Autumn Budget 2025: What Contractors, the Self-Employed and Small Companies Should Watch

• Budget date is set for 26 November 2025 and many changes are still speculative.
• Contractors should check whether more clients become “small” under IR35 thresholds from 6 April 2025.
• MTD for Income Tax (ITSA) starts from 6 April 2026 for >£50k income, expanding in stages.
• Corporation tax is unlikely to change (25% main rate, 19% small profits rate), but reliefs and allowances may change.
• VAT/Making Tax Digital compliance and digital bookkeeping remain vital regardless of Budget outcomes.

Budget choices never happen in isolation. Public finances, the Office for Budget Responsibility’s forecasts and market sentiment all influence what a Chancellor can do. Current reporting points to tight borrowing constraints and limited fiscal headroom, making targeted measures and administrative refinements more likely than sweeping tax-rate changes.

For small businesses this backdrop matters. When growth is subdued and revenue collection becomes a priority, governments often seek to:

• Encourage investment through capital allowances and reliefs
• Improve compliance with clearer guidance and stronger data collection
• Drive digital record-keeping and real-time reporting

These priorities suggest a pro-digital, pro-compliance environment in the months ahead, with incentives aimed at productive investment. The safest baseline assumption is that the government will favour steady evolution over surprise reforms.

• Keep your books tidy and reconciled.
• Plan cash flow and tax forecasts ahead of time.
• Engage early with your accountant on remuneration, dividends and pension contributions.

Whatever the Budget delivers, those foundations will make it easier to respond quickly.

IR35 and the off-payroll working rules are designed to ensure engagements are taxed correctly. In the private sector, medium and large clients must determine employment status. Where an engager qualifies as small under the Companies Act, responsibility for contract determination reverts to the contractor’s personal service company (PSC).

From accounting periods beginning on or after 6 April 2025, new higher size thresholds under The Companies (Accounts and Reports) (Amendment and Transitional Provision) Regulations 2024 mean that more engagers will fall within the “small” definition. This change will shift the burden of proof back to the contractor’s company in some cases.

For contractors, this means renewed focus on documentation, contracts and evidence of working practices. Where responsibility shifts, your PSC becomes the decision-maker again, and HMRC will expect to see clear reasoning behind each determination.

• No wholesale rewrite is expected — the trend remains one of refinement, not reform.
• Increased HMRC education and enforcement activity directed at medium and large engagers.
• Updated guidance drawing on tribunal decisions, especially for borderline cases.
• Continued scrutiny of supply-chain due diligence, especially where multiple agencies or umbrella companies sit between client and contractor.

1. Align contracts with reality. Ensure the written terms reflect how work is performed day to day.
2. Document working practices. Keep concise notes on control, mutuality and substitution.
3. Invoice consistently. Regular invoicing and project documentation support independence.
4. Review status when scopes change. A new project or altered responsibilities may affect your determination.
5. Check client size early. Determine whether new clients qualify as small under the updated thresholds.

The Making Tax Digital for Income Tax Self Assessment (MTD ITSA) rollout is confirmed and will apply in phases based on total business and property income.

Taxpayers within scope will file Quarterly Updates, an End of Period Statement and a Final Declaration through compatible software. The system is designed to reduce errors and improve timeliness of information submitted to HMRC.

Although the timetable is set, some refinements may appear in the Budget or subsequent guidance:

• Clarifications for landlords with multiple or jointly owned properties.
• Transitional easements for the first reporting year, such as light-touch penalties.
• Detailed guidance on how quarterly updates interact with payments on account.

• Adopt digital bookkeeping if you have not already.
• Reconcile bank feeds weekly and label income and expenses accurately.
• Keep property records by address and track supporting documents.
• Test MTD-compatible software before you are required to use it.
• Ask Sherwin Currid to review your income profile so you know exactly when you enter the regime.

Since April 2023, the UK corporation-tax framework has featured three key elements:

• 25% main rate for profits over £250,000
• 19% small-profits rate for profits up to £50,000
• Marginal relief tapering between the two thresholds

Associated-company rules apply when businesses share common control, which can adjust these limits.

