If we're talking new subs, then the best bang for your buck is going to be something -
or really anything - from the BK range. When you're buying direct from the factory then it's hard for any retail-only type product to compete with that sort of value.
The P12-300SB in either front firing (-FF) or down firing (-DF) version sits comfortably within your £400 budget. It's a 12" main driver plus a 12" passive driver in a sealed box. Top awards from AV Forums, Home Cinema Choice and Hi-Fi Choice. What Hi-Fi have never been fans of BK because it upsets their advertisers. I'm not saying that their reviews are biased towards the brands that pay for space in the mag, you understand......
For main speakers, you should really have a listen to some options and decide what suits your taste. With limited floor area, you're not going to have room to place floor-standers and give them the room they need to work without sounding boomy and overbearing unless they're very bass-lite to begin with. Rega Alya come to mind. Incredibly agile performers with a wonderful sense of musical timing; real toe-tapping speakers. However, since the Alyas have been discontinued for quite a while, and so has the Rega Senta centre speaker which was a rare beast at the best of times, then that's not really a sensible option used unless you drop incredibly lucky on someone selling a complete set. That leaves bookshelf speakers as the obvious alternative.
Pretty much anything in the £99 and above category is going to give you a fairly major step up from the Onkyo speakers. Going from the single driver per speaker design of the Onkyos to a two way design should yield sweeter treble and deeper bass, and more detail over-all. You'll still need to pay attention to positioning though. Anything that generates mid-bass needs to stay away from room corners. Positioning away from the back wall depends on the speaker design. Something large for a bookshelf speaker such as the Monitor Audio Bronze 2 needs about 8-12" (20-30cm) from the back wall. Wharfedale Diamond 220 can live with just a 3-5" gap, Dali Zensor 1 can be flat against the back wall. Position in from the side walls varies between 18" and 36" (50-100cm).
From the sound of your room layout and listening distance, my guess is your seating position is a sofa or chair up against the back wall. Stereo imaging is going to be a bit of a challenge then. The rough rule of thumb is that the speakers and seating position should form an equilateral triangle. That means you're the same distance to each speaker as the speakers are apart. If we take a side-wall gap of 20cm per speaker off the room width (125" = 317cm), and account for the speaker width, then that leaves about 260cm/102". A bit of Pythagoras gives a straight-line distance from the front wall speaker line to the ideal seating position of around 250cm (this accounts for the depth of speakers flat against the back wall). You sit another 80cm further back. Unless you can change the seating distance, - or music isn't so important - then that'll just have to be a compromise due to the room dimensions.
Getting Atmos to work in your room with your current speaker positions and up-firing speakers could be another challenge. The sound is going to bounce off the ceiling at the same angle that it hits. That means that whatever the angle set in the speaker, then that's the angle it will bounce back at from the ceiling. My guess is that whether you put up-firing at the front of the room or at the back, the reflected sound is always going to miss your listening position. You might have to rethink ATMOS unless you can either go in-ceiling above where you sit or find some up-firing speakers with a tilt facility.
