Autumn Budget 2025: What UK Businesses and Taxpayers Need to Know 📊
Introduction: A Pivotal Moment for UK Public Finances 💼
The Autumn Budget 2025, scheduled for Wednesday, 26 November 2025, arrives at a critical juncture for the UK economy. Chancellor Rachel Reeves faces one of the most challenging fiscal landscapes in recent memory, with mounting pressure to plug an estimated £20 billion to £50 billion gap in public finances whilst honouring Labour's manifesto pledge not to raise income tax, National Insurance (for employees), or VAT on working people.
This will be one of the latest fiscal events in the calendar year in recent history, giving the Chancellor additional time to navigate complex economic headwinds including stubborn inflation at 3.8% (almost double the Bank of England's 2% target) and UK 30-year bond yields at a multi-decade high of 5.6%.
For businesses, particularly SMEs still recovering from the October 2024 Budget's employer National Insurance increases and April 2025's National Minimum Wage rise to £12.21 per hour, the stakes could not be higher. This comprehensive guide examines what the Autumn Budget 2025 might contain and how you can prepare your business or personal finances for the changes ahead.
Understanding the Fiscal Context: Why This Budget Matters 📉
The Erosion of Fiscal Headroom 💸
Higher debt interest payments and weaker-than-expected receipts have taken the current balance from a surplus of £9.9 billion to a deficit of £4.1 billion in 2029-30, before accounting for new policies. This dramatic deterioration means the Chancellor must find significant savings or revenue to meet her self-imposed fiscal rules.
The Office for Budget Responsibility (OBR) will publish updated forecasts alongside the Budget, and early indications suggest the OBR is likely to roughly halve its 2.0% GDP forecast for 2025. This growth downgrade compounds the fiscal challenge, as slower economic expansion means lower tax receipts.
The Two Non-Negotiable Fiscal Rules
Rachel Reeves has committed to two fiscal targets that she describes as "non-negotiable":
- The Stability Rule: Ensuring day-to-day public spending is met by tax revenues by 2029-30 (achieving a current budget surplus)
- The Investment Rule: Public sector net financial liabilities must fall as a share of GDP in 2029-30 compared to 2028-29
The UK's Vulnerable International Position 🌍
The UK's fiscal position is increasingly vulnerable, by both historical and international standards. In 2024, the UK had the third-highest deficit among European countries, and the fifth-highest among 36 advanced economies. This context constrains the Chancellor's room for manoeuvre and increases pressure for decisive action.
If the UK's deficit is 4.2% of GDP (approximately £120 billion with GDP around £2.9 trillion), and the Chancellor needs to reduce this by one percentage point to meet fiscal targets, she would need to find approximately £29 billion through tax rises, spending cuts, or a combination of both.
Likely Tax Changes: What the Speculation Suggests 💰
Capital Gains Tax (CGT): Further Increases Expected 📈
There has been long-standing speculation that the Government could align CGT rates more closely with Income Tax. Currently, the main CGT rates stand at 18% for basic-rate taxpayers and 24% for higher-rate taxpayers following increases in October 2024.
Potential CGT Changes:
- Alignment with income tax rates (20%, 40%, 45%)
- Reduction in the annual exemption (currently £3,000)
- Changes to private residence relief for high-value properties
- Business Asset Disposal Relief rate increase to 18% from April 2026
A business owner selling their company for £800,000 (within the BADR lifetime limit):
At 14% rate (2025-26): CGT liability = £800,000 × 14% = £112,000
At 18% rate (2026-27): CGT liability = £800,000 × 18% = £144,000
Additional cost = £32,000 – a 28.6% increase in tax liability
Inheritance Tax (IHT): Tightening the Rules 🏠
Inheritance tax is expected to feature prominently in the Budget, following last year's announcements that private pensions will become subject to IHT at 40% from April 2027, alongside drastic reductions in allowances for agricultural and business property.
