The Bank of England has lowered its main interest rate (known as the Bank Rate) from 4.25% to 4.0% following its meeting on 6 August 2025. The decision passed by a narrow margin – five members of the Monetary Policy Committee (MPC) voted for the cut, while four preferred to hold rates steady
Why the Bank of England Made This Decision
The Bank Rate has been relatively high in recent years as part of the effort to control inflation — the rate at which prices increase. Inflation has been falling steadily from the double-digit levels we saw in 2022 and 2023. As of July, it sits at 3.5%, and the Bank expects it to briefly rise to 4% in September before continuing its downward trend towards its 2% target.
Economic growth remains sluggish, and businesses are cautious. Recent data shows fewer job vacancies and slower wage growth, suggesting that the strong demand for workers we saw after the pandemic is easing. A weaker job market reduces the risk of wages pushing prices higher, which supports the case for lower interest rates.
However, the Bank also notes that essential costs, such as food and energy, remain higher than before the recent cost-of-living crisis. This means they are cutting rates gradually rather than making sharp reductions.
What This Means for Marshall Krysko’s Clients
As an accountancy firm working with individuals, sole traders, partnerships, and limited companies, we understand that interest rate changes can affect more than just your mortgage. Here’s how the cut could be relevant to you:
1. Businesses with Loans or Overdrafts
If you have variable-rate borrowing, such as a business overdraft or loan tied to the Bank Rate, your interest costs could fall slightly in the coming months. Even a small reduction can help improve cash flow, free up funds for investment, or reduce financial pressure during quieter trading periods.
2. Property Developers and Construction Industry Scheme (CIS) Clients
Many construction projects rely on financing. Lower interest rates can reduce borrowing costs, making it easier to fund projects or bridge gaps in cash flow while waiting for payments. This is especially relevant if you are juggling multiple contracts or working with staggered payment schedules.
3. Sole Traders and Partnerships
For those who borrow to invest in tools, stock, or equipment, the cost of finance may come down. This could make it more appealing to bring forward planned purchases or growth investments.
4. Homeowners and Landlords
Tracker mortgage holders will likely see payments fall almost immediately. Fixed-rate mortgage borrowers won’t notice a change straight away, but if you’re due to remortgage in the next 6–12 months, you might find rates are slightly lower than earlier in the year. Landlords with buy-to-let mortgages could also benefit, which may help offset rising maintenance and compliance costs.
5. Savers
The downside of lower interest rates is that savings returns tend to drop. This won’t happen overnight, but banks often reduce rates on savings accounts following a base rate cut. If you rely on interest income, now may be a good time to review your savings strategy.
6. Tax Planning Opportunities
Lower interest rates can affect investment returns, borrowing costs, and business expansion plans, all of which can impact your tax position. For example, if borrowing becomes cheaper, it might be worth bringing forward capital investments to take advantage of potential tax reliefs this financial year.
What You Should Do Next
The rate cut is not a guarantee of further reductions, but financial markets are expecting at least one more cut before the end of the year if inflation continues to ease. That means now is a good time to:
- Review your borrowing and consider whether refinancing could save you money.
- Check if you can secure a better mortgage or loan deal in advance.
- Revisit your cash flow forecasts and budgets, factoring in any changes to interest costs.
- Look at your savings and decide whether to lock in a fixed rate before further cuts happen.
At Marshall Krysko, we work with clients across West Yorkshire and beyond to help them navigate these changes. Whether you’re a business owner, property investor, or individual looking to optimise your finances, we can help you understand the impact of interest rate changes on your tax position, cash flow, and long-term plans.
The Bank of England’s decision marks a potential turning point after recent significantly higher borrowing costs. Planning ahead now could put you in a stronger position to make the most of it.
