Autumn Budget 2025: The Major Announcements and Their Impact on UK Companies
The Autumn Budget introduced a mix of fiscal adjustments and policy updates with implications for companies of all sizes. Alongside revised economic forecasts, Rachel Reeves, Chancellor of the Exchequer, set out changes affecting corporation tax, capital allowances, pension contributions, business rates, and investment incentives. We’ve summarised the announcements below.
Leading up to the Budget, there was vast media speculation around what the announcement might contain. In fact, the Deputy Speaker of the House even highlighted the outstandingly high level of media solicitation and firmly stated it was unacceptable.
With a spending gap estimated to be between £20-30bn, Reeves had banked on being able to raise income tax by 2p, offset by a cut of the same rate on national insurance. The proposal was ultimately set aside following internal concerns about consistency with the party’s stated commitments.
What was announced was somewhat overshadowed by an early publication of the Office for Budget Responsibility (OBR) report, half an hour before the Chancellor had an opportunity to lay out their plans.
Economic forecast
The leaked OBR publication was reported to contain £26bn of taxes across the board, what was announced was fiscal headroom of £27.1bn by the Chancellor with which she stressed Labour had met the stability rule a year early.
The OBR downgraded its productivity assessment based on output per hour by around 0.3% by the end of the end of the forecast to 1%. The cut to the forecast had come about due to “a clearer and weaker” picture for growth. Despite the downgrade the fiscal watchdog stated that “(it does) expect some pick up from the dismal rates of productivity growth seen in the post-financial crisis period”.
The OBR also reported on the UK’s predicted GDP:
| Year | GDP | Change from March 2025 |
|---|---|---|
| 2025 | 1.5% | Up from 1% |
| 2026 | 1.4% | Down from 1.9% |
| 2027 | 1.5% | Down from 1.8% |
| 2028 | 1.5% | Down from 1.7% |
| 2029 | 1.5% | Down from 1.8% |
| 2030 | 1.5% | New forecast |
Source: The Guardian
Corporation tax
Permanent establishment
Rachel Reeves announced that changes will be made to the UK’s permanent establishment rules, aligning them with international standards, providing clarity for businesses that operate cross-border. The aim is to reduce uncertainty and instil consistency with the principles of the Organisation for Economic Co-operation and Development (OECD). As a follow-up, the UK’s definition of what a permanent establishment is will be pulled in line with the wording using the OECD Model Tax Convention, further reducing confusion for multinational domiciled businesses.
Late filing penalties
There will be an increase in penalties for late filings of corporation tax for returns where the filing date falls on or after 1 April 2026. Until now, this has been unchanged since 1998 and, in an effort to reinstate positive compliance behaviour, restores the penalties to their original real-terms value.
Capital Gains Tax
The Chancellor announced that Capital Gains Tax (CGT) relief that company owners receive when they sell their shares to employee-owned trusts is being halved to 50%, with immediate effect. When taken with other tax increases included in the budget, the Institute for Financial Studies stated that they “weaken incentives to save and invest”.
Salary sacrifice for pensions
This measure places a new cap on the National Insurance-exempt portion of employee pension contributions, reducing tax-free payments from existing limits to just £2,000 a year via salary sacrifice.
The change will come into effect in April 2029 and all pension contributions made in this way will remain exempt from Income Tax in the same manner they always have. For employers, this means that they will need to report the total amount sacrificed through their existing payroll software and all employer contributions will remain exempt.
The government stated that this will limit the benefits of salary sacrifice arrangements, which have grown over the years. The costs of relief through salary sacrifice relate disproportionately to pension contributions from higher earners. The move aims to make the system fairer and more sustainable, and estimates put the figure raised to the Exchequer at circa £4.7bn.
Investment schemes and PISCES
The Chancellor confirmed wider eligibility for the Enterprise Management Incentive (EMI) scheme, giving more scale-ups the ability to grant tax-advantaged share options as they grow. Limits for Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) investment will also increase, helping investors continue to support maturing companies. To bring the schemes into closer balance and encourage investment into high-growth areas, the VCT Income tax relief rate will move from 30% to 20%.