Possible IHT Changes:
- Lifetime gifting cap: Limiting the total value of tax-free gifts before death
- Extended survival period: Increasing the seven-year rule to 10 years
- Taper relief changes: Reducing or restricting existing relief that discounts IHT on gifts made 3-7 years before death
- Frozen thresholds: Extending the freeze on the £325,000 nil-rate band beyond 2030
- Residence nil-rate band restrictions: Potential reduction in the £175,000 RNRB
Pension Tax Relief: A Tempting Target 💼
With the annual cost of providing tax relief on pension contributions estimated at £45-£50 billion, speculation is mounting about potential changes:
Potential Pension Changes:
- Flat rate relief: Introducing a 30% flat rate for all taxpayers (currently relief given at marginal rate of 20%, 40%, or 45%)
- 25% tax-free lump sum: Reducing or capping the pension commencement lump sum (currently capped at £268,275)
- Salary sacrifice restrictions: Limiting the benefits of salary sacrifice arrangements
- Pension levy: A small percentage charge (e.g., 0.25%) on pension fund values
Higher-rate taxpayer contributing £20,000 annually:
Current system (40% relief): Tax relief = £20,000 × 40% = £8,000
Flat 30% system: Tax relief = £20,000 × 30% = £6,000
Annual loss = £2,000 – a significant reduction for higher earners
Business Owners: What to Expect 🏢
National Insurance on Rental Income? 💷
One of the more radical proposals being considered is bringing rental income of private landlords within the scope of National Insurance Contributions (NIC). Currently, rental income is subject to income tax but not National Insurance, creating a disparity with employment income.
If implemented at the self-employed rate, landlords would pay:
- 8% on annual earnings between £12,570 and £50,270
- 2% on earnings above £50,270
This move would raise a predicted £3.2 billion per year but represents a significant cost increase for property investors who haven't factored NI into their calculations.
VAT Threshold: Could It Change? 📊
At £90,000, the UK currently has a higher VAT registration threshold than any EU country. Rumours persist about potential changes:
- Reduction scenario: Lowering to £45,000 would bring more businesses into the VAT system, increasing compliance costs but also tax revenue
- Increase scenario: Raising the threshold could remove the artificial growth barrier for small businesses hovering just below registration
Business Rates Reform: Gradual Progress 🏪
The government has announced plans for business rates reform, including:
- Permanently lower multipliers for retail, hospitality, and leisure businesses with properties under £500,000 rateable value from April 2026
- Retail, hospitality and leisure relief extended for 2025/26 but reduced to 40% with a £110,000 cap
- Standard multiplier increase to 55.5p from 1 April 2025 for larger properties
- More frequent revaluations: Moving towards yearly revaluations to keep values current
| Property Type | Rateable Value | 2024/25 Relief | 2025/26 Relief | Impact |
|---|---|---|---|---|
| Small retail shop | £30,000 | 75% relief (£110k cap) | 40% relief (£110k cap) | Increase in liability |
| Medium restaurant | £85,000 | 75% relief (£110k cap) | 40% relief (£110k cap) | Significant increase |
| Large warehouse | £600,000 | Standard rate | Higher multiplier (55.5p) | Higher burden |
Impact of Existing Changes: Already in the Pipeline 🚀
Employer National Insurance: The £25bn Hit 💼
Already legislated from the October 2024 Budget, these changes took effect from April 2025:
- Rate increase: From 13.8% to 15%
- Secondary threshold reduction: From £9,100 to £5,000 annually
- Employment Allowance increase: From £5,000 to £10,500 (removes £100,000 cap)
Employee earning £35,000 per year:
2024/25 system:
Liable amount: £35,000 - £9,100 = £25,900
Employer NI: £25,900 × 13.8% = £3,574
2025/26 system:
Liable amount: £35,000 - £5,000 = £30,000
Employer NI: £30,000 × 15% = £4,500
Additional annual cost per employee = £926
However, 865,000 employers won't pay any NI due to the increased Employment Allowance, providing relief for the smallest businesses.