The Chancellor is unlikely to alter headline rates in 2025. Instead, the Budget may focus on:

• Consultations on investment reliefs, such as capital allowances or intangible-asset deductions.
• Simplification for small companies — potentially streamlining marginal-relief calculations.
• Targeted incentives for digital, green or high-productivity sectors.

Some commentators expect reviews of Capital Gains Tax and Business Asset Disposal Relief, which affect business sales and restructuring. A move towards aligning CGT rates more closely with income-tax levels or tightening relief conditions could alter after-tax proceeds for owner-managers planning exits.

1. Prepare quarterly profit forecasts so you can plan dividends and bonuses with accurate tax estimates.
2. Review pension-contribution headroom and incorporate this into remuneration planning.
3. Time capital investment carefully to maximise available reliefs.
4. Monitor associated-company counts and ensure group structures are properly documented.

Making Tax Digital for VAT is a mandatory piece of compliance for nearly all VAT-registered businesses. Digital record-keeping and linked software submissions are required for every return period.

• Reconcile regularly to prevent quarter-end rushes.
• Review coding between income, expenses and VAT returns to ensure accuracy.
• Retain evidence for all expenses, including exempt or zero-rated supplies.
• For cross-border trade, apply place-of-supply and reverse-charge rules consistently and keep records of customer location.

The Chancellor is unlikely to raise the main VAT rate, but there could be movement on thresholds. Consultations have floated the idea of lowering the VAT-registration threshold. Even modest changes can affect small traders, so reviewing turnover levels before the Budget is sensible.

Strong bookkeeping and digital processes remain the best defence against penalties and missed input-tax claims.

The government’s Transforming Business Rates Interim Report signals possible changes aimed at retail, hospitality and leisure premises. Proposals include permanent lower rates for properties with rateable values below £500,000, a new high-value rate for larger sites, and transitional relief to reduce sharp increases. Updates to the Small Business Rates Relief (SBRR) scheme and continued improvement relief could follow.

For businesses that rent or own premises, these changes could significantly impact overheads from 2026 onwards. Factoring them into cash-flow forecasts now will help avoid surprises later.

Expect continued focus on the consistency of employment and self-employment definitions. HMRC’s real-time information system has improved payroll visibility, and compliance checks often centre on PAYE accuracy

Budgets frequently use capital allowances to steer investment. The current full-expensing regime for qualifying plant and machinery encourages spending on equipment and technology. It may be extended to leased assets, and new green-investment tax breaks could appear to support net-zero goals without new headline taxes.

Before committing to major purchases:

• Run a profit forecast to see how timing affects cash flow.
• Confirm whether assets qualify for full expensing or the Annual Investment Allowance.
• Keep invoices and usage evidence ready for year-end review.

The government has been pursuing simplification across forms and reporting. Watch for Budget announcements that streamline Self-Assessment pages or align thresholds between taxes.

• Review contracts and ensure they match actual working practices.
• Keep concise evidence files on control, substitution and mutuality.
• Schedule regular IR35 status reviews.
• Prepare to take back IR35 responsibility where clients become “small”.
• Keep company records tidy and consistent.

• Confirm income levels against MTD ITSA thresholds.
• Choose intuitive software such as Xero and FreeAgent with reliable bank-feed integration.
• Reconcile weekly and capture receipts promptly.
• Create a timetable for quarterly updates.
• Request a tax projection before payments on account to smooth cash flow.

• Maintain a rolling 12-month profit forecast and update it quarterly.
• Review remuneration mix and pension strategy before year-end.
• Plan capital expenditure and align delivery dates with accounting periods.
• Check VAT coding and perform a pre-filing review each quarter.
• Keep board minutes and dividend vouchers fully up to date.

We work daily with contractors, freelancers, tradespeople and owner-managed companies, helping them stay compliant, minimise surprises and make confident decisions.

Sherwin Currid will publish a full post-Budget summary following the announcement on 26 November 2025, outlining what has changed, who is affected and what to do next. If you have any questions in the meantime, please feel free to contact us.