If you have employees, increases to both the national minimum wage and national living wage will have a cost impact. Both employer and employee NIC will be payable on salary sacrifice pension contributions above £2,000 per year from April 2029.

Both measures could have further implications on staffing and recruitment decisions for your business. From January 2026, investing in equipment will benefit from an increase in first year capital allowances for most main rate assets, where
other allowances are not available. This is offset to some extent by a reduction in the main writing down allowance rate from 18% to 14%.

For companies, corporation tax rates and thresholds remain unchanged. If you are a company shareholder, from April 2026 dividends drawn from the company will be subject to higher rates of tax. The basic and higher rates of dividend tax will rise by 2% to 10.75% and 35.75% respectively.

Following these changes, ensuring you are still on the most tax-efficient route to extract profit from the company will be important.

The minimum hourly rates that employers must pay their employees go up from 1 April 2026. Employers must pay their employees at least these minimum rates to avoid penalties, back payments and other regulatory action.

If you have employees paid at or just above these levels, you need to ensure that birthdays, full working hours and deductions are properly captured and dealt with. Please contact us for any support with business payrolls, including the operation of minimum
wage levels.

	1 April 2026 – 31 March 2027	1 April 2025 – 31 March 2026
National Living Wage (for employees aged 21 and over)	£12.71	£12.21
National Minimum Wage (for employees aged 18-20)	£10.85	£10.00
National Minimum Wage (for employees aged 16-17 and apprentices)	£8.00	£7.55

National Insurance Contributions (NICs)

NICs deducted from employee wages remain at the same levels as we head into 2026/27. This means that, for employees, no NICs are deducted on the first £12,570 of pay, then a rate of 8% applies on earnings up to £50,270, with a rate of 2% applied thereafter.

For employers, the rate of NICs will remain at 15% after the first £5,000* paid to each employee. The available employment allowance to offset this cost remains at £10,500 for eligible claimants.
*A higher threshold of £50,270 applies for employees who are under 21 and apprentices under 25. Other variations can also apply.

Salary sacrifice for pension contributions

From 6 April 2029, the amount that is exempt from NICs will be capped at £2,000 a year for employee contributions made via salary sacrifice. Any employee contributions above this amount made under salary sacrifice will be subject to employer and employee NICs.

Employees can still contribute as much as they want to their pensions, including via salary sacrifice, and these contributions will still be exempt from income tax (subject to the usual limits).

Removal of tax relief on non-reimbursed homeworking expenses

From 6 April 2026, employees will no longer be able to claim tax relief on additional household expenses incurred in employment duties that are not reimbursed by the employer. To date, a claim at the rate of £6 per week has been allowed. Employers can
still reimburse employees for these costs where eligible without deducting income tax and NICs.

For 2026/27, the annual investment allowance (AIA) will remain at £1 million and the full expensing regime will be available to companies.

The rate of writing down allowance (WDA) applicable to qualifying capital expenditure in the main rate pool will drop from 18% to 14% on 1 April 2026 for companies and 6 April 2026 for unincorporated businesses. Businesses with an accounting period that spans the date of change must use a hybrid rate. There are no plans to alter the 6% rate of WDA for qualifying expenditure in the special rate pool.

For qualifying expenditure incurred on or after 1 January 2026, a new 40% first year allowance (FYA) will be available to companies and unincorporated businesses. The new FYA can be used against assets used for leasing (overseas leasing is excluded) but not for cars or second hand assets. It will mainly be of benefit where the AIA or other FYAs are unavailable.

FYAs giving 100% relief for qualifying expenditure on electric vehicles and charging points were due to end in April 2026 but are now extended to April 2027.

As announced in the 2024 Budget, two new lower multipliers for eligible retail, hospitality and leisure (RHL) properties with rateable values (RV) below £500,000 will be introduced from 1 April 2026. Each of the new multipliers is 5p lower than the standard multiplier for a business property of equivalent rateable value.

The new multipliers will replace the 40% relief given to RHL businesses in 2025/26 and will be funded by a high-value multiplier on properties that have a rateable value above £500,000. Legislation and local authority guidance has already been published confirming the eligibility criteria for RHL properties.

Transitional reliefs may be available for eligible properties that cap bill increases due to increasing rateable values at the 2026 business rates revaluation or where the increase is due to a loss of Small Business Rates Relief, Rural Rates Relief, or RHL relief. In addition, if your business is currently receiving the 2023 Supporting Small Business Relief Scheme you will be eligible for the 2026 Supporting Small Business Relief Scheme until 31 March 2027.

The government plans to make electronic invoicing mandatory for all VAT invoices starting in 2029. A detailed implementation roadmap is expected to be published next year at Budget 2026.
The possibility of introducing real time reporting (RTR) is also being considered. This is where invoice information is automatically shared with HMRC, perhaps as soon as it is sent to a customer. However, the government has confirmed that this will not start in 2029. RTR would only be introduced once electronic invoicing is widely in use and well established.

From 1 April 2026, the VAT registration and deregistration thresholds will remain at £90,000 and £88,000 respectively. There have been no changes to the rates of VAT and the standard rate continues to be set at 20%.

Please get in touch with the Coopers&Co team if you have any queries about the impact of the Budget 2025 on your business.