Making Tax Digital (MTD): Expanding Reach 📱
MTD for Income Tax will apply to self-employed individuals and landlords:
- April 2026: Those with qualifying income over £50,000
- April 2027: Those with qualifying income over £30,000
- By 2029: Those with income over £20,000
This requires maintaining digital records and updating HMRC quarterly using compatible software – a significant administrative change for many small businesses and landlords.
How to Prepare: Practical Steps for Businesses and Individuals 📋
For Business Owners:
- Review your cashflow forecasts: Model the impact of potential tax changes on your business finances
- Consider timing of business disposals: If planning to sell your business, the increasing BADR rates may mean acting before April 2026 could save significant tax
- Audit your employment costs: Calculate the full impact of higher NI contributions and minimum wage increases
- Prepare for MTD: If you're approaching the income thresholds, start investigating compatible software now
- Review business structure: Consult with specialist accountants about whether your current structure remains tax-efficient
For Individuals and Families:
- Review your estate planning: With IHT changes likely, existing strategies may need revision. Consider making gifts sooner if the seven-year rule is extended
- Maximise pension contributions now: If relief rates are to be reduced, maximising contributions at current rates could be valuable
- Use your CGT allowance: The £3,000 annual exemption remains; use it before potential further reductions
- Consider ISA maximisation: With speculation about ISA limit reductions, making full use of the current £20,000 allowance makes sense
- Document your financial position: Keep clear records of all gifts, property values, and asset bases for future tax calculations
The Broader Economic Picture: Growth vs Austerity ⚖️
The Growth Challenge
Rachel Reeves has repeatedly stated that economic growth is the solution to Britain's economic problems. However, the Budget on 26 November faces the prospect of potentially constraining that growth through necessary tax rises.
The OBR's expected downgrade of growth forecasts reflects several challenges:
- Weak business confidence: 75% of businesses expect further tax increases according to Grant Thornton's Business Outlook Tracker
- Global uncertainties: Trade tensions and geopolitical risks affecting international trade
- Higher borrowing costs: Making government debt more expensive to service
- Productivity stagnation: UK productivity growth continues to lag historical trends
Balancing Act: Public Services vs Tax Burden
The Chancellor faces competing pressures:
- NHS and defence spending: Already committed to significant increases
- Infrastructure investment: Necessary for long-term growth but requires upfront spending
- Welfare costs: Rising with health-related benefit claims doubling since the pandemic
- Debt interest payments: Consuming an ever-larger share of government revenues
Timeline: Key Dates to Remember 📅
| Date | Event | Significance |
|---|---|---|
| 21 October 2025 | New public finance data released | Provides updated borrowing figures |
| 26 November 2025 | Autumn Budget 2025 | Chancellor's statement + OBR forecast |
| 6 April 2026 | CGT BADR rate rises to 18% | Already legislated; business disposals more expensive |
| 6 April 2026 | MTD for Income Tax begins (£50k+ income) | Quarterly digital reporting required |
| April 2026 | IHT APR/BPR restrictions begin | £1m cap with 20% rate above applies |
| 6 April 2027 | Pensions brought into IHT | Unused pension funds liable to 40% IHT |
| 6 April 2027 | MTD expanded (£30k+ income) | More businesses and landlords affected |
What the Experts Are Saying 💬
Rebecca Williams, Rathbones: "With the Budget now set for 26 November, it feels like a rather late fiscal event. But with public finances stretched thin, the delay underlines that ministers are in full-on thinking mode ahead of what is shaping up to be one of the most consequential Budgets in a generation."
Institute for Government: "Reeves may be tempted to follow the well-trodden path of essentially doing as little as she can get away with. However, genuine reform that has the potential to make lasting changes to UK's economic outlook cannot be announced at the dispatch box on a Wednesday in autumn."
