As the late, great author Douglas Adams nearly said 'I love opportunities. I love the whooshing noise they make as they go by.' The original quote was about deadlines, not opportunities, but I couldn't help but hear a loud whooshing sound as the Chancellor spoke.
The Chancellor presented this Budget confidently. Plenty of talk about making the difficult decisions, not ducking tough choices, facing head on the arduous dilemmas and the knotty options and gruelling alternatives and so on and so on. And there's no question taxes are rising substantially over the next few years.
But if you're going to do that, why not take the opportunity to reform more thoroughly? To take the accreted layers of tinkering and oddities and perversities built up from a thousand bad and/or cowardly choices of her predecessors and strip them back to replace it with something cleaner and more rational? But we don't get that because of the infamous manifesto promises. Income tax and property taxes are the most obvious examples of the Chancellor making – frankly – fairly easy and highly imperfect choices.
And the eagle-eyed, reading through the Budget, will notice that a lot of the tax increases don't kick in for a few years. Suspiciously close to an election. It looks dangerously like this is a Budget which is borrowing from the future. Which, in many ways, makes it a Budget that borrows from the young.
That's a longer-than-usual preamble rant so let's get down to business. What are some of the key tax announcements made today?
Personal Income Tax
The income tax and NIC system could do with a good overhaul but instead we get most of the money coming from threshold freezes / fiscal drag (plus ça change) plus a couple of percent extra income tax from politically easy targets (evil landlords, savers and dividend receivers).
If we take as read the fact that thresholds are frozen until the end of time, we can break down the other changes a bit more:
- From 6 April 2026 – the basic and higher rate of dividend income tax goes up by 2%, but not the top 'additional' rate (so the new rates will be 10.75% / 35.75% / 39.35%)
- From 6 April 2027 – all taxes on savings and property income increase by 2% (going up to 22% / 42% / 47%)
Employment Taxes
From an employment tax perspective the big announcement that had already been heavily trailed is the near-abolition of pension salary sacrifice. A threshold of £2,000 per year for salary sacrifice will be introduced. Below that: business as usual. Above that: there will be additional NIC costs. Businesses will have plenty of time to adjust though, it's not due to be introduced until April 2029.
There's also more detail on the umbrella company anti-avoidance that has previously been announced.
Our excellent employment tax specialist Phil Swinburn has the details on pension salary sacrifice here and on umbrella companies here.
Employee ownership in the meantime takes a hit. This follows last Budget's changes which tightened up eligibility for tax relief on sales into an employee ownership trust (EOT). The Government's back for another bite of the cherry by halving the CGT relief available from 100% to 50%. So most will pay 12% CGT on sales into an EOT. While that may seem like a very attractive rate, bear in mind that sellers into EOTs very often agree to take their proceeds on a heavily deferred basis. Maybe you're owed £5m for your shares but can only get £1m on day one. Paying £600k of CGT will feel very much like an effective 60% tax rate in the short term.
While it strictly is an employment tax matter (albeit for a special kind of employee!) significant changes were announced, due to come in from April 2027, around the taxation of image rights in connection with an employment. Have you never been paid whopping sums for your image rights by an employer? Me neither. From April 2027 image rights payments 'related to' an employment will be deemed to be employment income subject to PAYE / NICs. This is badged as a 'clarification' of the law but that is a misdescription. There has been an ongoing battle in the top tier of professional sport around payments made to players for image rights. Clubs make the argument that they exploit player's image rights in ways that go substantially beyond normal employment and that separate (non-PAYE) payments to players, or their companies, are justified. HMRC has long been skeptical and it looks like this change is the Treasury's way of declaring victory by legislative fiat. But we need to see what the law looks like and how widely the concept of a payment 'related to' employment is.
Property Taxes
The pattern with property taxes is the same as on income tax: politically-driven 'fixes' applied to a system which needs much more fundamental attention.
