The budget delivered a mixture of incentives for entrepreneurs and further challenges for established businesses. However, for many SME owners, the biggest concern won't necessarily be any individual tax announcement, but the wider economic outlook.
The downgrade in economic growth forecasts, combined with the prospect of inflation remaining elevated into 2027, paints a challenging picture. Businesses have already spent several years navigating rising employment costs, increased supplier prices and pressure on profit margins. This Budget suggests those challenges are unlikely to disappear anytime soon.
The real concern is that businesses could find themselves squeezed from both directions. Slower economic growth risks weakening customer demand, while continued inflation and higher employment costs make it increasingly difficult to protect margins.
Any positive news?
There are some positive measures. The proposed new Founders' Relief is a welcome incentive for qualifying entrepreneurs building high-growth businesses, and there are measures designed to encourage investment. However, the reduction in the Business Asset Disposal Relief lifetime allowance is less encouraging for established business owners who have spent years building value in their companies.
What is your key message to businesses?
Financial visibility and forward planning continue to be of the utmost importance.
Businesses need to understand not just whether they are profitable today, but how their financial position might change over the next 12 to 24 months. That means regularly reviewing pricing, understanding profitability by customer or service, forecasting cash flow and modelling the impact of increasing costs.
It is also important that business owners don't allow economic uncertainty to prevent them from making decisions. There will continue to be opportunities for well-managed businesses to invest, recruit and grow, even in a challenging market.
Ultimately, the businesses best placed to succeed won't necessarily be those experiencing the strongest sales growth, but those that understand their numbers, protect their margins and make informed decisions about where to invest.
The Budget may be outside a business owner's control, but how they prepare and respond to it certainly isn't.
Here's how the numbers shape up...
Economic growth is slowing: The forecast reduction in economic growth to 1% in 2027, this reinforces concerns about weak business confidence and investment.
Inflation remains a concern: With inflation forecast to rise to 3.8% in early 2027 businesses face further pressure on wages, supplier costs and overheads.
Profit margins will remain under pressure: Slower growth combined with rising costs could leave businesses squeezed from both sides. Reviewing pricing, profitability by customer and cost structures will be increasingly important.
Business Asset Dispsal Relief (BADR): A reduction in the lifetime allowance from £1 million to £500,000 has been announced with effect of 6th April 2027. Ths follows on from recent previous reductions to the allowance and an increase of the tax rate to 18%. This will increase the tax payable by business owners when they sell. Owners considering an exit should review the timing and tax implications.
New Founders' Relief: A 10% CGT rate on up to £10 million of qualifying gains has been announced which could provide a significant incentive for eligible entrepreneurs. Although the detailed rules are still subject to consultation until 30 November 2026 key points released are:-
Ownership: Must have held at least 25% of the ordinary shares, with corresponding economic and voting rights, when the company began trading.
Holding period: Shares held for at least five tax years
UK residence: UK tax resident for at least five continuous tax years before disposal
Company size: At least £10m turnover and 15 full-time equivalent employees in the accounting period before disposal
Growth and innovation: Must meet at least two of three tests: 25% annualised turnover growth, 25% annualised employee growth, or £1.5m qualifying R&D expenditure
Trading requirements: The company must satisfy UK presence and qualifying trading conditions.
Employment costs are increasing: The National Living Wage and National Minimum Wage will rise by 3.9% to £13.21 from 6th April 2027. Employers should factor higher payroll costs into their 2027 budgets, including associated on-costs.
Some support for operating costs: The extension of the fuel duty freeze and targeted business rates measures should provide relief for certain businesses, although the benefit will vary by sector.
Business rates relief: The Small Business Rates Relief threshold for qualifying retail, hospitality and leisure premises increases from £12,000 to £18,000 from April 2027.
Capital allowances: Increase from 1st January 2027 of the First-Year Allowance from 40-50% but the main writing-down allowance falls from 14% to 12% from 1st April 2027
VAT e-invoicing: A roadmap has been announced towards mandatory VAT e-invoicing from April 2029. This is relevant to businesses reviewing accounting systems and digital processes.
Business mileage: The 55p rate for the first 10,000 business miles becomes permanent, with the rate above 10,000 miles increasing from 25p to 35p from April 2027.