When the new Chancellor rises to her feet in Parliament on 30 October, she will be announcing what the government’s expectation management campaign has warned will be painful measures aimed at repairing the alleged £22bn black hole in the public finances. Her Budget package will emerge against the unenviable backdrop of elevated public debt, a historically high tax burden and hugely underfunded public services.

The question is: how might her pronouncements impact the business community?

Personal taxes

Despite some paranoia about how hikes to Capital Gains Tax and Inheritance Tax, a reduction in Pension Relief and a possible wealth tax might damage the motivation of entrepreneurs and prompt high earners to flee the country, the major impact of any Budget changes to personal taxes is most likely to be on consumer confidence and spending behaviour.

The exception will be any action on Business Asset Disposal Relief (BADR), the successor to Entrepreneurs Relief, where any reduction may change business owners’ attitudes. This could trigger a short-term rush to sell businesses if the effective date of the measures is delayed, or a longer-term re-shaping of expansion and business investment plans.

The government’s pre-election stance was to promise encouragement for entrepreneurs, so the greater possibility is for an increase instead in BADR, which is surely the preferable action for an administration which continues to preach the need for higher business investment to generate GDP growth.

Business taxes

Employers’ National Insurance

The government has confirmed its intention to increase employers’ national insurance contributions (NIC) and has failed to deny that it may extend NIC to the contributions businesses make to their pension schemes. This will be particularly problematic for labour-intensive sectors, such as hospitality and retail, and for smaller businesses with slim profit margins and limited financial resources. It may prompt some employers to cut back their recruitment plans and to consider trimming their existing staff. It could also make them think again about their investment and expansion plans.

Taxation of private equity carried interest

The government has already announced its intention to reform the taxation of private equity carried interest (the capital share of profits on a managed investment fund that is allocated to the fund executives). Detailed proposals will need to be announced on Budget day if the changes are to be implemented from April 2025 as seems probable.

Currently, carried interest that can pass the tests to be classified as a capital gain is taxed at 28%. If wider reforms are introduced to tax capital gains at income tax rates, this is likely to apply to carried interest as well. If a higher fixed rate of CGT is to be implemented, it follows that further qualifying conditions might be applied (around the percentage investment in the fund by individual PE executives) for some carried interest to be continued to be taxed as capital gains.

Roadmap for business taxation

The Labour manifesto committed to publishing a roadmap for business taxation within six months of the election in order to end uncertainty caused by constant changes. The Chancellor has confirmed this will be published on Budget day.

Sector specific taxes

• The increased windfall tax on oil and gas companies already announced will be confirmed.
• Similar proposals to increase the bank tax surcharge for a fixed period may also be published.
• While Rachel Reeves has pledged not to reimpose a cap on bankers’ bonuses, there will be a temptation to create a specific employers’ NIC surcharge on the bonuses banks pay to employees paying additional rate income tax.
• Other sector specific proposals could be introduced, such as a specific ban on water company dividends until sewage spills are under control.
• A rise in the rate of residential property developer tax may also be imposed, so that developers effectively fund a greater share of the cost of tower block cladding replacement.

Corporation tax & business rates

Previous pledges to cap corporation tax at 25% and retain full expensing of capital allowances should be confirmed in the Budget. Labour have promised to replace business rates, so some sort of announcement or timeline may be forthcoming and would be extremely welcome to many businesses.

Making Tax Digital initiative

There is speculation about whether the transition to Making Tax Digital for corporation tax will feature in the roadmap, or not. Although the original 2026 target date has been dropped, it is not clear if this part of the MTD initiative has been abandoned completely.

Importers & carbon

There may be an update on the implementation of a UK Carbon Border Adjustment Model (CBAM) that will affect importers. Labour has committed to implement it from 2027.

Reducing administrative requirements for smaller businesses

There may be simplification measures, such as increasing the size threshold for SMEs to remove administration burdens, as proposed by the previous government. This is a two-edged sword, in the sense that the credit information and ratings industry already struggles with the lack of public information on SMEs. Reducing that still further may lead to unintended consequences when these businesses try to agree credit limits with suppliers.

Employment

Although the Labour manifesto ruled out an increase in National Insurance rates, it did contain a commitment to increase the National Minimum Wage (NMW) to make it “a genuine living wage” by including cost of living considerations in the remit of the Low Pay Commission (LPC). The LPC report on the 2026 increases to the NMW will probably be published at the same time as the Budget.

More worrying for the business community are the employment rights changes that the government plans to implement, especially action on zero-hour contracts and the creation of new ‘day one’ rights for employees. Further details on implementation of these are likely to be published by Budget day, if not before.

Labour has also committed to replacing the Apprenticeship Levy with a more flexible “growth and skills levy”, a formal consultation on which may be published with the Budget.

Government industrial strategy

The new government has promised to create a formal industrial strategy for the next ten years and to set out proposals for supporting growth in different areas of the economy. Like the business tax roadmap, this ought to give businesses some long overdue certainty about government policy, enabling them to plan ahead for investments with more confidence.

Around the time of the Budget, the Government will publish a Green Paper on the strategy, leading to a full strategy document in 2025. A key feature will be the creation of a National Wealth Fund to invest in new technologies and infrastructure with the aim of driving economic growth, boosting job creation and ensuring food and energy security.

If you are seeking professional advice for your business, Opus is here to help. You can speak to one of our Partners who can discuss options with you. We have offices nationwide and by contacting us on 020 3326 6454, you will be able to get immediate assistance from our Partner-led team.