Recently, AJ Chambers spoke to Robert Leggett, Partner at Ensors (part of Azets). Robert leads the corporate and business tax team at Ensors. Here are Robert’s thoughts on the recent budget.
The leaking of the OBR report in error(?) ahead of the chancellor’s budget came with its own spectacle. Watching broadcasters make formal budget announcements ahead of the main event and before these had been officially spoken by the chancellor from the House of Commons was intriguing.
There had been considerable speculation and rumours circling of the possible policy changes leading into the budget. It is not unusual to witness some U-turns based on the strength of public opinion and concerns raised by professional bodies. Backed into a corner and to avoid breaking manifesto pledges, the chancellor appears to have responded with a smorgasbord of budget announcements to fill the black hole in the treasury finances; if there was a black hole of course…
My overall reaction and assessment of this budget is neutral considering the prevailing geopolitical issues and precarious state of the public finances. It was welcome news that the OBR lifted its 2025 growth forecast from 1% to 1.5% and that as result of the budget, the chancellor is looking to increase fiscal headroom to c£22bn.
As anticipated, tax thresholds for personal tax and employer National Insurance contributions (“NIC”) will be frozen for a further three years from 2028–29. Whilst extending the freeze in tax thresholds will reportedly raise significant extra tax for the Exchequer, this will also result in “fiscal drag” resulting in more people being caught by higher tax thresholds as salaries increase including more individuals being brought into the tax net.
There had been rumours abound regarding NIC being extended to rental income and employer’s NIC being applied to the profits of professional partnerships. The latter announcement was met with significant backlash from professionals including accountants and lawyers. These unfavourable proposals were dropped, and the chancellor instead opted to increase tax rates on dividends, property, and savings income by 2 percentage points looking to a wider base to help fill the blackhole in the public finances, albeit for some reason the top rate on dividends did not change. These changes, combined with the previous rise in the corporation tax rate, mean that owned managed businesses should carefully reassess their profit extraction strategies.
Salary sacrifice into pensions will be capped at £2,000 per annum from April 2029. Contributions exceeding this limit will no-longer be exempt from NIC and could potentially impact a significant population of the workforce and those businesses currently operating salary sacrifice arrangements. This could prove counterproductive and harm pension savings.
The rumoured “Mansion tax” was introduced as a council tax surcharge applying from 2028 to properties valued over £2m. The new charge will start at £2,500 rising to £7,500 for properties valued over £5m. I expect this will signal the beginning of a revaluation of properties for the purposes of council tax bands.
The government announced electric Vehicle Excise Duty (eVED), a new mileage charge for electric and plug-in hybrid cars, which will take effect from April 2028. The rate of eVED paid by electric vehicle drivers will be half the fuel duty rate paid by the average petrol/diesel driver. There will be no requirement to report where and when miles are driven, so there is no need for trackers in cars.
The main rate of corporation tax remains unchanged at 25% and there was some tinkering with the capital allowances regime, where the reduction in writing down allowances from 18% to 14% will raise significant revenues.
A £4.3bn business rates support package will cap business rate bill increases for sectors hit hardest by revaluations from April 2026. This includes permanent lower business rates for over 750,000 retail, hospitality and leisure properties, worth nearly £900m a year from April 2026.
Whilst no changes were made to the previously announced unpopular IHT changes, the freezing of IHT thresholds included a welcomed update that the £1m allowance for APR/BPR will now be transferrable between spouses and civil partners. This will not appease agricultural businesses who continue their protest against last year’s IHT changes.
Whilst certain stakeholders will be considered winners from this budget, including younger and lower paid workers and older savers, the tax burden has fallen on a broad demographic including middle and higher earners. Overall, it feels like it could have been a lot worse… perhaps it feels that way because the Chancellor warmed us up so much to expect the worst!
We also spoke to Tim Keech, Associate Divisional Director At AJ Chambers, for his thoughts on the budget.
Reading through the Autumn Budget, I’m struck by how many of the measures fall into that uncomfortable space between fiscal necessity and perceived unfairness. There are a couple of areas in particular that I suspect will jar with many people, even though from the Treasury’s perspective, they were nettles that probably had to be grasped.
The first is the shift in how we tax electric vehicles. For years, consumers have been encouraged to adopt EVs through incentives and policy nudges, and many have made that switch in good faith – often at considerable cost. Now, faced with a rapidly shrinking fuel duty base, the Treasury has clearly decided it can’t sit back and watch such a significant revenue stream evaporate. A move towards road-use charging feels almost inevitable in that context.
But inevitability doesn’t make it any less irritating for those who invested early in cleaner transport. I imagine many EV owners will feel they are being penalised for doing the “right” thing, particularly when public charging infrastructure and running costs are still far from perfect. It’s a reminder that long-term behavioural incentives can easily be undermined when the fiscal pressure mounts.
The other area that really caught my eye (and will no doubt concern many in my network) is the immediate cut in Capital Gains Tax relief for Employee Ownership Trusts, from 100% to 50%. EOTs have become an increasingly important succession route, and the relief has been a major part of their appeal. Reducing it so abruptly introduces real uncertainty for advisers and business owners alike, especially for deals already in the pipeline.
Both measures speak to the same underlying challenge: the government is trying to protect the public finances while still claiming to champion longer-term goals like decarbonisation and employee-ownership. The result is a Budget that may make fiscal sense on paper, but will feel like a step backwards for those who have embraced the policies being rowed back.
AJ Chambers were speaking with Robert Leggett of Ensors, a part of Azets. Robert is a partner, heading up the corporate and business tax team. Robert has a particular niche in tax planning for land development projects.
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