Grant Thornton Business Outlook Tracker: "75% of businesses expect further business tax increases this year, despite the Government's attempts to establish a more pro-business approach than Labour's 2024 Budget."
Frequently Asked Questions (FAQs) ❓
1. Will income tax rates increase in the Autumn Budget 2025?
Labour has pledged not to raise the basic, higher, or additional rates of income tax for working people. However, keeping thresholds frozen (fiscal drag) means more people pay higher rates over time. There is also speculation about potential increases not explicitly covered by manifesto pledges, such as a 1p-2p rise, though this would be politically risky.
2. How will the employer National Insurance changes affect small businesses?
From April 2025, employers pay 15% NI (up from 13.8%) on earnings above £5,000 (down from £9,100). This adds approximately £900+ per employee earning £35,000. However, the Employment Allowance has increased to £10,500, meaning around 865,000 of the smallest employers will pay no employer NI at all. Businesses should calculate their specific liability and factor this into 2025/26 budgets.
3. Should I sell my business before April 2026 to avoid higher CGT rates?
Business Asset Disposal Relief (BADR) rates will rise from 14% to 18% in April 2026, adding 4 percentage points to the tax on business disposals up to £1 million. If you were already considering a sale, the timing could save £40,000 on a £1m disposal. However, never let the tax tail wag the commercial dog – only accelerate a sale if it makes business sense. Consult with a qualified accountant before making this decision.
4. What inheritance tax planning should I do before the Budget?
With speculation about extended survival periods (seven years potentially becoming ten), lifetime caps on gifts, and reduced taper relief, consider making gifts sooner rather than later under current rules. However, ensure gifts won't compromise your own financial security. Review your Will, consider using the normal expenditure out of income exemption, and document all gifts made. Professional estate planning advice is essential given the potential for significant changes.
5. How can I prepare for Making Tax Digital for Income Tax?
If your gross income from self-employment or property exceeds £50,000 (April 2026) or £30,000 (April 2027), you'll need MTD-compatible software for quarterly digital reporting. Start researching software options now – look for packages that integrate with your bank, handle both income and expenses, and can submit returns directly to HMRC. Many accounting software providers offer MTD-ready solutions. Consider whether professional bookkeeping support would be beneficial to ensure compliance.
How MA & CO Accountants Can Help 🤝
Navigating the Autumn Budget 2025 and its implications requires expert guidance tailored to your specific circumstances. At MA & CO Accountants, we specialise in helping UK businesses and individuals understand and respond to tax changes.
Our Services Include:
- Budget Impact Analysis: We'll review how the announced changes affect your business or personal finances
- Tax Planning: Proactive strategies to minimise your tax liability within the new rules
- Business Structure Reviews: Ensuring you're operating through the most tax-efficient structure
- Estate Planning: Comprehensive IHT planning in light of upcoming changes
- MTD Readiness: Software selection, training, and ongoing compliance support
- Cashflow Forecasting: Modelling the impact of tax changes on your business finances
Don't wait until the Budget to start planning. The most effective tax strategies require time to implement properly. Contact our team today to discuss your specific situation.
Compliance Notice
Important: This article provides general information based on current legislation, speculation, and announced policies as of October 2025. It is not personalised financial or tax advice. Tax rules and rates may change, and your individual circumstances will affect how changes apply to you. Always seek professional advice from a qualified accountant or tax adviser before making financial decisions. MA & CO Accountants accepts no liability for actions taken based solely on the content of this article.
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About MA & CO Accountants
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Get in touch: Visit our website or contact us directly to discuss how we can support your business through the Autumn Budget 2025 and beyond.
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We've just published our comprehensive guide to the Autumn Budget 2025 – and with Rachel Reeves facing a £20-50bn fiscal gap, it's shaping up to be one of the most consequential Budgets in a generation. Which potential change concerns your business most: the CGT increases, possible IHT lifetime caps, or something else? 🤔
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