Budget 2025 – Small print update

Last Updated on 3 July 2026

Over the years I’ve learnt that hot takes on Budget day are a waste of time. The really interesting stuff for freelancers tends to be tucked away in the supporting documents.

The Chancellor only really talks about half the stuff that’s relevant when she speaks in the Commons.

I’ve just spent a day looking through the other half, and here’s a summary of some of the bits that might be useful for freelancers:

Income tax and NI

Let’s start with the easy one…

We’ll all be slowly paying more because the thresholds are not going up until 2031. As people’s income rises, the level hits the point when you start paying tax or hit the higher levels of tax.

But here’s something important you might have missed:

Sole Traders to pay some tax via PAYE??

This is an extract from the relevant Treasury document:

The proposal seems to be that if you have a mix of PAYE and sole trader income, you might have your PAYE tax code changed to take tax off you as you go through the tax year.

So ‘more timely’ means earlier.

How would they be able to do this? By using MTD for income tax data which higher earning sole traders will be reporting quarterly from April 2026 onwards.

This would be a big change to the way sole traders pay tax, at least those who also have PAYE income.

SneakyWatch: Up to now MTD quarterly reporting has been about encouraging people to keep more accurate records. This is the first time I’ve seen a proposal to change when we pay our tax.

Dividends (particularly relevant to Limited Company Freelancers)

Yet again dividend taxes are going up. This is basically an unavoidable tax rise for people who have to set up a limited company in order to get work.

The basic and higher rates go up by a whopping 2 percentage points, to 10.75% and 35.75% respectively. Bizarrely no change to the additional rate, which is still 39.35%

Making Tax Digital (sole traders)

This is still going ahead as previously announced. See my special MTD section >

But there will be no penalties for the first year of operation 2026-27. This is to give everyone time to get used to the system.

In following years penalties for late filing will be like points on your licence. So not an immediate fine. But the proposed fine levels will be increased from what was proposed last year.

Interesting things in the offing

E-invoicing is moving forward as previously announced, and is set to be introduced for all business-to-business VAT invoices from April 2029.

See my earlier blog on this: Next on the digital horizon – e-invoicing >

Read about e-invoicing on gov.uk here >

Finally, companies and recruitment agencies that use umbrella companies will have to ensure the correct PAYE taxes are being paid.

If an umbrella is pulling a fast one, the end client organisation will be deemed responsible. This could put a cat among the pigeons and weed out any dodgy umbrellas.

If my mixed metaphors are confusing, see my blog: What is an umbrella company? >

So as in previous Budgets, some interesting things lurk just below the surface.

If there’s an overarching theme here, it’s that everything is going digital. And any future government will exploit that to change how and when we track our money and pay our taxes.

Did I miss anything you think is a big issue for freelancers? Let me know below…

Posted on 01 December 2025