These changes build on the recent update that allows companies to amend Company Share Option Plans and EMI agreements so employees can exercise options at PISCES events without losing the related tax benefits. The government see this as a key step in ensuring that PISCES functions effectively and supports liquidity for scaling businesses.
Changes to ISA limits
One of the changes that was rumoured ahead of the budget announcement revolved around decreasing annual ISA limits, which currently stand at £20,000. Under the new regime, this will be the same but, for the under-65’s, cash ISA’s will only be allowed to make up £12,000 of this figure.
The move is very much seen as one that will tempt investors to diversify their portfolios and invest in the UK’s Capital Markets and the FTSE 100 and 250 markets saw mild gains immediately following the announcement.
The Chancellor stated that over 50% of the ISA market, including Hargreaves Lansdown, Barclays, and Lloyds, had signed-up to launch new online hubs to boost investment in UK businesses.
As a further incentive to use these mechanisms, the Chancellor announced a 2% rise in income tax savings outside of ISAs and pensions, including dividend income.
Business rates
A number of changes were announced that redistribute rate multipliers across sectors. The changes move the burden of business rates from smaller firms in the retail, hospitality, and leisure spaces to higher value commercial properties. These include higher value commercial properties such as logistic hubs and large office properties through a banded multiplier system.
Three-quarter of a million properties in the retail, hospitality, and leisure industries will benefit from reduced rates based on a lower multiplier applying to properties that fall under the £500,000 tidemark from April 2026. Conversely, those above this figure will be hit by higher multipliers to increase their contributions through this tax.
The banking sector avoids further taxes
Profits at UK banks have boomed in recent years and there was speculation that the sector could be a target for a tax raid in the Autumn Budget. The decision was made following industry engagement on the matter.
Subsequently, some of the country’s biggest lenders have introduced several lending schemes targeted at UK businesses. Lloyds have stated there is £35bn of new financing next year, whilst HSBC announced more than £11bn of support for both UK businesses and households.
Market reaction
Perhaps the only immediate piece of bad news was a drop in the pound immediately following the OBR’s premature publication of their report. Markets stabilised following the Chancellor’s statement. As mentioned, the FTSE 100 and FTSE 250 markets enjoyed a slight rise off the back of the budget announcement with banking in particular seeing a surge, likely through the omission of further taxes specifically targeting the sector.
Lindsay James, investment strategist at Quilter had a more grounded view, however: “While Rachel Reeves attempts to spin the OBR’s forecasts, it is clear that reality is far from rhetoric. Economic growth forecasts for 2025 may have been upgraded, but productivity has been downgraded, inflation is expected to be higher and spending is going up. Indeed, borrowing is rising and only being cut towards the end of the forecast period. Compared to March’s forecast, it is estimated to be £21 billion (0.7 per cent of GDP) higher in 2025-26, but still lower by £6 billion (0.2 per cent of GDP) in 2029-30, resulting from some of the more significant tax raising measures not kicking in until 2028, bringing some added uncertainty over its revenue-raising potential.”
A more neutral opinion was voiced by Sanjay Raja, chief UK economist at Deutsche Bank who stated, “Today’s budget was better than expected on many fronts – while perhaps under-delivering on other parts.”
Cytec’s view
“As a small UK business, we are pleased to see this Budget announcement having a lesser effect on small business in terms of impact from revenue-raising measures. The coverage of the budget prior to the announcement was full of headlines that, ultimately, didn’t come to pass. However, I am not sure the proposed policies will go as far as needed to curb longer term inflationary pressures, nor stimulating near-term growth that is so desperately required. We’re eager to see if the nervous reaction from the UK’s capital markets will turn into a more positive outlook and raise not just the number of UK investors but also their investments within British-listed organisations.”
