Changes to employee packages, profit extraction strategies and cashflow management are likely to be on the horizon for many Northamptonshire SMEs following the 2025 Budget.
In part, this is because November’s Budget announcements included continued freezes on income tax and National Insurance thresholds until 2031.
These freezes, combined with future increases to tax on dividends, savings and property income from 2026, are set to result in many business owners, directors and higher-earning employees experiencing gradual tax pressure.
Rises in the National Living Wage and younger workers’ rates will also increase employment costs, which is a significant consideration for many of Northamptonshire’s key sectors, including retail, hospitality, care and manufacturing.
Award-winning accountancy firm Elsby & Co has closely analysed the 152-page Budget to help companies understand what it means for them and the future of their operations.
Senior Client Manager James Fairweather said: “The Autumn Budget has mixed implications for small and medium businesses.
‘While permanent lower business rates for retail, hospitality and leisure sectors and extended relief schemes offer some cost stability, other measures have increased financial pressures.
“The freeze on income tax and National Insurance thresholds until 2030-31, combined with a 2% rise in dividend tax from April 2026, will squeeze margins for owner-managed firms.
“Wage costs will climb with the minimum wage rising to £12.71 in April 2026, and salary-sacrifice pension contributions above £2,000 will be taxed, reducing flexibility for employers.
“Changes to dividend tax may make small business owners revisit their remuneration package strategies, while the reduction to main rate capital allowance will increase tax for older businesses with historic capital balances.
“A lot of small businesses may well also now restrict their recruitment process, especially around young workers as a result of the rise in younger workers’ rates.
“Although initiatives like free apprenticeship training for under25s and expanded British Business Bank funding aim to support growth, SMEs face a challenging environment of higher compliance costs and tighter cash flow which will require careful planning and pricing strategies if they want to stay competitive.”
Property-related measures and business rates support may also create a mixed picture for county firms.
While high-value residential property owners face increased council tax surcharges, the commitment to permanently lower rates for retail, hospitality and leisure premises will be welcome news for many of Northamptonshire’s high streets, independent businesses and visitor-focused venues. However, the funding mechanism – higher rates for large commercial properties such as warehouses – may have implications for Northamptonshire’s logistics and distribution businesses. SMEs operating in, or supplying, these sectors may see cost changes filter through supply chains to them over time.
Other measures announced, such as the gradual reversal of the existing freeze on fuel duty, future mileage-based taxation for electric vehicles, and changes to pension National Insurance treatment, may not impact SMEs immediately but are likely to influence longer-term planning around fleet management, employee benefits and operational costs.
To help its clients quickly get to grips with the complexities of the announcements, Rushden-based Elsby & Co produced a 2025 Budget guide that highlighted its key takeaways, including changes to taxes, savings, taxable benefits and workplace benefits relief.
Managing Director Claire Emery said: “Over the coming weeks we will be helping SMEs across Northamptonshire to understand how the changes announced in the Budget will impact their specific structures, workforces and financial plans.
“We’re working with businesses to help them protect their cash flow and examine their pricing structures to see whether they need to be increased. We’re also helping firms with their plans for 2026 and beyond to ensure they are well positioned for the years ahead.”
The Budget also showed that the Government remains committed to delivering Making Tax Digital for income tax self-assessment, which is part of changes being made to modernise the tax collection system and affects landlords and sole traders.
Making Tax Digital starts in April 2026 for those with a qualifying income of over £50,000. The Government will expand the rollout of the programme to those with incomes over £30,000 in April 2027 and £20,000 in April 2028. However, it will not proceed with Making Tax Digital for Corporation Tax.
Claire added: “We know there are businesses who are daunted by this transformation to the UK’s tax system however, we can help to make the transition smooth and even beneficial for businesses in the long run. Creating real-time digital records for Making Tax Digital can help organisations with their cash flow management and forecasting and aid their business planning.
“With our team’s support, businesses can use the changes they need to make to be compliant with Making Tax Digital to help them modernise and gain better control over their finances.”
Find out more on the Elsby & Co website.
