In an unusual start to today’s fiscal event, the Office for Budget Responsibility inadvertently published their economic forecasts 45 minutes before Chancellor Rachel Reeves stood up to deliver her Budget speech. While the early leak caused embarrassment at Westminster, it gave businesses an advance glimpse of what was to come – and for SMEs, there’s much to unpack.
At Grosvenor House, we work day-in, day-out with small and medium-sized enterprises. From virtual offices to registered addresses and meeting rooms, we understand the challenges our clients face. Today’s Budget delivers a mixed bag for the business community, with some welcome support alongside measures that will require careful planning.
The Headline: Making the “Right Choices”
Chancellor Reeves framed her Budget around the concept of making the “right choices” for what she described as a fairer, stronger Britain. Her stated priorities are clear: stability, investment and reform as the platform upon which British ambition can “finally get moving again.” But what does this mean in practice for the businesses we support?
The Economic Backdrop
Before diving into the specifics, it’s worth understanding the economic context. The OBR’s forecasts show inflation is expected to reach 3.5% this year, slightly higher than the 3.2% predicted in March. Next year’s inflation forecast has also been revised upward from 2.1% to 2.5%, though the OBR maintains its 2% estimate for 2027 and beyond.
Average economic growth is now forecast at 1.5% over the forecast period, which represents a 0.3 percentage point reduction from March projections, primarily due to lower underlying productivity growth. For SMEs, this means navigating an environment of persistent cost pressures and moderate growth expectations.
Income Tax Threshold Freeze Extended
One of the most significant announcements for business owners and employees alike is the extension of the income tax threshold freeze. Originally planned to end in 2028, thresholds will now remain frozen until the end of the 2030/31 financial year: that’s three additional years.
This “fiscal drag” means more workers will be pulled into higher tax brackets as wages rise with inflation, even if their real purchasing power hasn’t increased. For SME owners and directors drawing salaries, this represents a gradual increase in tax burden over the coming years. The measure is expected to raise £7.6 billion by 2029-30, making it one of the single biggest revenue raisers in the Budget.
Corporation Tax: Stability Maintained
In welcome news for businesses, the Chancellor confirmed she will retain the current corporation tax rate at 25%. This provides the certainty that many businesses have been calling for and honours the commitment made in last year’s Corporate Tax Roadmap.
For SMEs planning investment and growth, this stability is crucial. Knowing that corporation tax won’t be increased allows for more confident medium-term financial planning.
Capital Investment Support
The government is maintaining its 40% first-year allowance for businesses investing in qualifying plant and machinery. This remains a valuable tool for companies looking to invest in new equipment, technology or infrastructure, offering tax relief on capital expenditure that can improve productivity.
Combined with the retention of the £1 million Annual Investment Allowance, these measures provide tangible support for businesses willing to invest in their growth.
Backing Entrepreneurs: Enterprise Incentives
One of the most encouraging aspects of today’s Budget is the expansion of enterprise incentives. The Chancellor announced plans to scale up eligibility for both the Enterprise Investment Scheme (EIS) and Enterprise Management Incentives (EMI).
The enterprise management incentive, which offers tax incentives to employees in smaller, high-risk companies, will be expanded so more companies can offer tax-relieved share options. Reeves also pledged to “re-engineer” venture capital trust schemes to ensure they support companies not just at startup, but as they scale and grow.
This is explicitly about backing entrepreneurs and ensuring that people not only start businesses in the UK but stay here as they grow. For ambitious SMEs, this could open up new opportunities for attracting and retaining talent through share options, and for accessing growth capital.
Apprenticeships: Free Training for Under-25s
In a significant boost for SMEs looking to develop their workforce, the Budget includes funding that makes apprenticeships for under-25s free for small and medium-sized businesses. This removes a major cost barrier for companies wanting to invest in the next generation of workers.
For service businesses like ours—and many of our clients—this could be transformative. Training young people has always made business sense, but the cost has sometimes been prohibitive. This measure directly addresses that challenge.
What SMEs Should Do Now
While today’s Budget provides some welcome certainty and support, it also requires businesses to adapt their planning:
Review salary and dividend strategies: With income tax thresholds frozen for longer, directors should work with their accountants to optimise their remuneration strategies over the medium term.
Evaluate capital investment plans: The continued availability of capital allowances makes this a good time to bring forward planned investments in equipment or technology that can drive productivity.
Explore enterprise incentive schemes: If you’re a growing business, investigate whether the expanded EIS and EMI schemes could help you attract investment or talent.
Plan apprenticeship recruitment: With funding for under-25 apprenticeships, consider whether this is the right time to invest in developing your future workforce.
Maintain contingency buffers: With inflation expected to remain above target through 2026, prudent cash management remains essential.
The Bigger Picture
Today’s Budget walks a tightrope between supporting business growth and filling what the Treasury describes as a substantial gap in public finances. Tax rises announced are expected to raise £26.1 billion by 2029-2030, with the income tax threshold freeze being the largest single contributor.
For the SME community, the key takeaway is that while there are no dramatic tax increases hitting businesses directly, the overall tax burden is rising through stealth measures. The government is clearly betting that stability, targeted investment support and skills development can offset these pressures and generate growth.
At Grosvenor House, we’ll continue to support our clients as they navigate these changes. Whether you need flexible workspace solutions, a professional registered address, or business support services, we understand the environment you’re operating in, and we’re here to help you succeed.
Final Thoughts
Today’s Budget is neither the worst-case scenario many feared nor the transformative package others hoped for. It’s a pragmatic attempt to balance the books while providing targeted support for business growth and investment.
For SMEs, the message is clear: plan carefully, take advantage of the support available, and focus on productivity and efficiency. The economic environment remains challenging, but with the right approach and support, there are opportunities for businesses willing to invest in their future.
Need a professional base for your growing business? Grosvenor House provides virtual office services, registered addresses, meeting rooms and business support to SMEs across the region. Contact us to find out how we can help your business thrive.