Autumn Budget Response – 26 November 2025

Autumn Budget Response – 26 November 2025

The long awaited Autumn Budget took place yesterday, and for most of our clients (individuals and owner managed businesses) I highlight the key areas you need to be aware of, and my recommendations for what we can be doing about these changes. If you have any questions about any of the changes, please reach out to me if you’d like to understand better how they may impact you, your investments, your business and your wealth.

Firstly, take what metaphor you may of the massive blunder of the Office of Budget Responsibility (‘OBR’) publishing their report before Rachel Reeves made her speech. The media, general public, financial markets all had complete access to the budget announcements on their smart phones before the speech even happened.

Despite the premature news leaking, the financial markets responded relatively positively with the fiscal responsibility of the Government. One of the fiscal positives taken is the amount of headroom the latest tax rises should create to prevent Labour having to come back a 3^rd consecutive year in 2026 with additional tax burdens. However, the OBR believe there is a 50% chance Labour will still be required to increase taxes in the Autumn budget of 2026 too depending on how the next 12 months play out. Although they could just be saying this to deflect any blame on any changes to their statistics in the future.

From a business point of view, this was a budget for fiscal responsibility, and not one for growth. Whilst Rachel Reeves would defend her position to get the government’s books better balanced, the next step must surely be a campaign to go for growth. Unfortunately, there is nothing radical in the budget to tremendously fix anything that’s majorly broken in the UK. For instance, the OBR has revised down productivity growth in its latests findings. To put this into perspective, if you were to take the productivity of the UK between Margaret Thatcher and Gordon Brown’s era, the UK would be 30% richer than it is now.

Labour’s internal politics (backbenchers particularly) prohibited Rachel Reeves from being allowed to cut spending so to a large extent she was backed into a corner on tax rises. As a result, the UK now collects historically an unprecendented amount of tax equating to 37% of GDP, previous heights were around 33% and under Boris Johnson was down to 28%. This is partly the fact there are tax rises but also that GDP growth is flatlining. The key tax changes affecting our clients are:

• Property Income, Savings Income & Dividend Income will now see a tax increase in 2 percentage points on both basic rate and higher rate tax from April 2026 – For clients already maximising their basic rate bands, there isn’t much tax planning available. For any basic rate taxpayer clients, we can ensure we are maximising your basic rate bands paying 8.75% before the hike to 10.75% occurs next year. Additionally, for any higher rate tax bracket clients close to the additional rate of tax, we can aim to maximise the lower rates of the current tax year.
  • Dividends 8.75% to 10.75% & 33.75% to 35.75%
  • Property & Savings Income 20% to 22% and 40% to 42%
• Salary Sacrifice Pensions being capped at £2k from April 2029 – Therefore any employed higher rate taxpayer clients may wish to maximise this relief before the changes come in! Classic Labour protecting public pensions and hurting private pensions.
• Tax Free Allowances continue to be frozen until 2028 i.e. inflationary pay rises, higher profits, higher dividends etc. may naturally push you into a higher rate tax bracket. To put into perspective this will generate a further £8 billion in the government’s tax coffers.
• ‘Mansion Tax’ (will be referred to as council tax surcharge) – Properties >£2m will pay £2.5k/year rising to £7.5k/year on properties >£5m.
• Electric Vehicles – a new mileage based charge on battery EVs from April 2028. Some are estimating 470,000 fewer electric vehicles will be sold. From the tax man’s perspective, if all cars became electric where only petrol cars were taxed, then the government would get no tax revenue at all from vehicles. Therefore, as EVs become more common, there will naturally be an erosion of the tax perks available. However, any company cars, electric vehicles are still the cheapest tax option.
• Inflationary increase in minimum wage roughly 4% – This will have a knock on effect with higher prices for businesses with resaonably sized workforces.
• Business rates – some incentives remain for the leisure and hospitality industry, and more deprived areas of the UK such as Liverpool. However, most of the UK, will see the gradual increases of business rates.
• Employee Owned Trusts tax advantages halved – Small business owners selling their companies to the staff (via an EOT) has been gaining traction last few years, partly because the capital gains tax for the seller was 0%. Clearly EOTs have been gaining too much traction, that the government now wishes to control the amount of EOTs getting established, and ensuring business owners are still paying some capital gains tax on any business sale.

The UK is a heavily progressive tax system. The top 0.1% of UK taxpayers pay 5-10% of the total, the top 1% of UK taxpayers pay 28% of the total tax & the top 10% UK taxpayers pay 60% of the income tax. We tax the rich like a Scandinavian country, and the lowest incomes are taxed similarly to the United States. Therefore, it’s concerning that the ones with the broadest shoulders continue to require even broader shoulders.

