Budget 2025 for Founders: The Key Changes, Hidden Impacts and New Opportunities

The Budget Explained: What Founders Need to Know (And Why It Matters More Than Ever)

After weeks of leaks – and the budget being prematurely published by the OBR - the Chancellor’s 2025 Budget has finally landed - and while it isn’t overflowing with giveaways, it does send a clear signal: the rules of the game are shifting for founders.

What This Year's Budget Means For Founders

While many headlines will focus on tax rises, the deeper story is this: the government wants to support businesses that build, innovate, hire and scale - and is quietly shifting incentives in that direction.

Taxes are tightening in some places, opportunities are opening in others, and the government is putting its weight behind businesses with the potential to grow, scale and create jobs. In short, ambition to scale is being rewarded. Founders who run smaller businesses and rely on a salary and / or dividends, are likely to feel the squeeze.

That tone was set right at the start of Rachel Reeves’ speech, when she paid tribute to the people who build things from scratch:

Because growth doesn’t just appear out of thin air. It is built patiently, and stubbornly, by the people who take risks. By founders who bet their savings on an idea. By firms breaking into new markets, developing new technologies, creating new jobs and new opportunities.

It’s not often founders get name-checked in the opening part of a Budget speech. And while many of the measures announced today will increase the overall tax burden, they’re paired with reforms aimed at supporting innovative, high-growth businesses.

In other words, this Budget rewards those who are building big.

Below, we break down the key announcements and, crucially, what they actually mean for you.

Top 9 Budget Announcements for Founders (and What They Mean)

1. Income tax thresholds frozen until 2031

Your personal allowance and higher-rate tax thresholds will stay exactly where they are for years to come.

The personal allowance (the point at which you start paying tax on employment income) will stay at £12,570 and the higher rate threshold will remain at £50,270 until April 2031.

 
What it means:

As your salary rises, more of your income will be subject to tax – and more of it at the higher rate if you’re above the higher rate threshold – than would be the case had tax thresholds moved with inflation. Often referred to as a “stealth” tax, the cost for sole traders and those drawing a salary from their business will go up, without the rate of tax itself having increased.

2. Dividend tax rises (from 2026)

Dividends are commonly used by founders, as part of their remuneration mix, with many combining both salary and dividends to draw money out of the business - this change will therefore impact many founders.

Rates are increasing by two percentage points across the basic and higher bands, with the basic rate rising to 10.75% and the higher rate to 35.75%. 

What it means:

If you pay yourself partly in dividends - as many limited-company directors do - your take-home income will fall. Time to speak to your accountant and revisit your pay structure.

Don’t have an accountant?

Try the Institute of Chartered Accountants ‘Find an Accountant’ tool. Look out for those displaying a ‘Business Advice Service’ logo, as they provide free initial consultations to founders and SMEs.

3. Pension salary-sacrifice capped (from 2029)

Another part of tax-efficient remuneration planning for many founders. Moving forward, only the first £2,000 of salary-sacrificed pension contributions will avoid National Insurance.

 
What it means:

A popular tax-efficient perk becomes less efficient. If you employ people, you may also need to rethink your benefits packages.

4. Employment costs rising

Minimum wage uplifts in 2026, and changes to pension rules all push staff costs up. This follows National Insurance Cost increases that were part of the last Budget.

In terms of minimum wages, from 1 April 2026, those over 21 will be legally entitled to £12.71 an hour (an increase of 50p). For workers aged 18 to 20 the new rate will be £10.85, while under 18s and apprentices will get a 45p rise to £8 an hour.

While this is positive news for employees, we know that many small businesses were holding off on expanding or hiring staff due to anticipated cost increases. 

What it means:

Hiring becomes more expensive for most organisations.

This could be a time to consider an apprentice. The ‘Youth Guarantee’ offers six-month paid work placements for eligible young people. The Budget increased support for small businesses who take part in the initiative, making this a more attractive option for some if they have the right opportunities available.

