UK Autumn Budget 2025 - A Gamble for Growth

With various tax raises leaked, announced, retracted and reannounced, the only real surprise was that there was anything new for the Chancellor to say. 

Having been strongly condemned by the Deputy Speaker of the House for all the leaks before standing up, Rachel Reeves may have felt well-prepared for the jeering from the opposition benches as she announced only her second Budget. There is no escaping the fact that it was a Budget full of tax rises that will affect a lot of “ordinary working people”, especially if they participate in any online gaming, drive EVs, make pension contributions by salary sacrifice or run their own businesses.

However, for some of our clients there were glimmers of hope, with the EMI option eligibility criteria being significantly broadened meaning growing businesses will be able to offer these highly tax-advantageous incentives to their employees. The extension of the EIS schemes should also increase funding for scale up as well as start-up businesses, and the 3 year stamp duty holiday for companies listing on the main market aimed at rejuvenating the London IPO market could reopen another potential exit route.

Business Tax

Expansion of Enterprise Management Incentives (EMI)

In a major win for founders and startups, the Chancellor delivered on her promise to expand the EMI regime, announcing one of the most significant packages of reforms since its introduction. This will allow a wider range of companies to offer tax-advantaged share options to recruit, retain and incentivise employees, enabling growing companies to continue offering EMI options further into their lifecycle and addressing the most common ongoing operational issue. The UK has thrown open its doors to entrepreneurial talent, inviting them to launch their businesses here.

With effect from April 2026:

• the employee limit for qualification will double from 250 to 500 employees so larger companies will be able to offer these highly-tax beneficial options to their group employees located in the UK;
• the overall company limit on the value of shares that can be placed under option will double from £3 million to £6 million (calculated, usually with a significant discount, as at the date of grant leaving the company free to grow);
• the gross assets test determining whether companies qualify to offer EMI options will quadruple from £30 million to £120 million, enabling even Main Market listed companies to now offer these benefits to their employees and executive directors; and
• the maximum period during which EMI options may be exercised will increase from 10 years to 15 years (recognising that the time from investment to exit has lengthened in the current economic climate and importantly, this extension of EMI tax treatment can also be applied to existing EMI options).

The most welcome news though was the reduction of administrative burdens on companies - and a boost to ensuring EMI qualification remains intact through to an exit - with the requirement to notify the grant of EMI options to HMRC being removed with effect from April 2027 (including for existing options).

The surprise was that the individual limit on grants remains static at £250,000.  However, having previously increased from £120,000 in 2012 and given the limitations on other remuneration tax reliefs in the Budget, this is presumably a policy decision.  In any event, the EMI option grant limit for individuals still remains significantly higher than those for any other UK tax-advantageous option plan and, for private companies, can still be ‘stretched’ by coupling the options with a growth share arrangement.

EMI and Company Share Option Plans (CSOP) Options - Private Intermittent Securities and Capital Exchange System (PISCES) Reforms

With the anticipated launch of the London Stock Exchange’s new PISCES later this year (a new choice for achieving share liquidity in the private arena), the Chancellor built on previous promises to ensure EMI and CSOP options granted before April 2028 may be amended at any time to include PISCES as an exercisable event without losing their favourable tax advantages. After that date, PISCES must be written into all new contracts from the start. This will be legislated for in Finance Bill 2026-27, with the changes taking effect retrospectively from 15 May 2025. Given the extension of EMI option plans to 15 years under the broader EMI option changes outlined above, companies should diarise to update their existing EMI and CSOP option terms if not exercised before the amendment deadline.

Employee Ownership Trusts (EOT)

In a further erosion to the EOT regime (which is already under increased valuation scrutiny from HMRC), the Chancellor announced that the current Capital Gains Tax relief available on qualifying disposals to an EOT would be reduced from 100% to 50% with immediate effect from 26 November 2025. Additionally, Business Asset Disposal Relief and Investors’ Relief will not apply where EOT relief is claimed.

Other Employee Share Plans Updates

The government has also published a summary of responses to the 2023 Call for Evidence on tax-advantageous all-employee SIP and SAYE plans. This response confirms that, whilst these plans are generally valued by employees, HMRC will review its guidance and the government will consider whether any legislative amendments are required in relation to SIP and SAYE plans to ensure they remain fit for purpose and continue to support employee share ownership.

