government/collections/budget-2025
1. At a Glance – Headlines for Companies
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The 25% main corporation tax rate stays in place and is expected to be capped for the life of this Parliament.
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New capital allowance rules will change how quickly tax relief is given on equipment and machinery from 2026.
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Dividend tax for shareholders rises from April 2026.
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Employee Ownership Trust (EOT) relief and Business Asset Disposal Relief (BADR) become less generous over time.
2. Corporation Tax – What Stays the Same
Corporation tax remains on a tiered system:
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19% small profits rate on profits up to a lower threshold
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25% main rate on higher profits, with a tapered effective rate in between
The government has signalled that the 25% main rate will be capped for this Parliament, giving some certainty for planning.
For many small and medium-sized companies, the key questions stay the same:
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How many associated companies do you have?
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Where do your profits sit within the bands?
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Is your group structure set up sensibly?
3. Capital Allowances – Investing in Your Business
From around the start of 2026, the capital allowances framework shifts:
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A new first-year allowance gives larger relief up front for qualifying plant and machinery.
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The standard writing-down allowance for the remaining balance is expected to fall from the current level to a lower percentage, meaning slower relief thereafter.
In practice:
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Timing is more important – when you buy assets can affect the cash tax you pay.
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Bigger investments (e.g. vans, machinery, IT kit, fit-out) should be looked at alongside your expected profits for the year.
4. Directors and Shareholders – Dividend Tax from April 2026
From 6 April 2026, the tax rates on dividends increase:
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Basic-rate band dividends: 10.75%
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Higher-rate band dividends: 35.75%
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Additional-rate band dividends: 39.35%
At the same time, the income tax thresholds that decide which band you fall into are frozen, so more directors are likely to become higher-rate taxpayers over time.
Impact on the classic “small salary, large dividend” approach:
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The strategy is still valid, but:
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The tax advantage of dividends is smaller than it used to be
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There is more value in planning the mix of salary, dividends and pension contributions
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The timing of major dividend payments (before or after April 2026) could make a difference
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5. Selling or Passing On the Company
Budget 2025 makes some key changes to business exit taxes.
5.1 Employee Ownership Trust (EOT)
Previously, qualifying disposals to an Employee Ownership Trust could benefit from full capital gains tax relief.
Going forward:
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Only part of the gain will qualify for that relief
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The rest will be subject to capital gains tax at the relevant rates
This doesn’t remove EOTs as an option, but it does mean:
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Business owners will no longer enjoy a completely tax-free gain
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EOTs must be compared more carefully with other exit routes (trade sale, management buy-out, share buy-back, etc.)
5.2 Business Asset Disposal Relief (BADR)
Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) is also becoming less generous over time, with higher tax rates on qualifying gains than in previous years.
For owners planning to sell in the next few years, it will be important to:
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Understand which disposals qualify
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Model the capital gains tax bill under the new rates
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Consider the timing of any sale or share reorganisation
6. Planning Points for Owner-Managed Companies
Some practical questions to consider:
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Are you paying yourself in the most tax-efficient way under the new dividend tax rates?
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Should you adjust the balance between salary, dividends and pension contributions?
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Are you timing large capital investments in a way that makes the most of the new allowances?
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If you are thinking about selling or passing on the business, have you reviewed your options in light of the changes to EOTs and BADR?
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Is your group structure still appropriate, especially if you have multiple companies or plan to grow?
7. How BB Accounting Solutions Can Help
We can support company owners and directors with:
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Director remuneration reviews – modelling salary vs dividend vs pension to maximise your net income
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Capital expenditure planning – reviewing when to buy major assets and how to finance them
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Group and company structure reviews – checking your structure is efficient for current corporation tax rules and future plans
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Exit and succession planning – working with your legal advisers to structure EOTs, trade sales or management buy-outs in a tax-efficient way
Next step:
If you own a limited company and want to make sure you’re still paying yourself and investing in the most tax-efficient way after Budget 2025, get in touch and we’ll review your position.