PwC previews the UK Autumn Budget 2025

Claire Blackburn, Head of Tax, PwC UK 

“After what feels like something of a ‘lost year’ for the economy, the stakes are high ahead of the Autumn Budget.       

“Talking to businesses they want two things from this Budget; no surprises and encouragement to invest in the UK.  

“The first is clear. Businesses took the bulk of the £40bn in tax rises in the last Budget with the message it was a one off. Any further increases will need to be carefully thought through and justified firmly to ensure confidence is not hit.

“Second, the UK was voted the second-most attractive global destination for international investment according to our Global CEO Survey. Despite this potential, inward investment has stagnated. The tax system is an important lever the government could pull harder. Creating the conditions to convert sentiment into action and attract overseas investment presents great opportunity for growth, for example, every £1 spent on public Research & Development investment delivers £8 of wider economic benefit.

“The government will seek to mix realism with optimism in presenting why tax rises are necessary while outlining a credible long-term plan for moving the country forward.”

Colin Graham, Head of Tax Policy, PwC UK

“A growth-focused Budget that shuts down the recurring speculation of tax increases for the next few years and provides a clear pathway forward for business to plan and invest with certainty will be crucial.

“The role of tax in long-term strategic business planning is significant, but constant change makes it a pain point. Our Global Tax Survey found that less than half of business leaders feel prepared for ongoing regulatory changes. Given limited room for giveaways, focus should be on improving the regulatory environment - including the role of tax administration – to make doing business in the UK easier.  We may not see giant leaps in one Budget but small consistent steps in clarity, certainty and process could add up to large gains in the future. The government’s business tax roadmap is a solid foundation, but the journey feels a bumpy one for business.

“The cautious optimism felt at the beginning of the year has turned to caution among the public and businesses. The Chancellor will need to find a way to inject optimism.”

Christine Cairns, Tax Partner, PwC UK

“The Chancellor’s speech last week gave the strongest indication yet that tax rises will be unavoidable and, with a shortfall now touted at around £20bn to 40bn, will likely impact many people, with giveaways frugal and targeted. 

“No path is without potential backlash. A bold change to one of the biggest taxes is – at least on paper - the simplest route, but would reverse a manifesto pledge and impact many. The average annual salary for an employee is £37,430, and by our calculations, if all other rates and allowances remain as per the current tax year, a 2p increase in the basic rate would decrease the annual net take home pay of £497.20, or a monthly reduction of £41.43.

“Similarly, limiting employer NIC relief on pensions contributions could raise roughly £6 billion to £10 billion a year depending on scope, but would run counter to government efforts to tackle the retirement savings crisis.

“The mosaic approach involving lots of small tweaks to multiple taxes that impact specific parts of the economy, can leave those impacted groups feeling singled out, causing political capital to be spent and a greater risk for unintended consequences. 

“Outside the debate on headline rate potentially going up, the elephant in the room is the continued effect of ‘fiscal drag’. The freeze on personal tax thresholds until April 2028, rather than indexed to follow inflation, naturally means many working people are paying more tax, sooner than they otherwise would. An extension to the freeze to 2030 would likely raise over £10 billion over the two additional years.

“Being outside the EU brings some flexibility on raising incidences and rates of VAT. Currently food, transport and clothes are zero rated, and any changes to this would likely be unpopular among the general public.

“Elsewhere, the 2024 Budget froze the ISA allowance until 2030, so unlikely we’d see changes to the limit this time. However, the concept of ISA reform persists. There is a good argument for encouraging a change in saving habits towards investments. Only 8% of the UK’s total wealth is tied up in investments, compared to 33% in the US or 25% in Canada. Getting more wealth in investments that fund British companies could be a boon for growth.”

Dipan Shah, Private Business Tax Leader, PwC UK

“The Chancellor has indicated that higher taxes for the wealthiest are likely in this Budget, emphasising that “those with the broadest shoulders should pay their fair share of tax.” However, she has ruled out introducing a wealth tax. It would have been a challenging tax to introduce given the high cost of calculating and collecting it, which could also strain HMRC’s limited resources.