5. Expansion of the British Business Bank and Start Up Loans

The British Business Bank (BBB) is receiving a major boost through its new Five-Year Strategic Plan, backed by an increased permanent financial capacity of £25.6 billion. As part of this, funding for early-stage founders is set to grow significantly.

The Start Up Loans scheme - already a lifeline for thousands of new entrepreneurs - will expand from issuing around 11,000 loans a year to 19,000 per year over the next three years. The BBB will also invest at least £5 billion in growth-stage and scale-up funds.

 
What it means:

More early-stage founders will be able to access the affordable, government-backed finance they need to get their ideas off the ground. For many people taking their first steps into entrepreneurship, this expansion could be the difference between putting plans on hold and launching with confidence.

Find out more about Start Up Loans here.

6. Business rates reforms

From April 2026, business rates in England will be updated to reflect property values assessed since 2023 - meaning most bills will rise.

To soften the blow, the government has announced a three-year, £4.3bn transitional support package. Caps will limit how fast bills can increase:

• Properties up to £20,000 rateable value (£28,000 in London): 5% in 2026–27, 10% + inflation in 2027–28, 25% + inflation in 2028–29

• £20,001–£100,000 (£28,001–£100,000 in London): 15% in 2026–27, 25% + inflation in 2027–28, 40% + inflation in 2028–29

• Over £100,000: 30% in 2026–27, 25% + inflation in 2027–28, 25% + inflation in 2028–29

Alongside this, the government is introducing permanently lower business-rate multipliers for retail, hospitality and leisure (RHL) businesses with rateable values under £500,000. Over 750,000 shops, pubs, cafés and leisure venues are set to benefit.  

What it means:

If you run a high-street or customer-facing business, there’s meaningful help on the way. But many other businesses - especially those in offices, studios, warehouses or industrial sites - should prepare for higher rates from 2026 and factor these rising costs into long-term planning.

7. Customs duty relief on low-value imports ending (by 2029)

The government will remove customs duty relief on goods valued at £135 or less, citing the need to protect British businesses and level the playing field between the high street and online sellers relying on cheap imports.

The change will take effect by March 2029 at the latest. 

What it means:

If your business imports low-value items - particularly in e-commerce, retail or drop shipping - your costs will rise.

UK-based producers and makers may become more competitive as imported alternatives become more expensive. It’s a good moment to review supply chains and explore whether local sourcing or bulk ordering could reduce the impact

8. Tax administration overhaul (Making Tax Digital, penalties and new tech)

The government is investing £59m in new technology so that, from April 2027 for VAT and April 2028 for Corporation Tax, approved accounting software can offer real-time prompts, checks and error flags as returns are filed.

Making Tax Digital (MTD) will continue its rollout. Penalties for late filings are also being modernised, with clearer, more consistent rules across taxes.

We will be running free sessions with Sage in January to help founders better understand and prepare for these changes.  

What it means:

Compliance is getting stricter, but also cleaner. If you’re already using cloud accounting software, you’ll benefit from smoother filing and fewer mistakes. If you’re still working from spreadsheets or paper records, the clock is ticking - switching to digital tools now will make life much easier later.

Sage are currently offering eligible startup’s 90% off for 10 months.  

9. Expanded Enterprise Investment Scheme (EIS) & Venture Capital Trust (VCT) limits

Annual and lifetime company limits are being increased, with more flexible rules for knowledge-intensive companies.  

What it means:

Raising investment could get easier for some. Investor appetite for EIS-qualifying startups is likely to grow, although this could come at the expense of earlier-stage SEIS opportunities if investor appetite / focus shifts.

Virgin StartUp is here to help

Whether you’re navigating new tax rules, planning a raise, sharpening your growth strategy or simply looking for a supportive community of fellow founders, we’re here for you.

Join the Virgin StartUp Community today.

Want to dive deeper?

You can read the full Budget and the Chancellor's Budget speech. You can explore the business support fact sheets and the overview of growth policies.

Written by Andy Fishburn, Managing Director, Virgin StartUp