Venture Capital Trusts (VCT) and Enterprise Investment Scheme (EIS) Changes

From April 2026, the investment limits and gross asset thresholds for VCT and EIS companies will be doubled to support more investment in companies looking to scale-up. The lifetime company investment limits will increase to £24 million (£40 million for Knowledge Intensive Companies). The annual company investment limits will increase to £10 million (£20 million for Knowledge Intensive Companies). The gross assets test will increase to £30 million before share issue and £35 million immediately after. This has taken into account market feedback to widen the availability of the reliefs and encourage greater investment in more mature businesses and should provide a boost in EIS investment. 

However, to balance the amount of upfront tax relief offered by VCTs compared to the EIS and incentivised funds to support high-growth companies, the government is reducing the upfront VCT Income Tax relief from 30% to 20%. This may result in a significant spike in VCT investment in the short term before the April 2026 deadline. Nevertheless, the last time VCT Income Tax relief was reduced in 2006/07, fund raising through VCTs fell significantly which may now be repeated next tax year.

Capital Allowances

UK businesses will be interested in upcoming changes to the capital allowances regime for main-rate plant and machinery.

From 1 January 2026, qualifying expenditure will attract a 40% first-year allowance, enabling companies to accelerate a significant portion of relief into the year of investment and improve near-term cash flow. However, from April 2026, the main writing-down allowance will fall from 18% to 14%, slowing relief on the remaining balance. In reality, this represents a front-loading of deductions and a longer recovery period, rather than an increase in the overall quantum of relief available to businesses. The government’s own forecast estimates that this will raise an additional £1.46 billion by 2030, confirming that this measure is intended to act as a ‘revenue-raiser’, rather than a net tax cut. 

Stamp Duty Reserve Tax (SDRT) — UK Listing Relief

From 27 November 2025, transfers of securities in companies recently admitted to trading on a UK regulated market will be exempt from the 0.5% SDRT charge. The relief will last for 3 years after listing and will cover all company securities, including depositary interests.

The exemption does not cover the 1.5% SDRT charge on issues into depositary receipt systems or clearance services, nor transfers connected with mergers or takeovers.

The measures apply to agreements to transfer made on or after 27 November 2025 and for the shares of the relevant company newly listed on or after that date.

International Tax

After two rounds of consultations, the government has published its responses on how it plans to proceed with proposed reforms to the UK’s transfer pricing (TP), permanent establishment (PE) and Diverted Profits Tax (DPT) rules – which will generally take effect for chargeable periods beginning on or after 1 January 2026. 

On TP, key reforms include (1) widening the categories of ‘related persons’ who are subject to the rules (currently by reference to control, 40:40 JVs and when “acting together” in financings) to include certain ‘common management’ scenarios, (2) introducing a more prescriptive acting together test; and (3) excluding UK-to-UK transactions from TP entirely, other than in certain cases (e.g. patent box, where the parties have different corporation tax rates or currencies or in certain excluded categories) or where HMRC or the taxpayer decide otherwise. 

On PE, the reforms will update the UK domestic legislation to more closely align to the latest OECD Model Tax Convention and Commentary but preserving and modernising the Investment Manager Exemption and related guidance in Statement of Practice 1/01. 

The reforms will also withdraw the DPT as a separate tax and introduce the new Unassessed Transfer Pricing Profits charge within the corporation tax rules that, while having a similar scope and application to the DPT, will have new legislative tests using two gateways, and be within the scope of the UK’s tax treaty network. 

Personal Tax

Savings and Dividend Income 

In addition to the increase in tax on property income (see Real Estate below), the government announced an increase in the rate of income tax on dividends and savings. Tax on income from savings will increase by 2% across all tax bands from April 2027. 

Interestingly, while the basic and higher rate of tax on income from dividends is also set to increase by 2% from April 2026, the additional rate of tax on dividends remains unchanged. 

Tax Thresholds 

The government has announced that the freeze on personal tax thresholds and the National Insurance contributions (NICs) threshold is to be extended from 2028 until 2031. This means that over time, employees will pay more income tax as wages increase and employees are pushed into higher tax brackets.  

In addition, the Personal Allowance, higher rate and the additional rate threshold remain unaltered. The NICs Primary Threshold, Lower Profits Limit, the NICs Upper Earnings Limit and Upper Profits Limit are also unchanged. The government is also maintaining the per-employee threshold at which employers become liable to pay National Insurance (the Secondary Threshold) at £5,000. 

