Budget 2025: How the changes will affect you and your business

What's Changing for Limited Companies

Dividend tax is going up

This is the big one. From April 2026, dividend tax rates rise across the board:

• Basic rate: 8.75% → 10.75%
• Higher rate: 33.75% → 35.75%

If you pay yourself through dividends (and most limited company owners do), your tax bill is going up.

What we're doing: We're updating our Tax Calculator (the tool that helps company directors find the optimal split between salary, dividends and other income) so your recommendations stay tax-efficient under the new rates.

Capital allowances: more relief upfront

From April 2026, a new 40% first-year allowance will let businesses deduct 40% of the cost of qualifying plant and machinery – such as tools, computers, or vans – from their taxable profits straight away.

However, most businesses will still benefit more from the Annual Investment Allowance (AIA), which gives a 100% deduction on qualifying purchases up to its £1 million cap. Because AIA is more generous, it will continue to be the default option for anyone who hasn’t used up their AIA limit.

This means the new 40% allowance is mainly useful for businesses that have already exhausted their £1 million AIA and are looking for additional upfront tax relief on further qualifying spending.

What we're doing: Our corporation tax calculations have been updated to reflect the new capital allowance rates.

Late filing penalties doubled

Miss your company tax return deadline (12 months after the end of your financial year end) from April 2026 onwards, and the penalty is now an eye-watering £200 – yes, that’s double what it used to be.

What we're doing: We're adding smarter deadline reminders and starting the filing process sooner after your financial year ends – giving you more time to get your documents ready and keeping you on track to avoid that hefty £200 fine.

Electric vehicle allowances extended

Good news if you're thinking about switching the company car. The 100% first-year allowance for zero-emission cars and EV charge points has been extended to March 2027. Plus, the expensive-car threshold for zero-emission vehicles rises to £50,000 from April 2026.

What we're doing: Our filing process will have the new thresholds and extension dates in place for the relevant years.

Mandatory e-invoicing is coming

From April 2029 (April 2027 for smaller VAT groups), HMRC will require electronic invoicing for all VAT-registered businesses. Paper and PDF invoices won't cut it anymore.

What we're doing: We know 2027 sounds a long way off but we're already working hard to improve our invoicing experience ahead of the new requirements. If you're not already using it, do try ANNA's free invoicing feature (did you know that as well as creating invoices we’ll also chase them for you til they are paid?) – that way you'll be ahead of the game when the rules kick in.

What's changing for employees, sole traders and the self-employed

Changes in homeworking relief

From April 2026, employees whose employers have not reimbursed their home working costs will no longer be able to claim tax relief on unreimbursed home office costs.

For example, Emma works from home two days a week and pays £6 per week in additional heating and electricity costs. Her employer does not reimburse her for these expenses. Under the current rules, Emma can claim tax relief on the £6 per week. From April 2026, she will no longer be allowed to claim this tax relief – unless her employer reimburses her, she simply has to cover the cost herself.

What we're doing: We’re amending our guidance and calculations so you're not claiming tax relief that no longer exists.

Capital allowances boost (yes, you get it too)

The same 40% first-year allowance that applies to limited companies also now applies to unincorporated businesses. If you're a sole trader buying new tools, vans, or equipment from April 2026, you'll get generous upfront relief too.

What we're doing: Updating our guidance for unincorporated businesses so you know exactly what you can claim.

National Insurance thresholds nudged up

The Lower Earnings Limit rises to £6,500 (from £6,396) and the Small Profits Threshold to £7,105 – both up around 3.8%. Class 2 contributions stay at £3.65/week.

Honestly? Most people won't notice much difference. But it's there.

What we're doing: We’re updating our payroll system to reflect the new thresholds from April 2026, so your payroll calculations stay accurate.

Fuel duty freeze extended (for now)

If you're a delivery driver or tradesperson clocking up miles, there's a small reprieve: the fuel duty freeze continues until September 2026. After that, it'll start to unwind gradually.

What we're doing: Nothing system-side needed here – we just wanted you to know.

What Wasn't in the Budget

A few things people were worried about didn't happen:

• VAT threshold – no change. It stays at £90,000.
• Corporation Tax rate – no increase. Still 25% for profits over £250,000.

If you were bracing for movement on either of these, you can relax. For now.

What ANNA's Doing Next

We've already started. Here's where we are:

1. Guidance updates – Our documentation is being updated with the confirmed Budget information so you can get accurate answers straight away.
2. Calculation engines – Our accountants and developers are updating the tax calculators, payroll engine, and Self Assessment tools to reflect the new rates and thresholds. We test everything thoroughly before it goes live.
3. Deadline reminders – With penalties doubling, we're making sure our reminder system is even harder to ignore.
4. Guidance and explainers – Expect more articles like this one, breaking down what each change actually means in plain English.

You don't need to do anything right now. When each update goes live, we'll let you know – and your ANNA account will reflect the new rules automatically.

The Bottom Line

This Budget brought real changes like dividend tax, capital allowances, homeworking relief, and more. Some kick in as early as January 2026, others not until 2029. It's a lot to track.

But that's our job, not yours. ANNA's already updating, already testing, and already preparing your account for what's ahead.

You focus on running your business. We'll handle the tax.

Have questions about how a specific change affects you? Open ANNA and ask – we're ready to help.