The Autumn Budget 2025 presents a series of fiscal measures aimed at stabilising the UK economy, addressing the ongoing cost-of-living crisis, and ensuring long-term growth. With public finances under pressure, the Chancellor has outlined a plan to increase tax revenues while also providing targeted support to households and businesses.
A key aspect of the Budget is the freeze on income tax thresholds until 2031, which will push many taxpayers into higher tax bands as earnings rise. The freeze will contribute to raising more from personal income taxes over the coming years, alongside increased revenue from income on assets (property, dividends, savings) and reforms to capital gains and pension tax reliefs, while leaving the main income tax and National Insurance Contributions (NICs) rates unchanged. These changes are designed to raise the necessary funds to address fiscal deficits and meet public sector spending needs. However, the Government has also announced measures to support smaller businesses, including expanded employment allowances and continued funding for critical sectors such as green technology, research and development (R&D), and infrastructure.
For some households, the freeze on tax thresholds will increase financial pressure. However, welfare increases and investments in social housing are aimed at alleviating the cost-of-living strain, particularly for low-income families.
This report breaks down the key fiscal measures and explains their expected impact in straightforward terms, covering many of the major changes. However, given the extensive nature of these reforms, please feel free to contact us for more detailed, specific information tailored to your individual circumstances.
Economic outlook: OBR summary
The Office for Budget Responsibility (OBR) has provided its latest economic forecast, which shapes the Government’s fiscal plans. Real GDP growth is projected to average 1.5% between 2026 and 2029, a downward revision from earlier forecasts. The main driver behind this slowdown is lower productivity growth, which has been revised down to 1.0% (from 1.3% in March). The OBR attributes this to ongoing global uncertainties, a reduction in trade intensity, and a slower-than-expected recovery in productivity following recent economic disruptions.
Despite this, the OBR forecasts that inflation will gradually fall back to the Bank of England’s target of 2% by 2027, with real wage growth expected to remain positive. The near-term economic outlook remains subdued, with inflation expected to average 3.5% in 2025 before decreasing.
The OBR also expects public sector net borrowing to decrease gradually over the forecast period, from 4.5% of GDP in 2025/26 to 1.9% in 2029/30. While the short-term borrowing requirement is high due to increased public sector spending, especially in health, infrastructure, and social services, the long-term outlook shows a slow but steady recovery. Tax receipts are expected to rise due to frozen personal tax thresholds and higher nominal earnings, although these increases may place additional strain on taxpayers.
Debt as a percentage of GDP is expected to rise to 96% by 2030, primarily due to short-term fiscal stimulus and public sector investment. Despite these pressures, the OBR projects that the Government will meet its current balance target in 2029/30, with a £21.7 billion surplus. However, risks remain in the form of potential economic shocks, fluctuations in global trade, and changes in interest rates, which could impact growth and public finances.
In conclusion, the OBR’s forecast indicates a modest recovery for the UK economy, with tax rises funding necessary public sector investments. While short-term challenges persist, the medium- to long-term outlook is more stable, with targeted investments in green infrastructure and technology expected to drive future growth.
KEY BUSINESS CHANGES
The 2025 Budget introduces several significant changes for businesses, striking a balance between new obligations and continued support for growth. A key focus is on enhancing business rates relief for small and medium-sized enterprises (SMEs). The Government has decided to introduce lower business rates multipliers for eligible retail, hospitality, and leisure (RHL) properties, starting in April 2026. These new multipliers will be 5p lower than the national standard, benefiting approximately 750,000 properties in these sectors, which have been under significant pressure since the pandemic.
Additionally, the high-value multiplier will increase for properties with a rateable value above £500,000. These changes are designed to provide much-needed support to sectors that are still recovering from the economic impact of recent challenges.
Employer National Insurance
The secondary threshold for employer NICs will remain frozen at £5,000 until April 2031, extending the position established in last year's Autumn Budget. This means employers will continue to pay 15% NICs on employee earnings above this relatively low threshold for the foreseeable future.
For smaller businesses benefiting from the Employment Allowance – doubled to £10,500 last year and in effect from April 2025 – the impact remains manageable. However, employers without access to this relief will see their payroll costs remain elevated compared to pre-2025 levels.
Changes to corporation tax and capital allowances
The main corporation tax rate remains at 25%, and full expensing continues for qualifying plant and machinery. However, the Budget introduces two significant changes for other categories of capital expenditure. From 1 January 2026, a new 40% first-year allowance will apply to expenditure allocated to the main pool, which will benefit a business which is unable to use the existing first-year allowance rules or has already exceeded the annual investment allowance limit. In addition, from April 2026, the main writing-down allowance will be reduced from 18% to 14%, increasing the time it takes for businesses to obtain tax relief on remaining expenditure.
These changes affect assets that do not qualify for full expensing and will be particularly relevant for businesses making substantial ongoing investment in plant and machinery. The Annual Investment Allowance (AIA) remains unchanged at £1 million, with no new restrictions announced.
Support for SMEs
The Budget also continues to support businesses through the Small Business Rates Relief (SBRR) scheme. From April 2026, the grace period for businesses expanding into a second property will be extended, allowing businesses to retain their relief for an additional two years. This measure is expected to help SMEs manage costs as they grow, offering more stability during periods of expansion.
Incentives for innovation and growth
For innovation-driven businesses, the Government has increased the eligibility for the Enterprise Management Incentive (EMI) scheme. From April 2026, companies with up to 500 employees and gross assets of up to £120m will be able to offer tax-advantaged share options to a broader pool of employees. This change will help fast-growing companies attract and retain the talent they need to scale, boosting the UK's entrepreneurial ecosystem.
Increased funding for R&D
Further support for investment is provided through changes to the UK’s venture capital schemes. The Government will raise the annual and lifetime investment limits for both the Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS), increasing the amount of capital that high-growth businesses can access. However, from April 2026, the rate of upfront income tax relief on new VCT subscriptions will fall from 30% to 20%, aligning it more closely with other reliefs and better balancing the overall package of incentives.
Boosting investment in emerging sectors
In addition to the tax reliefs, the Government is funding a variety of infrastructure and development projects aimed at stimulating long-term growth. This includes £14.5m for industrial projects in Grangemouth and substantial investments in clean energy and advanced manufacturing. These projects are expected to create thousands of jobs and drive economic growth, benefiting businesses across multiple sectors.
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