Changes to Salary Sacrifice Through Pension Contributions Exemptions

From April 2029, only the first £2,000 per annum of pension contributions made through salary sacrifice will be exempt from NICs. Employers and employees can still make contributions, but any employee contribution above £2,000 will be subject to both employer and employee NICs. This will also apply to employees who choose to sacrifice salary to receive Tax Free Childcare or Child Benefit.

However, all pension contributions made through salary sacrifice will continue to be exempt from income tax (subject to the usual limits). 

ISA Reform

From 6 April 2027, the annual cash ISA limit will be £12,000, within the £20,000 overall ISA subscription limit. Savers aged 65 and over will continue to be able to save up to £20,000 in a cash ISA each year. Annual limits will remain unchanged for ISAs, Lifetime ISAs, and Junior ISAs and Child Trust Funds until 5 April 2031. 

The government will consult in early 2026 on introducing a new, simpler ISA product to support first-time buyers. Once available, this product will replace the Lifetime ISA.

Energy

Energy Profits Levy (EPL)

The government has confirmed the EPL will stay until March 2030, unless oil and gas prices fall below the thresholds set by the Energy Security Investment Mechanism sooner. If triggered, the EPL will cease and be replaced by a permanent Oil and Gas Price Mechanism (OGPM), which adds a 35% rate when oil prices exceed $90 per barrel and gas prices exceed 90p per therm. Legislation for the OGPM will be introduced in the next Finance Bill 2026–27.

Climate Change Levy

From April 2027, CCL rates for gas, electricity and solid fuels will rise in line with inflation (RPI). The main rate for liquefied petroleum gas will stay frozen, and the reduced rates (which apply as a percentage of the main rates) will also remain unchanged. 

Electric Vehicle Exercise Duty (eVED)

From April 2028, a new mileage-based eVED will apply to electric and plug-in hybrid vehicles (3p per mile for electric vehicles and 1.5p per mile for hybrids). This aims to cover road maintenance costs and replace lost fuel duty as more drivers switch to cleaner vehicles.

Media Entertainment and Sport

Gambling

The gambling industry had been steeling itself for tax rises since the consultation earlier this year, but the announcement was harsher than even the most cynical observer expected, with Remote Gaming Duty increasing from 21% to 40% from April 2026. There is significant concern that this hike will make it far harder than it already is for the regulated market to compete with the increasingly bold and sophisticated black market (not least because the duty is payable on bonuses and incentives, not just real revenue), subverting policy goals and potentially challenging the viability of some regulated business models.

The government had originally consulted on a single remote gaming and betting duty but has concluded that remote betting and remote gaming have different characteristics and risks and therefore has decided to continue with different tax treatment. In addition to the new higher rate of Remote Gaming Duty, the government announced a new Remote Betting Duty within General Betting Duty at 25% from April 2027. Remote UK horseracing bets will not be subject to the new rate and will remain taxed at 15%.

In person gambling duties will not be affected at all, and the government has also announced that Bingo Duty will be abolished from April 2026 (although online bingo will be subject to the 40% Remote Gaming Duty). 

Film Tax Relief

As expected, the government will not make any changes to the UK’s film tax relief regime. In particular, it has confirmed the extension of the 40% business rates discount for film studios in England until 2034 - a move that reinforces the UK’s long-term ambition to remain a top destination for global film production.

Real Estate

High Value Council Tax Surcharge: the ‘Mansion tax’

The government confirmed it will be introducing one of the most talked-about pre-Budget ideas, a new High Value Council Tax Surcharge (HVCTS) on owners of residential property in England worth £2 million or more. 

With effect from April 2028, owners of residential property worth between £2 and 2.5 million will have to pay an annual charge of £2,500 on top of their council tax bill, increasing to up to £7,500 for properties worth £5 million or more. The surcharge will have four bands and be applied on a sliding scale. Property values will be based on 2026 valuations provided by the Valuation Office.

The government will consult on the exact implementation of the HVCTS in the new year. The Treasury anticipates that fewer than the top 1% of properties will be affected. Notably, unlike council tax, the revenue raised will be directed to the Treasury despite being collected by local authorities.

