In Labour’s first Autumn Budget in 14 years, Reeves presented a series of measures designed to offer targeted support for businesses, promote sustainable investment, and maintain fiscal security, especially for small and mid-sized businesses. However, the reliefs are balanced by increased contributions from large companies.
Financial Support for Business Investment and Rates Relief
A critical component of the Budget was the maintenance of corporation tax rates. The main rate has been capped at 25% for the duration of the Parliament. Smaller companies with profits under £50,000 will still benefit from the reduced rate of 19%. This consistency is to foster long-term planning for businesses.
The lifetime limit for business asset disposal relief (BADR), which offers a reduced rate for qualifying business disposals, was maintained at £1m to encourage entrepreneurship and business investment. The BADR rate will remain at 10% this year. However, it will rise to 14% in April 2025 and 18% from April 2026, aligning with the main CGT rates.
Investment in Green and Digital Infrastructure
The Energy Profits Levy on oil and gas companies was increased by three percentage points to 38% and extended until 31 March 2030. Additionally, their 29% investment allowance has been removed. The money raised will be diverted toward environmental projects. In line with sustainability goals, the Budget introduced green grants and subsidies for energy-intensive sectors, such as logistics and manufacturing, to help businesses reduce carbon emissions.
The Chancellor also announced a heavy investment in HMRC modernisation to improve tax compliance. This includes funding for 5,000 additional compliance officers and updates to tax processing systems. Reeves aims to make tax filing more efficient and lessen the administrative burden on businesses. The enhanced digital capabilities may reduce compliance costs for smaller businesses.
Sector Specific Support and Incentives for Growth
The Chancellor unveiled a £20.4bn R&D allocation for 2025/26 to assist with industry-specific recovery and encourage innovation, especially within the high-tech, pharmaceutical, and manufacturing sectors.
The annual investment allowance remained at £1m, allowing companies to deduct investments in machinery and other qualifying assets. This provision, combined with the full expensing scheme for capital expenditures, incentivises technology-driven growth and may aid businesses in scaling up by making infrastructure upgrades more feasible.
Additionally, fuel duty remains frozen for another year at a flat rate of 52.95p per litre, which helps to contain costs for logistics and transport-heavy industries.
In an unexpected move, draught alcohol duty will be cut by 1.7% from February 2025, equivalent to a penny off each pint, a relief aimed at supporting the hospitality sector. While largely symbolic, it demonstrated some Government support for an industry significantly impacted by changing consumer behaviours and economic pressures post-pandemic.
Reforms and Long-Term Rate Adjustments
The Budget also confirmed that the small business rates multiplier will remain frozen at 49.9p for another year, extending relief to small enterprises across the UK. Looking ahead, the Government has pledged to reform business rates permanently for retail, hospitality, and leisure sectors starting in 2026/27, introducing a lower multiplier intended to reduce long-term costs for high-street businesses. These upcoming reforms are expected to stabilise property tax expenses for smaller operations, potentially incentivising further investment in physical storefronts and revitalising local economies.
This relief provides a buffer as businesses adapt to other fiscal changes introduced in the Budget, offering consistency amidst broader economic shifts.
New Compliance Rules Target Umbrella Companies
The Chancellor also introduced measures to address non-compliance and fraud within umbrella companies.
One key measure is the establishment of mandatory due diligence requirements. Businesses engaging with umbrella companies will need to ensure these entities comply with tax obligations or face penalties. The initiative, effective from April 2026, is expected to enforce stricter adherence to PAYE (Pay As You Earn) tax and NIC regulations within the supply chain.
Additionally, HMRC will now be able to reclaim unpaid taxes directly from other entities in the labour supply chain if an umbrella company defaults. This approach mirrors existing rules for agencies and places responsibility on larger recruitment firms and end clients to ensure compliance throughout their labour networks. These changes could foster greater transparency and protect workers from underpayments while ensuring consistent tax revenues for HMRC.
Looking Ahead
Despite the headline announcement of increases in employer national insurance contributions, this Budget provided immediate and extended support for smaller businesses and promised sustainability and compliance enhancements. Still, the eventual scaling back of reliefs, like business rates, may present challenges for specific sectors.
The focus on digital compliance improvements may lead to greater efficiency within the tax system, reduce the burden on businesses, and crack down on fraud and malpractice.
Feel free to get in touch with our team of experts today by clicking here.