Council tax was and is a mess with numerous examples of unfairness (partly structural, partly due to the cowardice of governments refusing to revalue properties for decades). With the proposed reforms as they stand (due to come in from 2028) the structure of the tax is kept broadly intact with a couple of flashy 'surcharges' added to £2m+ properties. The whole creaking edifice lumbers on, mildly more progressive by some standards but still with many unfairnesses - ultimately it ducks the opportunity to create a rational property tax that could promote a healthier economy in real estate. And anyone dreaming of something so radical as abolition of SDLT (a tax that can credibly be blamed for doing a lot of economic damage that offsets the tax it raises) can forget about it.
The picture on business rates is more benign. When dealing with cost-sensitive businesses like high street retailers you can't afford to avoid revaluations and make politically-driven decisions. You're into the nerdy world of technocratic change to minimise 'negative externalities' (bad stuff). That's reflected in the business rate announcements; there's a 2026 revaluation which will undoubtedly create 'winners' and 'losers' so a lot of effort is being put in to smooth the impact of changes on smaller businesses and make many other tweaks. More notable is the new scheme which will come into effect from 6 April 2026 for retail, hospitality and leisure which creates permanently lower 'multipliers' for smaller properties in those sectors. This seems like a sensible approach to try and create stability for those businesses versus the varied 'holidays' and temporary relief schemes that they've had in recent years.
Investment Tax Reliefs
Change ahead for Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) tax reliefs. These are the government's flagship programmes for encouraging investment in small and medium sized businesses. There are three lovely liberalisations and one rather regrettable restriction, all taking effect from 6 April 2026:
- The permitted gross assets threshold for qualifying companies pre-investment is going up from £15m to £30m, and the equivalent post-investment limit goes up from £16m to £35m.
- The amount that a company can raise annually through these schemes is going up from £5m to £10m, or if you're a so called 'knowledge-intensive' company you can leave those dullards in the dust because your threshold goes from £10m to a whopping £20m.
- The amounts that can be raised through these schemes over a company's lifetime are also going up, from £12m to £24m (for the dullards) and from £20m to £40m (for those boffins at the knowledge-intensive companies).
- For reasons unclear, the income tax relief available to investors in Venture Capital Trusts is going down from 30% to 20%. It's been 30% for nearly 20 years. The only explanation I can offer on this is that's part of the 'smorgasbord' approach to making lots of tiny savings from odds and sods.
On a slightly related note, businesses will be encouraged to list on a UK-regulated market by creating a three year relief from stamp duty for transfers of shares in newly-listed companies, effective immediately.
Enterprise Management Incentives
OK, even a grump like me has to be happy about this. Substantial changes are being made to the UK's gold standard employee equity incentive, the Enterprise Management Incentive scheme. The size thresholds for EMI companies have stagnated for a long time. But now the maximum number of employees is going up from 250 to 500, the maximum gross assets threshold is going from £30m to £120m, and the maximum value of shares which can be under EMI options is going from £3m to £6m. That puts it firmly within reach of swathes of medium sized businesses who would have struggled previously.
Our fantastic share plans experts Kathy Granby and Michael Birchall have more thoughts on this here.
Smorgasbor(e)d
In line with the 'smorgasbord' approach there are a lot of individual, relatively minor announcements for businesses today. Some are simplifications or relaxations which should broadly be welcomed. So further progress with plans to modernise stamp duty on shares (which remains our most laughably antiquated tax), and for cross-border businesses there's welcome reform of transfer pricing, permanent establishment rules and the diverted profits tax. There are some reforms as well to tax write-downs on expenditure which doesn't qualify for the (evidently misnamed) 'full expensing' regime; the net effect of these reforms are harder to unpick but since the OBR reckons it will raise about £1bn next year I think it's safe to say it's not all sunshine and lollipops.
There are also the usual promises to crack down on avoidance and evasion, and close the tax gap, which forms the background hum of any Budget these days. And there are a thousand and one other small changes which somehow help add up to a balanced Budget with apparently bags of headroom. In much the same way as one can sweep up tiny fragments of wood and glue them together to make MDF. There, that's the analogy. This Budget is the MDF chest of drawers of Budgets. Perfectly serviceable. Unflashy. Might not bear close inspection. But where's the craft...?
[UPDATE! The Budget has garnered so much attention that colleagues have written separate articles focussing on the Budget specifically from the point of view of: