At a glance

• There are long-term cost pressures for SMEs including higher minimum wage, and a cap on NI-free pension salary sacrifice contributions.
• Investment and growth levers exist, but details are thin: EMI, VCT, and listing reliefs are referenced to aid scaling, but no new CGT or major relief updates are confirmed yet.
• Plan for rising costs, reassess exit strategies, and stay alert to changes while acting now rather than waiting for future budgets.

This Budget arrived under unusual circumstances. The Office for Budget Responsibility accidentally released its report two hours early, creating confusion before the Chancellor even stood up. Outside Westminster, around 10,000 farmers were protesting, highlighting deeper economic discontent across multiple sectors.

Against this backdrop, the government leaned heavily on the language of growth, promising support for scale-ups, startups, and innovative businesses entering new markets.

The measures that matter to SMEs

• Investment and growth incentives
  The Chancellor highlighted reforms to Enterprise Management Incentives (EMI) schemes, Venture Capital Trusts (VCTs) and Listing reliefs. The stated aim is to make the UK a fertile environment for investment and scaling. However, details were thin, and much of what was mentioned had already been announced previously.The impact on the VCT market could be significant, allowing more established businesses to access this level of funding. This can make the market more attractive to investors who will be able to diversify in more holdings than they can currently. However, with income tax relief being cut by a third from 30% to 20% this may have an impact on how VCT funds raise capital. I still believe it offers attractive tax reliefs to investors who are looking at an alternative investment solution. Time will tell if this shift provides the growth that the government is leaning heavily on!!
• Frozen tax thresholds
  This headline measure is the one with the biggest impact. The decision to freeze both tax and national insurance thresholds for three more years means more employees will be pushed into paying income tax, and more workers will enter higher tax bands as wages rise. For employers, this increases payroll pressure, reduces net take-home pay for staff, and complicates recruitment and retention.
• Salary sacrifice cap
  Tax breaks on salary sacrifice arrangements will now be capped at £2,000 per year, limiting an option employees and employers have used to manage compensation costs creatively. We know that recruitment and retention are a real issue for small businesses at the moment, and overall packages are a key tool we recommend in efforts to find and keep valuable employees. From 2029 contributions above £2000 per year will incur national insurance contributions costing both staff and companies.As a business owner who is making pension contributions to their own scheme, this cap may not impact you, but please seek advice on your own personal circumstances.The use of salary sacrifice has been a useful tool for many in the NHS and key sector workers. The concern in the long term could be that these workers could just decide to finish work altogether and we could have a loss of skill in critical areas. Time will tell if this has a lasting impact on the workforce.
• Employee ownership trusts (EOTs)
  The big news for owners planning an exit via an EOT is that tax relief will drop from 100% to 50% with immediate effect. 50% relief means an effective capital gains tax (CGT) rate of 12%. While business asset disposal relief may soften the blow, this is still a major shift, and it may diminish the attractiveness of a previously popular exit route. The onus on planning your exit has never been more important.
• National minimum wage
  For employees over 21, the minimum wage will increase from £12.21 to £12.71 per hour from April 2026. This 50p rise will add to wage pressures across retail, hospitality, care, and other labour-intensive sectors.
• IHT
  In the 2024 Budget a limit of £1million was introduced for agricultural property relief and business property relief, causing anger among farmers and businesses.
  However, in the 2025 Budget Reeves confirmed this £1 million relief could now be transferred between spouses and civil partners. This means one half of a couple could now benefit from relief of £2 million. This is a small token for farmers and business owners but still is not the result many were hoping and can still place huge pressure on farms and businesses if the worse was to happen and a shareholder passes away.
• Cash ISAs
  As had been widely expected, Reeves has reduced the amount that can be invested into a cash ISA from £20,000 to £12,000 a year for the under-65s. It will still be possible to invest £20,000 into a stocks and shares ISA or a combination of cash and equities. Announcing the change, the Chancellor said that someone who had invested £1,000 a year into a stocks and shares ISA since they were first launched in 1999 would be some £50,000 better off than someone who had put their savings into cash ISAs. Reeves also pointed to the UK as having one of the lowest retail investment levels in the G7 and the move was aimed at addressing this. She said: “Low investment is the cause of our productivity problem.” I welcome the change to have more onus on long term investment for your savings, and utilising the ISA wrapper has always been a cornerstone of a good financial plan. But to move the needle to encourage savers away from cash holdings to stocks and shares, there needs to be more work on the educational side of investing. This should start in the schools and colleges and maybe this will move us from the lowest investment levels in the G7.
• Income tax
  In another move set to hit those who save more, from April 2027 savings income tax will rise by two percentage points for each band of taxpayers. This will see the rate rise to 22% for basic rate taxpayers, 42% for higher rate taxpayers and 47% for additional rate taxpayers. The number of people who save enough to pay income tax on their returns is believed to be relatively small. However, the move will add a layer of complexity to savings and could be seen as a deterrent to saving more. We also have seen that all property income will fall in line with the Savings Income thresholds, 22%, 42% and 47% for basic, higher and additional rate taxpayers from 6 April 2027. For individuals who take income through dividends or have investments with dividend returns, have also seen their Dividend tax increase. For basic rate payers it will now be 10.75% up from 8.75% and higher rates at 35.75% up from 33.75%, there is no change to additional rate.When you strip away the rhetoric, this Budget contains significant, long-term tax increases delivered subtly through frozen thresholds, increased wage requirements, and reduced reliefs. For many SMEs, this will feel like higher costs with little new support.

While the Budget might not bring immediate relief, it does offer one thing: certainty. Tax thresholds, relief structures, and wage forecasts are now clearer for the next few years.

So here are my key recommendations:

• If you’re considering growth, plan ahead for rising labour and tax costs.
• If you’re planning to sell, review your exit strategy, especially if an EOT was on your radar.
• If you need to raise investment, stay alert: EMI, VCT, and listing relief changes could become meaningful once further detail emerges.
• Most importantly, now is not the time to pause. Business owners and senior leaders cannot and should not wait for more generous spring statements or future budgets.
• This Budget was not designed with SMEs front and centre. But the environment it creates, predictable, yet challenging, means business owners can refocus on what they can control.
• Growth is still possible. Exits are still achievable. But it’s up to the SME community to control the controllables, take action and move forward decisively.

The value of an investment with Brooks Financial Planning will be directly linked to the performance of the funds selected and may fall as well as rise. You may get back less than the amount invested.
The levels and bases of taxation and reliefs from taxation can change at any time. Tax relief is dependent on individual circumstances.