Top implications for businesses – Autumn Budget 2025

After months of build-up and speculation, Rachel Reeves delivered her second Budget. Thanks to the early release of the Office of Budget Responsibility’s report, there weren’t any big surprises. It was a Budget aimed at ‘rebuilding the economy’ and promoting growth through ‘stability, investment and reform’.  

During her speech, the Chancellor emphasised the importance of entrepreneurs and the need to match private enterprise with public ambition.  The government have launched a policy paper on entrepreneurship in the UK signalling priority areas for further action to support entrepreneurs, and a call for evidence on tax policy to support investment in high-growth UK companies.   

The impact of a further increase in the national minimum wage from April 2026, and a restriction on the national insurance saving employee pension contributions made via salary sacrifice from April 2029 will further increase the cost to employers.  

The Chancellor did announce that training provided by small and medium-sized enterprises for under 25’s would be completely free. 

Otherwise, there appears to be stability in the corporate tax regime, with the continuation of full expensing of capital costs, which will help businesses plan with certainty, and as in recent years there were no substantive changes to the VAT regime.   

Below, we explore the key implications and what they mean for businesses.

Capital allowances changes

From January 2026, a new 40% first-year allowance (FYA) will apply to qualifying plant and machinery purchases, extending relief to unincorporated businesses (including partnerships with corporate partners) and assets bought for leasing, which were previously excluded. From April 2026, the writing-down allowance (WDA) for main-pool assets will drop from 18% to 14%, reducing ongoing tax relief. Read more about capital allowances changes here.

Major tax changes to support scale-ups

Reforms were announced to support scaling businesses by expanding tax reliefs for both companies and investors. From April 2026, Enterprise Management Incentives (EMI) limits will significantly increase – doubling employee thresholds, quadrupling asset caps, and extending option exercise periods – allowing growing firms to retain talent longer.  Investor schemes also see enhancements: Enterprise Investment Scheme (EIS) limits will double whilst preserving existing tax reliefs, whilst Venture Capital Trust (VCT) relief reduces from 30% to 20%. These changes aim to make follow-on funding more attractive and help scale-ups secure talent and capital without cash strain. Read more about tax changes to support scale-ups here.

Employee Ownership Trust (EOT) tax relief slashed by 50%

The 2025 Budget has halved the capital gains tax (CGT) relief for disposals to Employee Ownership Trusts (EOTs), replacing the previous 100% exemption with a 50% exemption effective immediately. This change follows a sharp rise in the cost of the relief, projected to reach £2 billion by 2028–29, and comes amid broader CGT increases that had made EOTs highly attractive. Read more about EOT tax relief here.

Capital gains tax: Anti-avoidance on share exchanges and reorganisations

The government has announced immediate changes to modernise the anti-avoidance rules applying to share exchanges and company reorganisations. These updates aim to close loopholes and ensure that tax-neutral treatment is only available where genuine commercial purposes exist, preventing arrangements designed to sidestep CGT. The measures will take effect immediately, so businesses currently involved in restructures or share-for-share transactions should review their plans carefully to ensure compliance. Read more about capital gains tax here.

Overseas workday relief

The government will limit the proportion of earnings an employer can exclude from PAYE through a PAYE notification to a maximum 30%, which is the maximum overseas workday relief one is able to claim through self-assessment. This aligns the PAYE system and the self-assessment system. It has been announced this measure will take effect from 6 April 2026.

Conclusion

The stability in the main corporate tax regime is to be welcomed, as are the improvements to capital allowances and the investment reliefs, which should help investment both by businesses and individuals.   

It will be interesting to see the outcome of the government’s review into entrepreneurship in the UK and the tax policies that could be adopted to promote growth and risk-taking. 

Businesses with employees being paid the National Minimum Wage and those operating a salary sacrifice scheme for pension contributions will need to consider the impact of the changes announced today.

If the Budget has raised any questions for you, book your place on our question time webinar this Friday at 9:30am.  Alternatively, if you would like any further information or guidance on this topic, get in touch with your usual Kreston Reeves contact or contact us here.