Upsides of the budget & UK Economy generally:

• The UK is still the 6^th largest economy in the world. Whilst growth is flatlining, we haven’t experienced a recession despite Brexit, despite COVID and despite paying record high taxes as a percentage of GDP. There continues to be a resilience in the economy to withstand it. For my clients (individuals and owner managed compaines), this boils down to the strength and capability of yourselves and constant efforts to add value to society in your specific field. I refer to it as ‘survivor mentality’.
• It could have been worse – the build up had more concerning tax rises than what has actually happened
  • Income Tax & NI for self-employed, partners and employees wasn’t touched despite hype of a 2% increase
    • Therefore increasing the reasoning for sole traders not to move into a limited company as dividend tax has increased
  • Speculated leaving the UK taxes did not come into effect, enabling individuals the opportunity to leave the UK without significant tax burden
  • Corporation tax wasn’t increased any further (however a big tax increase happened in 2023 clients are now paying)
  • Capital Gains Tax wasn’t increased any further (however the Autumn 2025 budget had major change significantly impacting our tax advice)
  • Inheritance Tax wasn’t increased any further (however the Autumn 2025 budget had collossal change massively impacting our tax advice)
  • Pensions – I was worried that the available higher rate tax relief on pensions could have been reviewed, but only changing salary sacrifice means there are still tax benefits for higher rate taxpayers. However pensions becoming part of your Estate for Inheritance Tax does still really offend me from the last budget, and so we must not as a default anymore simply pour any excess funds into pensions like we used to because of this huge change. I.e. if the pension pot may outgrow what you intend to live on during retirment.
  • National insurance on LLPs wasn’t introduced which has avoided major tax increases for many service based businesses like estate agents, solicitors, dental practices, accountants etc.
• Non tax benefits –
  • Waiting lists come down in NHS
  • More investment in state schools and other public sector spending
  • Talks about AI usage and government efficiencies are positive

Dowsides of the Budget & UK Economy generally:

• Tax for savers, property investors and business owners has increased again
• Tax increases of the previous budget remain in tact
• Starting level of Real Household Disposal income (RHDI) per person has been revised down since March 25’s last forecast
• Government spending up
• Welfare up
• Unemployment up
• Debt-interest up (paying £100bn/year in interest, national debt at ~100% GDP)
• Growth down
• Investment down
• Business confidence down
• Productivity growth down

From a business point of view, unless you’re in a new high growth sector, or selling overseas to a growing market, the size of the UK industry you are in is likely not to grow too much. This means it becomes a bigger challenge to compete against your competitors than before, and in these situations as they say ‘the cream rises to the top’ and the invisible hand of the economy will cut the dead wood from the trees (i.e. failing businesses). This means businesses need to hone in further on your USPs, to reasonate with more customers and better with existing customers, to improve customer offering and/or protecting prices. In other words, more needs to be done, and it is possible you can outwork and outperform your competitors to continue growing sustainably in the long term despite the economic and fiscal backdrop. Plus, if or when the UK economy starts to grow again, you will hopefully be in a better position to capitalise on this. The biggest areas of focus I would recommend are:

• Attracting and Winning business – Most companies problems disappear if sales increase at the right margins, and therefore this must always take first priority
• Competitor benchmarking – Identify what is working in your industry for competitors, see if it can work for you too, and double down on what is succeeding
• Efficiencies – Many manual tasks can be removed this day and age through automation and also now with AI. This could be as simple as using the right software. For instance, with Xero bookkeeping we recommend, there are automatic bank feeds, bank rules you can set-up for quick bank reconciliations, Hubdoc invoice scanning software to store digital records that can also be automtically posted to your Xero ledger. All such things are factored into our pricing and services to you. There will be efficiencies gained using the right softwares in other parts of the business too like your CRM software which form part of your customer service, your sales pipeline, project management. And now, there are more CRM and other 3^rd party softwares that integrate with Xero (& others) so that all your systems talk to each other. Key thing to look for is if you, or any staff, perform any repititve tasks. Chances are the task can get automated.
• Overhead control – The government’s fiscal responsibilty means we should all be fiscally responsible too. Things like minimum wage rises could mean you decide not to take on an extra staff member that you would like, or the increase in corporaiton tax a few years ago means you’re looking for better ways to reducing your tax bills like making more capital investments back into your business or extracting profits tax efficiently through pensions.
• Cashflow management – If margins are getting squeezed, or revenue is falling, and that cash balance is becoming a concern, then investing in cashflow management could be a make or break of the business.
• Re-assess your business and wealth strategy for these changes & the impact on your loved ones
  • Do the inheritance tax changes mean less money in your family’s pocket?
  • Can your family live without your income in case of critical illness or death?
  • Are your financial interets like a trading business in a good place, i.e. a family member could take it over easily, or the capital value can be cashed on a distressed sale

In closing summary, the situation sounds quite doom and gloom. However, we are genuinely somewhat pleased the changes aren’t massively detrimental although still not welcomed. We were extremely nervous watching this budget, probably the most nervous of a budget in a long time, in part due to the major tax increases from the 2025 budget if something similar was to follow again. Furthermore, if we were to have an open mind, some may see it as the naïve view, but if we assume Labour succeed to balance the books and collect more revenues than they spend for better fiscal responsibility, at the expense of limited economic growth for the UK next 12 months, you must surely expect the next budget of Autumn 2026 to be more focused on growth and how we can all progress our profits and income putting more money back in our taxpayer pockets again. In addition, new small businesses entering tough markets in the right way I am seeing make great progress, and I’m also seeing larger more established businesses making effective change too, whether that’s cutting its cloth, or finding better ways to win business and efficiencies of operating.