Change to Tax Rates for Property

From 6 April 2027, the tax rate on property income will increase by 2%, moving the basic, higher and additional rates to 22%, 42% and 47% respectively. The property income tax rates will apply to English, Welsh and Northern Irish taxpayers. The increase will hit landlords and it is expected the increase may subsequently impact rents. 

Annual Tax on Enveloped Dwellings (ATED)

The government has proposed the removal of the 12-month statutory time limit for claims to ATED relief under section 106(6) of the Finance Act 2013. The measure will apply as if it had always been in force.

The amendment does not affect the current time limit for amending an ATED return,  and late filing penalties. 

VAT Treatment of Land Intended for Social Housing 

The government has stated it will shortly consult on the reform of VAT rules to incentivise the development of land intended for social housing.  Further details are pending.

Retail and Consumer

E-Invoicing 

The government has announced in the Budget that it will require all VAT invoices to be issued as e-invoices in a specified electronic format from April 2029 for business-to-business and business-to-government transactions. The government will work with stakeholders to develop an implementation roadmap to be published at Budget 2026. This is a significant development that is not to be underestimated by UK businesses in terms of future compliance and technical investment, noting the EU is introducing similar mandatory e-invoicing requirements.

Low Value Imports 

To support fair competition between high street businesses and online retailers following rapid growth in low value imports, the government is removing the customs duty relief on goods imported into the UK valued at £135 or less, making them subject to customs duty from March 2029 at the latest, and will be consulting on implementing a new set of customs arrangements for these goods. The UK is not alone in reforming its approach to low value imports, with the US and EU taking similar steps to ensure fairer tariff treatment and appropriate control of booming low value trade.

Taxi Services 

In response to the 2024 consultation on the UK VAT treatment of Private Hire Vehicles (PHV) services, the government will legislate so that, with effect from 2 January 2026, suppliers of PHV and taxi services, will be excluded from the Tour Operators’ Margin Scheme (TOMs) except where such services are supplied in conjunction with certain other travel services. Ride-sharing taxi app businesses have been using TOMs for their services, allowing them to reduce the amount of VAT to account for on passenger fares.  The government’s position is that TOMs was “never designed” for the PHV sector in this way, and it has been litigating this issue, taking the position that it is not appropriate for such apps and other PHV suppliers to exploit TOMs to lower their effective VAT rate. The change is to ensure that, from 2 January 2026, all PHV operators (PHVOs) in London, and all PHVOs who operate as ‘principal’ nationally, will pay VAT in the same way.  No changes to the regulatory framework are proposed but this will be kept under review. 

Business Donations 

Following a Spring 2025 consultation, the government will introduce a new VAT relief for business, allowing them to donate goods to charities up to a per-item value limit of £100 for most goods, without the donor business incurring VAT (as could occur under current rules). Recipient charities can use such goods for onward distribution or in the delivery of their services. Charities must be registered with HMRC for tax purposes and where required, registered with the main charity regulator in the UK, and will include charitable incorporated organisations.  

Cross Border VAT Grouping Amendment 

The government will clarify the rules relating to operating cross border VAT grouping from 26 November 2025 by reverting to the UK’s previous position in respect of unconditional whole entity VAT grouping. Further details are pending.

Business Rates – retail, hospitality and leisure properties

As part of the government's wider commitment to rebalance the business rates system and protect the high street, the Chancellor introduced two permanently lower business rates  multipliers for retail, hospitality and leisure (RHL) properties with rateable values below £500,000 and a new high-value business rate multiplier for RHL properties with rateable values over £500,000.  From April 2026,  the new multipliers will be set at 38.2p for small business RHL, 43p for standard RHL and 50.8p for high-value RHL. 

The permanently lower business rates proposed for RHL properties with rateable values below £500,000 will be funded through increased revenue received from the high-value RHL properties.  

Tourist Tax

Following other cities across the globe (including New York, Paris and Venice), English mayors will be given the right to impose a tourist tax on overnight stays. The new levy will be collected and used locally, and will apply to visitors at hotels, holiday lets, bed and breakfasts and guesthouses. It will be up to each mayor if they impose the tax and introduce any exemptions, and the mayors will be free to use the funds raised for local causes.

Boring but possibly important

This is not the end of the tax changes for the government. Although the Chancellor committed to a single fiscal event each year, we will wait with bated breath to see what is announced in early 2026 at the new “Tax Update event” when the government will announce further changes to tax and customs administration.