Autumn Budget 2025: What It Really Means for Your Service-Based Business

Unfortunately, this year’s Autumn Budget didn’t quite deliver the festive cheer we were hoping for.

You’ve worked hard to build your business. You’ve juggled client work, admin, finances, and probably sacrificed more than a few weekends to make it all happen. So when the Chancellor stands up to deliver the Budget, you’re hoping for some recognition of that graft - maybe even a bit of support to help you grow.

Unfortunately, this year’s Autumn Budget didn’t quite deliver the festive cheer we were hoping for.

Rachel Reeves’ second Budget landed with a thud for business owners, bringing increased tax burdens and very little in the way of growth incentives. Let’s cut through the jargon and talk about what actually matters for you as a female micro business owner.

The Reality Check

This Budget won’t make your life easier. Between frozen income tax thresholds, increased dividend tax rates, and the scrapping of homeworking allowances, there’s not much to celebrate. But before you put your business in the bin, let’s break down what’s changing and what you can actually do about it.

What’s Changing (And Why You Should Care)

Income Tax: The Squeeze Continues

Income tax thresholds are frozen until April 2031. Translation? As your income hopefully grows, more of it gets taxed at higher rates. It’s called fiscal drag, and it’s effectively a pay cut in disguise.

From April 2026, dividend tax rates are increasing by 2 percentage points. If you pay yourself through dividends (like many service-based business owners do), you’ll be taking home less. The ordinary rate jumps to 10.75 percent and the upper rate to 35.75 percent.

From April 2027, property and savings income will also face separate, higher tax rates. If you’ve been building a property portfolio alongside your business, or you’ve got decent savings tucked away, this will hit your take-home too.

Goodbye, Homeworking Allowance

From April 2026, the £6 per week homeworking deduction for income tax is being scrapped. If you’ve been claiming this while working from your kitchen table or spare room office, that small bit of relief is disappearing. Employers can still pay it tax-free, but if you’re a sole trader or director, you’ll need to review what you can legitimately claim as business expenses instead.

Pension Contributions: A New Cap

From 2029, salary sacrifice pension contributions will be capped at £2,000 before National Insurance kicks in. If you’re a limited company director optimising your pension contributions to save on tax, this will change your strategy. It’s not immediate, but it’s worth planning for now.

National Living Wage Increases

The National Living Wage is rising to £12.71 for those aged 21 and over - a 4.1 percent increase. If you employ anyone, your wage bill is going up. For micro business owners operating on tight margins, this adds pressure to your bottom line.

The Apprenticeship Opportunity

Here’s a rare bright spot: under-25 apprenticeships are now fully funded. If you’ve been thinking about bringing someone into your business to support your growth, this could be a game-changer. The Government is covering the cost of training, which means you can invest in developing talent without the hefty price tag. For service-based businesses looking to scale without overstretching, this is worth exploring.

What You Can Actually Do About It

Let’s be real: you can’t change government policy. But you can control how you respond.

Get Your Financial House in Order

Now is the time to review your business structure. Are you still operating as a sole trader when a limited company might be more tax-efficient? Or vice versa? Speak to an accountant who understands service-based businesses and can help you navigate these changes.

Plan Ahead for Tax

With dividend tax rates increasing, consider whether you need to adjust how and when you pay yourself. Could you take a higher salary and lower dividends? What impact would that have on your National Insurance contributions and pension? These aren’t simple questions, but they’re worth asking.

Review Your Expenses

With the homeworking allowance disappearing, make sure you’re claiming every legitimate business expense you’re entitled to. Keep detailed records, understand what HMRC allows, and don’t leave money on the table.

Think About Bringing in Support

If you’re stretched thin and considering hiring, explore the fully funded apprenticeship scheme. It’s not just for traditional trades - service-based businesses can benefit too. Whether it’s admin support, social media management, or another area where you need an extra pair of hands, this could help you scale without breaking the bank.

Focus on Growth

Yes, taxes are going up. But the best way to offset that is to grow your revenue. Where can you increase your prices? What services could you add? How can you attract higher-value clients? Growth isn’t just about ambition - it’s about sustainability.

The Bigger Picture

This Budget reflects a government focused on raising revenue, not necessarily on supporting small business growth. That’s frustrating, especially when female-led businesses already face systemic barriers like limited access to funding, networks, and mentorship.

But here’s what they can’t tax: your determination, your expertise, and your ability to adapt. You’ve built something from nothing. You’ve navigated challenges that would have broken others. And you’ll navigate this too.

Moving Forward

The uncertainty of the past few months is over. We now know what we’re dealing with. So take a breath, get your plans in place, and focus on what you can control: delivering exceptional work, building strong client relationships, and running a business that works for you - not just one that survives, but one that thrives.

Because that’s what we do. We adapt. We strategise. We keep moving forward.

And when the next Budget rolls around? We’ll be ready for that too.

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Need support navigating these changes? Join the What She Said Collective - a community of ambitious female micro business owners who are redefining success on their own terms. Together, we’re stronger.

Financial details reviewed by Yvette Fitzhenry, Chartered Accountant and Strategic Advisor @yourbusinessfinancebff