“Although inheritance and capital gains taxes may be reviewed, they bring in comparatively less revenue - £9bn and £19bn respectively to £303bn forecast from income tax for 2025/26 by the OBR. There is also speculation about taxing high-value assets, such as a possible ‘mansion tax’ on properties valued at over £2 million. This approach again would be difficult and impractical to implement, requiring frequent property valuations and would mainly affect London and the South East.

“In combination with raising headline tax rates, the Chancellor might consider more targeted changes, like restricting certain reliefs, adjusting rates depending on asset types, or making capital gains tax bands closer to those for income tax.”

Phil Vernon, Head of Business Rates, PwC UK

“With or without any Budget announcements, business rates are currently going through the most significant changes in years. In 2026, the triannual business rates revaluation (England and Wales) will seek fair redistribution of business rates payments reflecting property market shifts, and the current two multipliers tax rate will be replaced by five, with specific rates likely announced at the Budget.  In addition, compliance will tighten as material changes that impact rateable value, i.e. extensions, new machinery, etc are now required to be reported, with sizeable fines for the non-compliant.   

“The Retail, Hospitality, and Leisure (RHL) sectors will see the current 40% relief gone on 1 April, 2026, replaced by a two-tier system with a rate reduction for premises under £500,000, but higher rates for larger property businesses like hotels and supermarkets.

“The upcoming Budget promises additional change. The government's interim report on business rates reform highlights a move from a “slab” to a “slice” model is being considered, where rates rise progressively across value bands, potentially making the system fairer but more complex. Anti-avoidance measures for empty properties may also be looked at.

“These moves aim to rebalance the £25bn to £30bn business rates system. Striking the right balance requires careful recalibration to accommodate industry-specific relief without compromising fiscal balance. Get it wrong and business confidence can take a hit.”

Victor Cramer, Tax Director, PwC UK

“Indirect taxes play a vital role in the UK’s tax system, both as a consistent revenue stream (VAT alone generated approximately £178 billion in 2024-25 period) and as a tool nudging consumer and business behaviour (i.e. the landfill tax, sugar tax, tobacco duty etc). It presents the Chancellor with several revenue generating options this Budget. 

“A key choice is whether to review the VAT registration threshold. Historically, there have been small changes - increased by only £5,000 two years ago - but there is currently huge bunching of roughly 10,000 businesses just below the current level.  If, for example, it is reduced from £90k down to £60k, this would likely pull in a lot of small business to taxation. While it would be an instant revenue raiser, it would increase admin and costs for those small businesses and may have unintended consequences of being potentially inflationary.  

“A more popular move would be to raise the threshold a bit higher to £100k, incentivising those businesses bunched just below the threshold to seek more work, which might have the knock-on effect of boosting the country’s productivity and give a bump in revenue generation from other taxes elsewhere in the system.  

“Beyond thresholds, the complexity of the VAT system remains a challenge. While broad exemption reform to sectors such as healthcare or additional changes to education appear politically sensitive, there is incentive to at least seek review – the government has however ruled out removing VAT exemption on private healthcare, for example, despite potential to raise £1.5 billion annually.  Gambling duties are also under scrutiny, with proposals to increase Remote Gaming Duty from 21% to 50%, potentially raising £1.6 billion annually. A simplification of the current three-tier system may also be on the table.

“With every Budget comes pressures to increase duties on alcohol, tobacco, and vaping duties, so we may see changes here. The plastic packaging tax has not quite echoed the success of the landfill tax, so a re-evaluation may be possibility also.”

Holly Grantham, ESG Tax Leader, PwC UK

"In the short term, the Chancellor this Budget may seek to give consumer some good news, with a reduction to the 5% VAT rate for domestic fuel & power being considered. This would be popular, but would come at an estimated cost of £2.5bn and could be seen to disproportionately benefit high-energy domestic users. It could also have the knock-on effect of widening the gap between EV drivers with at-home charging facilities who can avail themselves of the domestic VAT rate, and those without, who pay the standard rate. 

