Budget 2025 (Part 2): What It Could Mean for SMEs, Self‑Employed and the Wider Business Community

As we continue our look ahead to the Autumn Budget 2025, Part 2 focuses on areas we did not explore in Part 1. This includes wider business support measures, possible changes affecting self‑employed workers, skills and workforce pressures, and the government’s growing push into AI and digital infrastructure.

 

A Tougher Economic Backdrop

In the weeks leading up to the Budget, the UK’s financial position has tightened. Several outlets report a £20-30 billion gap in the public finances, driven by slower growth and higher borrowing costs (www.unbiased.co.uk). As a result, the Treasury needs more revenue but is also trying to stick to its promise not to raise headline income‑tax rates.

In early November, the Chancellor appeared to signal that an income‑tax rise was on the table (www.theguardian.com), prompting market reaction and widespread commentary. Days later, news received updated signals suggesting that she might drop or scale back any direct rate increase, instead favouring threshold freezes or other indirect measures (www.independent.co.uk).

These shifting hints have left many unsure whether income‑tax policy will tighten sharply or merely continue through stealth. This uncertainty makes it harder for firms to plan, especially because personal tax changes can influence staff pay expectations, retention pressures and overall wage costs, all of which feed directly into business budgeting and investment decisions.

 

Support for SMEs? – Capital Allowances, Reliefs and Business Rates

SMEs are hoping for practical support, but high fiscal pressure limits what the Chancellor can offer. Most analysts expect the government to maintain full expensing (www.grantthornton.co.uk), which allows companies to deduct the full cost of eligible equipment from their taxable profits. This can make purchasing machinery, vans or certain tools more affordable by lowering the final tax bill.

At the same time, businesses continue to raise concerns about the broader capital‑allowances system, the rules that decide what equipment qualifies for tax relief and how quickly costs can be written off. When these rules change frequently, it makes long‑term planning difficult (www.fticonsulting.com).

Business rates remain one of the biggest fixed costs for SMEs, especially for shops, workshops and hospitality. Industry groups warn that without reform, rising rates could put additional pressure on high‑street and service‑based firms, with a predicted record number of more than 17 thousand store closures (bmmagazine.co.uk).

The Federation of Small Businesses (FSB) has also renewed its call for a higher VAT registration threshold, which has been frozen for years. Raising it would reduce admin requirements for smaller firms operating close to the limit (www.scottishfinancialnews.com).

Why it matters: These decisions influence day‑to‑day choices for SMEs, from everyday decisions like replacing vehicles or upgrading technology, to bigger questions about business survival, hiring, keeping shops open and managing rising fixed costs. Clearer, more stable rules help businesses plan ahead with confidence, while uncertainty around tax reliefs, rates and thresholds often leads firms to delay investment, recruitment or maintenance decisions. Reliable guidance is especially important for sectors with tight margins, seasonal income or high operating costs.

 

Self‑Employed Workers, Contractors and the Gig Economy

Several areas of the Budget may shape how self‑employed people work and manage their tax obligations.

National Insurance (NIC)

The Treasury is reviewing Class 4 NIC, which self‑employed people pay on their profits. Reports suggest this could involve adjusting thresholds or slightly increasing rates to raise revenue without altering income‑tax bands. Any such change would directly affect how much self‑employed people pay (www.saffery.com).

Expenses and Reporting Rules

There is discussion about tightening what counts as a business expense. Stricter rules could increase taxable profit. HMRC is also using new international reporting rules, requiring digital platforms to submit earnings data for gig‑economy workers and freelancers, meaning more accurate reporting and fewer grey areas (www.expensein.com).

Why it matters: Even small rule changes can significantly affect self‑employed workers’ cash flow. Tighter expense rules, higher NIC or more frequent reporting may mean higher monthly outgoings and less flexibility, especially for people with seasonal or unpredictable income. The Budget could quietly increase the administrative and financial burden on self‑employed workers. Anyone running their own business should be prepared for possible changes to NIC, expense rules and reporting requirements.

 

Skills, Technology and AI – What Businesses Need to Know

Reports in 2025 show a more complex picture than the usual “skills shortage” narrative. Many hands‑on sectors still struggle to recruit, particularly drivers, warehouse staff, mechanics, vehicle technicians, hospitality workers and social‑care staff, according to various labour‑market updates (www.theaccessgroup.com) and industry bodies such as Logistics UK (logistics.org.uk) and UKHospitality (www.ukhospitality.org.uk).

For transport, courier and fleet‑based businesses, shortages across driving, warehouse work, vehicle repair and customer‑support roles continue to affect delivery capacity, turnaround times and operational efficiency.

Industry groups are calling for improvements to apprenticeships in logistics, engineering, vehicle maintenance and cyber‑security, alongside reforms to the Apprenticeship Levy (www.cipd.org).

On the digital side, businesses report difficulty finding people with up‑to‑date technical skills, such as cyber‑security, telematics support, connected‑vehicle systems, cloud infrastructure and data analysis. These skills are becoming increasingly important as fleets adopt tools like dashcams, telematics and automation systems.

The government is placing heavy emphasis on technology. The Budget is expected to highlight major investment in AI and digital infrastructure, building on previous announcements, including but not limited to:

• £2 billion in AI investment confirmed as part of the 2025 Spending Review, aimed at accelerating adoption of AI across public services and industry

• £750 million for a UK national supercomputer, supporting cutting‑edge AI research and large‑scale model development

• £160 million for TechFirst, a programme designed to expand digital and technical skills

• R&D funding increased above inflation rate to £22.6 billion per year by 2029/30.

  (Source: www.techuk.org)

While these investments could modernise key sectors, the government may be moving too quickly without fully understanding AI’s long‑term impact on the job market. Automation could replace many roles before workers have time to retrain, and if training programmes focus too much on technology, it may not align with the skills that are and will be actually needed.

Why it matters: Skills shortages in frontline roles and growing demand for specialist technical expertise both affect business continuity. For SMEs in transport, logistics and service sectors, difficulty finding the right people can increase operational strain, slow growth and raise risk exposure. And while the government is investing heavily in AI and digital infrastructure, many of these projects, such as building large data centres, may not create the kind of solutions needed to address current shortages and grow economy.

As AI adoption accelerates, automation may help ease shortages in some routine or hard‑to‑fill roles. However, this does not automatically solve the wider labour challenge. If businesses and government focus only on technology and do not invest enough in people, many workers may find it harder to adapt or re‑enter the job market. A shrinking workforce eventually means lower consumer demand, fewer customers and weaker economic growth.

For SMEs, this means two things: ongoing recruitment challenges in essential roles, and longer‑term uncertainty as automation reshapes job structures. Staying flexible and continuing to invest in staff development will be vital to building a resilient workforce for the years ahead.  The question is whether the Autumn Budget will address this issue.

 

Ratcliffes’ View

With the Autumn Budget approaching, the government’s shifting signals make this a challenging period for SMEs, contractors and self‑employed workers. Part 3 of our series will provide a clear, practical breakdown of the confirmed measures once the Chancellor delivers the Budget on 26 November.

If you would like help preparing for possible changes, reviewing your insurance or planning ahead for 2025–26, our team is here to support you.

Get in touch with us today for advice tailored to your business.