A self-employed view of the 2025 Budget

The run up to yesterday’s budget was chaotic. Widespread scaremongering about tax rises and VAT registration threshold drops caused a lot of uncertainty, but the 2025 Autumn Budget could have been a lot worse for self-employed people.

Income tax, National Insurance and VAT

The freeze in income tax and National Insurance (NI) thresholds has been extended for another 3 years, from April 2028 until April 2031. Whilst not a tax rise as such, with income rising but thresholds frozen, people will gradually pay more tax and NI on what they earn. The Chancellor admitted that this decision will impact working people, but in general it will affect higher earners more.

Whilst a 2% increase in tax on dividends, savings and property income was announced, there is no change to the rate of income tax or NI payable on self-employed income.

National Minimum Wage

Businesses that employ staff have got another National Minimum Wage increase to plan for. The minimum wage for 18- to 20-year-olds will go up from £10.00 to £10.85 an hour from 1 April 2026, while the National Living Wage will go up from £12.21 to £12.71 an hour.

Apprenticeships

The government has announced funding to make sure that apprenticeships are free for small and medium-sized enterprises.

Business Rates

There will be permanently lower business rates for over 750,000 retail, hospitality and leisure properties – and a business rates support package for sectors that are going to be hit hardest by the triennial property revaluations due to take effect on 1 April 2026.

Greater Lending to Small Businesses

Several banks have announced that they will make more finance available to small and medium-sized businesses – after the banks themselves were spared from higher taxes in the Budget.

Vehicle Running Costs

A new statutory fuel finder scheme (Fuel Finder) is going to be launched in early 2026. All petrol stations will need to report their prices, giving drivers access to live, station-by-station fuel prices to enable them to find the cheapest fuel wherever they are.

The government has announced that electric vehicles (EVs) will be subject to a new mileage-based charge, of 3p a mile for fully electric cars and 1.5p for plug-in hybrids. The rate will increase with inflation each year. This is in addition to the new annual Vehicle Excise Duty (VED) for electric vehicles that came into effect from April 2025. Time will tell what effect this will have on EV sales and the transition from petrol and diesel to electric.

[Image credit: Nick Fewings / Unsplash]

Business Mileage

If you use “simplified expenses” to calculate your self-employed vehicle expenses, you can deduct a fixed rate of 45p a mile for the first 10,000 business miles travelled and 25p a mile thereafter. The rate is the same whether you drive a petrol, diesel, electric or hybrid vehicle.

Mileage rates haven’t increased since April 2011. Whilst the EV surcharge is relatively modest – an electric vehicle travelling 8,500 miles a year will pay an extra £255 a year – it is going to erode even further the amount that flat rate mileage allowances contribute towards vehicle running costs.

An alternative to “simplified expenses” would be to claim a fair business proportion of total vehicle running costs. However, once you’ve used the flat rate mileage allowance for a vehicle, you’ve got to continue to use it for as long as you use that vehicle for your business. You can’t switch methods from year to year depending on which works out best.

If you would like a free Excel template that calculates how much mileage you can claim for using your privately-owned car or van for your business, visit www.springreach.co.uk/resources