“In the long term, Fuel Duty will one day be a dead tax. PwC’s eReadiness survey found that 70% of people in the UK are planning on buying an electric car within the next five years, this is gradually depleting the UK's dependence on oil and gas, but may cause headaches for tax revenues as it generates £25bn a year in public funds. Recent PwC research found that if no changes are made, there will be a potential £9bn loss through tax revenues by 2030 and a possible £27bn loss by 2040.  

"The Chancellor may want to think of the long-term sustainability of tax revenues. With countries like Iceland and New Zealand already introducing taxation measures for EVs, we may see the government starting the process towards EV drivers paying some kind of new per-mile levy. It would be a major undertaking both operationally and technologically, so unlikely to be done overnight, but the Budget may be the point in which the goal is established.” 

Paula Letorey, Workforce Tax Partner, PwC UK

“Rachel Reeves’ pre-budget speech last week put particular focus on how the productivity gap “has consequences for working people, for their jobs and for their wages”. Employers will play a critical role in improving the productivity gap. They are still adapting to a great deal of additional cost and complexity following the unexpected changes to NIC in the 2024 Budget and the imminent introduction of the Employments Rights Bill.  Businesses tell us the churn of change is leading to hesitancy in investment and hiring decisions. Businesses are awaiting certainty of what comes next.  

“On top of the anticipated increase in the National Minimum Wage, a number of potential measures being cited may further increase the costs of employment. For example possible benefit changes, the key one being pension salary sacrifice which is commonplace for many employers.  This is all at a time when businesses are considering their structure and skills for the future as they navigate economic uncertainty and with the emergence of technology.  

“More broadly, two standout workforce priorities for the Budget are; tackling inactivity and building the skills for the industries of tomorrow. 

“With approximately 9.1 million working-age people currently economically inactive in the UK, focusing on return-to-work policies is urgent. There are tax mechanisms that could assist, for example reducing employer NICs temporarily for hiring long-term unemployed or the economically inactive. Furthermore, expanding childcare tax support and employer-supported childcare schemes could lower childcare as a barrier to many parents returning to work.  

“Encouraging business to upskill the existing workforce is also vital.  This could be done through expanding tax deductions for businesses investing in employee training, particularly in high demand sectors like tech, healthcare, and green energy. 

“To boost training among SMEs, introducing a way businesses can offset costs of accredited training against taxable profits would make it more attractive. 

“PwC’s research earlier this year on economic inactivity found that 81% of businesses say their productivity has been impacted, with the majority adding this is affecting financial performance. This has broader impacts through lower tax receipts and higher public spending. Anything in the Budget that helps people back into work and stem the flow of people out of the work will be pivotal for the government’s growth ambitions.”

Gareth Henty, Head of Pensions at PwC

“Several pension policy shifts may be on the horizon in the Autumn Budget, changing how pensions are taxed and incentivised, with major effects for employers, employees, and retirement planning overall.

“One area under scrutiny is the restriction or removal of salary sacrifice arrangements and the introduction of employer National Insurance Contributions (NICs) on pension contributions, which could raise £6bn to £10bn.  This would mark a major shift in workplace savings policy. While long debated, it would mean a second significant increase in employment costs for employers, following on from last year’s budget, and it is also likely to reduce take-home pay for employees. 

“A change to salary sacrifice and NIC on pension contributions may serve to discourage pension participation and deepen the nation's looming crisis of under-saving for retirement, a concern the newly established Pensions Commission was set up to address.  The additional cost and complexity of changing current arrangements would not be welcomed by employers.  

“The Chancellor has considered a reduction in the tax-free lump sum available at retirement but given the impact on public sector workers this is likely to be too challenging to implement. The move could influence retirement decisions, prompting some individuals to retire earlier to secure existing benefits, while others may delay retirement to rebuild value. This shift in behaviour would complicate workforce planning and succession strategies. 

