Not every Budget is remembered afterwards and not every Budget is consequential but when the Chancellor rises to deliver her second Autumn address on November 26th, it might very well be both. 

A hard prevailing economic environment marked by subdued growth, high public debt servicing costs and stubborn core inflation, although it has reduced slightly most recently – has created a significant fiscal hole estimated to be between £20 billion and £40 billion.

The previous government did their best to conceal the extent but after over a year in government, this is very much her problem to solve now. 

The Treasury has stated its focus is on growth through investment and reform however filling this gap will likely require some combination of tax increases and spending cuts. 

The position of business leaders across all sectors is clear: they want “no surprises and encouragement to invest in the UK”.

Given the political constraints of manifesto pledges not to raise the headline rates of Income Tax, National Insurance or VAT, there is little wriggle room for the Chancellor. Experts predict that she will then rely heavily on targeted tax rises directed primarily at wealth and asset holders alongside increases in “sin taxes” and administrative measures. 

In this blog, we’ll take a strategic overview of what directors can expect and how these changes will impact their businesses and personal finances.

Corporate Tax and Investment Stability

For many directors and business owners, the good news is that the core corporate tax environment is expected to remain stable, helping to maintain a degree of certainty for planning purposes. 

  • Corporation Tax rate: No major changes are anticipated for the headline Corporation Tax rate, which was capped at 25% for the duration of this Parliament under the 2024 Corporate Tax Roadmap. 
  • Investment incentives: Crucial investment incentives established in previous Budgets are expected to remain in place, including permanent full expensing, the £1 million Annual Investment Allowance and generous reliefs for Research & Development (R&D) and the Patent Box.
  • Potential Investment Boosts: Directors should watch for potential positive steps, such as the extension of full expensing to cover intangibles (such as patents, licences and software) or modifications to land remediation relief to encourage brownfield site development.
  • Banking: The banking sector remains under review – while major increases are unlikely, the Chancellor could look to reverse a previous 5% cut to the bank surcharge or restore a portion of it.

The rising cost of employment and pensions

Businesses already absorbed a rise in employer National Insurance Contributions (NICs) last year. This Budget’s focus is expected to tighten employee-related tax reliefs and increase mandatory wages.

  • National Minimum Wage/National Living Wage: A rise in both is strongly expected which will directly increase wage costs especially for sectors such as retail, hospitality and leisure.
  • National Insurance thresholds: Rather than increasing the headline rate, the most likely mechanism for raising tax revenue is extending the freeze on Income Tax and NI thresholds beyond their current end date of April 2028. This “fiscal drag” is a stealth tax that raises payroll costs for businesses over time as salaries increase. 

Pension salary sacrifice: a major target

  • Expected restriction: Speculation is rife that the tax-efficient nature of pension contributions made via salary sacrifice schemes will be restricted. Over 90% of mid-market businesses anticipate reform here. 
  • The £2,000 Cap: The proposed change involves capping the NI-exempt amount at £2,000 per annum.
  • Business Impact: If this measure is adopted then employers would face paying the 15% Employer’s NICs on sacrificed contributions exceeding the £2,000 threshold. This increased complexity and cost could lead some employers to withdraw salary sacrifice arrangements altogether, harming pension saving efforts. 

Business operations, property and compliance

Directors should prepare for structural and technical reforms concerning VAT, business rates and customs duties. 

Business Rates Reform

Further update on business rates reforms are expected, aimed at stimulating investment and removing barriers to growth.

  • Relief for RHL: Permanent lower rates for Retail, Hospitality and Leisure (RHL) properties (with Rateable Values under £500,000) are set to be confirmed from April 2026. This relief will be funded by a new high-value multiplier applied to larger properties (over £500,000 RV). 
  • Structural Change: The government is exploring the case for moving from the current “slab” system (a single multiplier applied to the full value) to a “slice” system (a marginal tax rate applied to successive value bands). 
  • Small business relief: Expect some enhancements to Small Business Rates Relief (SBRR), specifically aiming to remove the perceived “cliff edge” that currently discourages small businesses from expanding into multiple sites. 

Digital Tax Administration and Customs

  • E-Invoicing: Businesses should actively prepare for updates on the government’s e-invoicing proposals. If made mandatory, this will require significant process adjustments in tax and finance departments, modernising VAT reporting.
  • Closing Low-Value Customs Loophole: There is a high likelihood the Chancellor will move to close the customs duty relief that allows small packages (under £135) to enter the UK without import duties. This measure is intended to help UK retailers compete against foreign online sellers.
  • Transfer Pricing: Technical tweaks to transfer pricing rules are expected, potentially extending new reporting requirements to medium-sized companies.

Directorial and entrepreneurial tax focus

With pledges on broad-based taxes under pressure, the Chancellor has signaled that the wealthy must contribute. Directors who sold significant assets (including property and company shares) should pay close attention to proposed changes aimed at wealth, which are rated high likelihood.

  • Property taxes – there is a high likelihood that a Mansion Tax or high-value levy will be introduced which could see the introduction of an annual charge (1% above £2 million value) or the removal of the Capital Gains Tax (CGT) exemption on the sale of primary residences above a high threshold (£1.5 million).
  • Landlord/partners taxes – A possible introduction of NI on rental income or extending NICs to private landlords’ rental income.
  • Business exits & assets – Another possibility is potential increases to Capital Gains Tax or reductions to the £3,000 Annual Exempt Amount (AEA). 
  • Inheritance tax – It’s likely that there will be restrictions placed on gifting such as introducing a lifetime cap on tax-free gifts or extending the “seven-year rule” for gifts to fall outside the estate.
  • International mobility – there have also been reports of the introduction of a “settling-up” charge or exit tax on assets for individuals leaving the UK with research suggesting that implementing such a scheme could raise up to £2 billion in much-needed revenue for the Treasury. 

Navigating the hard choices

The overall picture emerging is that the Chancellor is likely to proceed via a mosaic of targeted tax increases to avoid breaking core manifesto pledges. 

This means avoiding any giant or controversial leaps but implementing small consistent steps in tax changes that cumulatively add up to large gains for the Exchequer. 

Directors and business owners should recognise that uncertainty demands proactive financial and strategic planning on their behalf. 

Chris Horner, Insolvency Director with BusinessRescueExpert, said: “It’s useful to think of the Chancellor approaching this Budget as a shipwright. 

“She’s trying to patch a leaky boat (the fiscal hole she inherited) without using the three largest sails (Income Tax, NI and VAT rates) for propulsion. 

“She must instead rely on smaller, specialist tools like tightening wealth taxes and shrinking tax reliefs to keep the ship of state afloat and on course to the stated destination of growth.”

While we won’t know for certain what the changes will mean for you and your business until after Wednesday 26th November – you can start preparing now by arranging a free initial consultation with one of our advisors. 

They will be able to let you know what your options are depending on where you want your business to go and help you plan to get there quickly and efficiently.