Recent budgets have kept many headline tax rates unchanged, but that doesn’t mean tax bills are standing still. For owner-managed businesses and sole traders, one of the key things to be aware of is the continued freeze on tax thresholds.

Income tax bands and allowances have not risen in line with wages or inflation and are set to remain frozen for several more years. As profits or drawings increase, more business owners may find themselves paying higher rates of tax – even though the tax rates themselves haven’t changed. This effect is often referred to as “fiscal drag”.

The same issue applies to Inheritance Tax. The main thresholds remain fixed, which means business assets, property and personal wealth are more likely to fall within the scope of IHT over time, particularly where a business forms a significant part of an estate.

There are also changes ahead for those considering selling or winding down a business. Business Asset Disposal Relief is due to become less generous from April 2026, which could increase the tax payable when selling a qualifying business or shares.

While none of these changes are dramatic in isolation, together they can influence how and when business owners take income, plan for succession, or think about an eventual exit. If you would like to speak to a member of the team about this, please contact us on 01227 277667.