Reflections on Autumn Budget 2025

Following months of Budget speculation, the Chancellor has now delivered some clarity, although the outcome was far from straightforward. £26bn of tax rises were announced which – in addition to the £41bn from last year – takes the overall tax burden to a record high of 38% of GDP.  This will impact competitiveness as will the ever-increasing complexity in our tax code - instead of bold, sweeping reforms, we saw a smorgasbord of 85 separate policy decisions.  

Compared to last year, this Budget leaned heavily towards personal tax changes, rather than business taxation. For individuals, the main changes were the freezing of income tax thresholds for three more years, and higher taxes on investment income, which will raise significant amounts of tax. This was coupled with various tweaks to the scope of inheritance taxes and capital gains tax as well as the heavily trailed introduction of a £2,000 limit for salary sacrifice pension contributions.

For business, the Chancellor reaffirmed commitment to the 2024 Corporate Tax Roadmap with no changes to the corporation tax rate and full expensing for capital investment retained. Businesses avoided major shocks this time, but the administrative burden and overall level of taxation continues to climb. A number of consultations were also released which will need to be worked through over the coming months, including a Call for Evidence on how the tax system supports entrepreneurship.

The Chancellor’s approach prioritised fairness and fiscal headroom over radical reform. While the £21.7bn headroom offers some fiscal stability and should bring more confidence for business investment, there was a shortage of measures to tackle the critical barriers to unlock higher economic growth and prosperity. The UK continues to be highly attractive to international investors, but the rising overall tax burden and associated complexity of the UK system raises some questions as to whether that competitive positioning will be sustained.