The Budget and professional services firms

Last month, Rachel Reeves delivered her Autumn Budget. Whilst professional services firms were not in the Chancellor’s sight, several measures were announced that will impact professional services firms and the partners and owners who run them. 

Measures that will affect firms 

One of the single largest costs to professional services firms is their people. Salaries, wages and employee benefits are typically the largest expense as firms rely on highly-skilled employees. From 2029, there will be a £2,000 limit on employees paying pension contributions under salary sacrifice arrangements. This announcement will lead to additional national insurance being paid by both the employee and the employer on contributions above £2,000 a year. This will affect payroll costs and impact profitability.  

It was also confirmed that the corporation tax rate will remain unchanged. However, there were some small changes to the capital allowances regime, including a reduction to the standard writing down allowance for main-rate assets from 18% to 14% per annum in April 2026.   

Succession planning continues to be a key issue for professional services firms and should be reviewed at least annually. One option that some firms have been considering when looking at their exit strategy is Employee Ownership Trusts (EOTs). The Budget announced that tax relief on disposals to EOTs will be halved, making this an opportune moment to revisit your firm’s succession plans.  

Measures that will impact partners and owners  

For individuals, several changes may affect those working in the sector. These include increases to the tax rates on dividend income from April 2026 and on rental and savings income from April 2027.  The freeze on income tax bands has also been extended until 2031, extending fiscal drag. This means that more employees and partners will move into higher tax bands over time.  

Given the changes to dividend tax rates and pensions, it could be a good time to review remuneration and extraction planning.  

Inheritance tax (IHT) thresholds are due to remain frozen. This will likely mean that more individuals could be brought into the scope of IHT due to increasing property prices over time. If you haven’t already considered your IHT position, now may be a good time.   

There is also a high value council tax surcharge being levied on properties worth more than £2 million from April 2028.  

Next steps  

In light of the Budget announcements, firms should review their tax planning and succession strategies, while individuals consider their personal tax and IHT positions carefully..  

If the Budget has raised any questions, or if you would like further information or guidance, please speak to your usual Kreston Reeves contact or get in touch with us here. To access our full Budget summary, please click here.