“We could see proposals to standardise tax relief on pension contributions, moving from marginal rate relief to a flat rate. While on one level this could simplify the system, it would disproportionately affect middle- and higher-income earners and may prompt a rebalancing of benefits packages. The complexity of applying such changes to defined benefit schemes – which would affect a large proportion of public sector employees - adds further uncertainty.

“The Government might also consider further restrictions to the pensions annual allowance on the basis that this would only affect higher earners.  However, the impact on middle- to higher- paid employees in the public sector could be significant and risks accelerating the retirement of    experienced and skilled public sector workers.  

“Meanwhile, expanding auto-enrolment eligibility to younger workers and underrepresented groups could improve long-term savings outcomes but may be viewed as an additional employment cost, with knock-on consequences. Employers would need to enhance communications to ensure compliance and engagement.  “Finally, a potential to introduce NICs for older workers earning above the upper earnings limit could reduce incentives to remain in the workforce post-retirement age, potentially impacting sectors reliant on experienced talent.”

Rachel Taylor, government and health industries leader at PwC 

“As the Autumn Budget approaches, attention will be firmly fixed on how the Chancellor manages the delicate balance between necessary fiscal discipline and the urgent need to accelerate economic growth. This Budget must be aligned with the country’s growth priorities, as outlined in the Industrial Strategy, to attract investment, foster growth, and ignite the skills revolution businesses and industries need. Achieving this should go hand-in-hand with further regulatory reform to strengthen the UK’s appeal as a destination for business investment. Without a strong, coordinated push to unlock public–private investment, the UK’s growth prospects risk being held back.”

Cara Haffey, Leader of Industry for Industrials and Services at PwC UK

“As the Autumn Budget fast approaches, the manufacturing industry will be keen to hear what steps government will take to boost growth and ensure the industry can compete on the global stage. 

“Our Value in Motion research shows that megatrends, such as AI, climate change, and geopolitical shifts, are driving industries including manufacturing to reconfigure how they operate through innovation and automation, to ensure they can meet future demands. 

“There is opportunity and there is ambition, the key to unlocking this will be focusing on three areas; strengthen the skills pipeline, support resilient supply chains, and drive innovation. 

“One change which could really make a difference would be to allow the inclusion of leasing within Full Expensing — this would enable thousands of smaller firms to invest in modern machinery and technology without upfront capital barriers. 

“We have already seen some positive measures announced to energise the sector and steps taken to inject investment. The Regional Investment Summit saw some key announcements: it brought the Life Sciences Innovative Manufacturing Fund (LSIMF) into play, with its first two investments announced in Keele and Birmingham, potentially unlocking over £30 million. 

“We also saw a targeted skills package announced by The West Midlands Combined Authority in October, this is a welcome response to the need to work with business to deliver much-needed skills and training. The pace of change is rapid, so in parallel, businesses can’t sit still and wait for the skills to come to them, the sector itself needs to focus on upskilling its current workforce. 

“The Chancellor’s promise to ‘cut red tape’ has been received positively but the industry is also looking for direction, following consultations on key reliefs relating to R&D and other measures for major capital projects which provide tax certainty. 

“The industry is primed to power economic growth, the government’s Industrial Strategy recognises that, now businesses need clarity and stability”.

Rachel Moore, R&D Tax Partner, PwC UK

“The UK R&D tax landscape has undergone significant change in recent years, most notably, the merger of the previous relief schemes into a single R&D Expenditure Credit (RDEC) regime.  This has been accompanied by enhanced compliance measures and increased HMRC scrutiny to strengthen oversight of the system. 

“With this in mind, businesses will be hoping for a Budget that brings stability rather than further major changes to the R&D regime, along with progress towards greater simplicity and certainty. The merged RDEC regime is seen by some as overly complex, resulting in higher compliance costs. A more streamlined process and clearer guidance on eligible claims would be widely welcomed. Potential announcements, such as the introduction of an advance assurance regime, could help achieve this, provided they do not add to the administrative burden for businesses."