What the 2025 Budget means for business financing strategy
The November 2025 Budget did not change headline business tax rates, but it will influence how companies choose to fund investment, manage cash flow and plan growth.
For many businesses, the focus is shifting towards using finance strategically rather than relying on retained profits.
Investment and asset finance
The introduction of a 40% First-Year Allowance (FYA) for plant and machinery strengthens the case for investing in equipment and assets. When combined with leasing, hire purchase or asset finance, businesses can benefit from accelerated tax relief while spreading costs and preserving cash.
This makes external finance an increasingly tax-efficient way to support capital investment.
Growth funding and cash flow
With corporation tax remaining at 25% and operating costs under pressure, many businesses are using structured finance to:
– Maintain working capital
– Fund expansion
– Balance cash flow with tax efficiency
Businesses with international operations or complex structures may also face increased compliance and planning needs, driving demand for working capital and flexible funding solutions.
Changes to Employee Ownership Trust relief
The Budget reduced Capital Gains Tax relief for Employee Ownership Trusts (EOTs) from 100% to 50%. This makes employee ownership-based exits less tax-efficient and may lead some owners to:
– Delay exit plans
– Reinvest in the business
– Use debt or alternative finance to support growth instead
What this means for businesses
Overall, the 2025 Budget:
– Encourages investment through finance rather than retained profits
– Increases the appeal of asset-based lending
– Highlights the need for tailored funding strategies
How Principle Finance can help
At Principle Finance, we help businesses structure finance solutions that support growth, investment and cash flow resilience.
If you’re reviewing your funding strategy following the 2025 Budget, we can help you explore the most suitable finance options for your business. Get in touch on 0330 107 1558 or email [email protected] to discuss your options.