Jerroms Responds to Autumn Budget: What It Means for Midlands SMEs

Drawing on their deep local knowledge and national perspective, they highlight the practical implications of the Budget for SMEs, offering insights into how these changes could affect day today operations, growth opportunities, and long-term resilience.

• Increase in Dividend Tax Rates

• Tax Gap and Administration

• Employee Ownership Trusts Tax Relief Cut

• Freeze on Income Tax and National Insurance thresholds

• Tax increase on Savings, Dividend and Property Income

• Salary Sacrifice

• ISA System Shifts

• Property Income Tax

Expert Commentary

Nick Wright, Head of Tax at Jerroms Miller Specialist Tax:

Increase in Dividend Tax Rates

“For many small company directors, dividends are a core part of take-home pay, so the April 2026 dividend tax increase will be felt directly. The basic rate rising to 10.75% means higher annual tax bills for hundreds of thousands of directors. The OBR highlights that the measure is expected to raise £1.2bn per year, even after allowing for some directors accelerating dividends before the change. My advice to business owners is to use the period before April 2026 to assess whether bringing forward dividend distributions or adjusting salary/dividend mix is appropriate, this change has substantially reduced the tax benefit of taking remuneration as dividends.”

Tax Gap and Administration

“The Government’s new package of tax administration, compliance and debt-collection measures is a welcome step toward closing the UK’s tax gap. The OBR notes that these measures are expected to raise £2.3 billion a year by 2029–30, and HMRC’s analysis shows a particular focus on tackling non-compliance among small businesses, which now accounts for around 60% of the overall tax gap. For honest taxpayers who play by the rules, reducing the tax gap is unquestionably positive. It means a fairer system where compliant businesses are not undercut by those who don’t meet their obligations.”

Employee Ownership Trusts Tax Relief Cut

“Capital Gains Tax relief cut from 100% to 50% for sales to employee ownership trusts (EOTs) is a huge blow for the employee ownership sector and, frankly, will raise very little in terms of tax revenues.

Sales into EOTs will clearly decline now and given last year's announcements restricting the ability to use EOTs for avoidance purposes, I'm surprised this further restriction has been announced.

From here on, I expect we will only see sales into EOTs where the retiring shareholders genuinely believe in employee ownership as a business model.”

Kate Moon, Tax Director, Jerroms:

Freeze on Income Tax and National Insurance thresholds

“Not surprising, but disappointing nonetheless to see a further freeze on Income Tax and National Insurance thresholds until 2031. Increased costs of living result in higher earnings and not increasing these thresholds year on year increases the overall tax exposure to most UK households – with an estimated 1 million more taxpayers falling into the higher rate tax bracket. The national insurance threshold freeze is not good news for small businesses when combined with the national minimum wage increase planned for April 2026.”

Tax increase on Savings, Dividend and Property Income

“An additional 2% tax increase on savings, dividend and property income is more bad news for investors and landlords, who have already seen tax free allowances and reliefs reduced drastically over the last few years.”

Restrictions to Tax Relief for Employee Ownership Trusts

“A welcome relief to see no changes to the Inheritance Tax regime, which was plundered in October 2024s budget, leaving many businesses and farmers with an unexpected inheritance tax exposure for deaths post April 2026. However, restrictions announced today to tax relief for Employee Ownership Trusts will be a further blow for any of the business owners who had decided to sell their business as a result of the restrictions to business relief announced in last October’s budget.”

Jamie Ellis, Independent Financial Adviser, Jerroms Financial Planning: 

Salary Sacrifice

“From April 2029, salary sacrifice above £2,000 will be treated like any other employee pension contribution, triggering both employer and employee NICs. The policy preserves relief for employer contributions but chips away at one of the most effective planning tools for individuals looking to boost long-term savings. It’s a clear revenue-raising measure rather than a simplification.”

ISA System Shifts

“From April 2027, the ISA system shifts noticeably. The total £20,000 allowance remains, but only £12,000 can go into a cash ISA, with the remaining £8,000 channelled into a Stocks & Shares ISA. It raises practical questions about how this will be monitored, given that cash and money-market funds can already sit inside a Stocks & Shares ISA.

That said, the direction of travel is obvious. Holding too much cash for too long leaves savers exposed to inflation, and over recent years we’ve seen how quickly the real value of cash can erode. This reform effectively nudges working-age savers towards having a portion of their ISA in assets that have a better chance of keeping pace with rising prices.

Over-65s will still have access to the full £20,000 cash allowance, which recognises that later-life savers often prioritise stability and shorter-term needs. But for everyone else, it reinforces the long-standing message: excessive cash can feel safe, but inflation quietly diminishes its spending power over time.”

Property Income Tax

From April 2027, property income tax rates jump by two percentage points to 22%, 42% and 47%. It’s yet another squeeze on landlords at a time when the sector is already weighed down by more legislation, more bureaucracy and stronger renters’ rights. Direct property has always been illiquid, and these extra tax pressures simply reduce the net return further, especially with higher running costs and tighter rules. Yes, some of this may feed through into higher rents, but that’s expected to be offset by downward pressure on house prices.

This is exactly why we’ve always favoured a globally diversified, multi-asset approach, not putting all your eggs in one basket. It spreads risk sensibly, stays liquid, and aims for inflation-beating returns without relying on any single asset or illiquid investment. Given the shifting landscape for landlords, the argument for broad, diversified portfolios is stronger than ever.”