Limited Company Contractors: What you need to know about the Autumn Budget 2025

Chancellor of the Exchequer Rachel Reeves delivered the Autumn Budget on Wednesday the 26^th of November 2025, setting out a series of tax-raising measures worth up to £26 billion.

Here we take a look at some of the Budget highlights that will impact you as a limited company contractor.

Tax bands and personal allowance

The tax bands will remain the same and continue to be frozen until April 2031.

Basic rate – £37,700

Higher rate – £50,270

Additional rate – £125,140

This means that many more people will end up paying extra tax over the next few years as incomes rise with inflation.

The Income Tax personal allowance will also remain frozen until April 2031 at £12,570.

National Insurance Contributions

In April 2025, the Employers’ National Insurance rate increased from 13.8% to 15% – a massive hit to all businesses, and this figure currently remains.

The Secondary Threshold, which is the point at which employers become liable to pay NICs on an individual employee’s earnings, was reduced to £5,000 a year (from £9,100) on the 6^th April 2025. In the last Autumn Budget, this was to be frozen until 2028; however, this will now be maintained at this level until April 2031.

Class 4 rates of self-employed NICS remain the same for 2026/27 at 6% and 2%.

Self-employed workers with profits of £6,845 and above get access to contributory benefits, including the State Pension, through a National Insurance credit, without paying Class 2 NICs.

Those with profits under £6,845 who pay Class 2 NICs voluntarily to get access to contributory benefits, including the State Pension, will continue to be able to do so.

National Living Wage and National Minimum Wage

National Living Wage (NLW) and National Minimum Wage (NMW) rates are set to increase from the 1^st of April 2026.

• For those aged 21 and over – increasing from £12.21 to £12.71
• For those aged 18 to 20 – increasing from £10.00 to £10.85
• For those aged under 18 – increasing from £7.55 to £8.00
• For apprentices – increasing from £7.55 to £8.00

Dividends

The Dividend Allowance will remain the same for 2026/27, with the first £500 of dividends chargeable to tax at 0%.

There will be a 2% increase in the basic and higher rates of Income Tax applicable to dividends, which will come into effect in April 2026. The additional rate will remain the same.

The rates are:

Basic rate taxpayers – 10.75%

Higher rate taxpayers – 35.75%

Additional rate taxpayers – 39.35%

Corporation Tax

The rates of Corporation Tax will remain unchanged, with the government committing to capping this main rate for the duration of the Parliament.

It’s important to be aware that the penalty for taxpayers submitting a Corporation Tax return late will double for returns for which the filing date is on or after the 1^st of April 2026.

Salary sacrifice for pensions

Those who choose to sacrifice part of their salary to invest more into their pension pot will need to be aware that from April 2029, only the first £2,000 of employee pension contributions paid in this way will be exempt from NICs.

Employers and employees can still make contributions above £2,000 through salary sacrifice arrangements, but any employee contributions above this amount will be subject to employer and employee NICs, like other employee workplace pension contributions.

• Employers will need to report the total amount sacrificed through their existing payroll. All employer pension contributions will continue to be free of NICs.
• Employees, as well as employers, will pay NICs on the amount above £2,000 for employee contributions through salary sacrifice.

HMRC

While the government has decided not to proceed with Making Tax Digital (MTD) for Corporation Tax, it remains committed to MTD for Income Tax.

If you are self-employed or a landlord, you will be affected from the:

• 6th April 2026 – if you have an annual business or property income of more than £50,000
• April 2027 – if you have an annual business or property income of more than £30,000

There will also be several HMRC compliance initiatives, including:

• Investment to modernise the tax system and help taxpayers get their taxes right the first time.
• Having Income Tax Self Assessment taxpayers with Pay As You Earn (PAYE) income to pay more of their Self Assessment liabilities in-year via PAYE from April 2029.

Take a look at our Budget page for a full breakdown of the Autumn Budget 2025.

To find out more about contracting, please contact Jaime on 01442 795 100 or email jaime.thorpe@dolanaccountancy.com.