Autumn Budget 2025

1. Accelerate dividend payments

Given speculation around changes to dividend taxation, including the possible removal of the dividend allowance, directors may wish to bring forward dividend payments to benefit from current rates and allowances. For family businesses, the income can be spread among family members if they are shareholders. The £500 dividend allowance represents a small tax-free band that should be used.

2. Review capital gains strategy

The Business Asset Disposal Relief (BADR) rate on a lifetime gains limit of £1 million is scheduled to increase from 14% to 18% in April 2026. Small business owners contemplating a sale, liquidation or capital restructuring should assess whether an earlier disposal could secure a lower effective tax rate, subject to anti-avoidance provisions.

3. Review Inheritance Tax (IHT) strategies and reassess the impact of upcoming Business Property Relief (BPR) changes

The proposed £1 million cap on 100% BPR from April 2026 may significantly impact succession planning. More business owners are actively considering whether lifetime transfers of qualifying assets to individuals or trusts, potentially 100% exempt from the donor’ s inheritance tax if the donor survives seven years, are appropriate in their circumstances. Those in the process of making transfers of assets to the next generation might be advised to do so in advance of the budget, given the potential for further changes in this area.

4. Pension savings strategy

Pension IHT reliefs are due to be withdrawn from April 2027.  There are rumours that marginal-rate relief for personal pension contributions might be curtailed and replaced with a less favourable flat-rate (e.g. 30%) regime.  However, the basic UK pension-savings regime of tax-deductible contributions, tax-free growth and mostly taxable pension is very likely to survive in some form. Many business owners who are future pensioners are underprovided for a dignified retirement. If contributions remain a good idea, then this is very likely to remain true after the budget, especially if there is personal income otherwise chargeable at 60%.

5. Pension withdrawals

There is speculation that exit lump sums (the smaller of 25% of the fund or £268,275) may be restricted as part of a political wish to visit any increased pension income tax liabilities away from ‘working people’ and onto those with the ‘broadest shoulders’. Any proposals in this area are likely to impact only those with the most significant pension savings. Many have withdrawn their lump sums, fearing the worst, and for some that will be sub-optimal as their savings income will have exited the tax-free pension environment and will now be largely taxed, reducing disposable income. We suggest that pension saving is an area for medium/long-term thinking when in possession of facts, rather than engaging in panicky attempts to second-guess what the Chancellor might do. There remains a good chance that the Chancellor will do nothing sudden in this area.

Next steps

We recommend engaging with your Crowe tax adviser to assess how these opportunities align with your business’s structure and long-term objectives. Early action may help mitigate the impact of forthcoming changes and preserve value.