The 2025 Autumn Budget has been set for 26 November. As a result of the bleak economic outlook the possibility of tax increases has become increasingly likely. Therefore, we'll discuss our 2025 Budget predictions of the potential tax changes which could affect you and your business
Overview
The Government's manifesto has committed to maintaining corporation tax at it's current rate of 25% for the entire parliament. Additionally, it has pledged not to increase National Insurance, the basic, higher, or additional rates of Income Tax or VAT.
Therefore the Government's strategy could be to abolish or restrict allowances as a method of increasing tax revenue. Consequently, they could argue they have not broken their manifesto promise to increase taxes on 'working people'. Presumably SME owners fall within this category too?
Our 2025 Budget predictions of the potential tax changes are covered below.
Income tax and National Insurance
The government could extend the freeze of the Personal allowance and tax thresholds beyond the previous deadline of 5 April 2028.
What's more, the budget could remove the tax and NI advantages associated with Salary sacrifice arrangements. This is a topic we propose to cover at a later date.
Additionally, the government could introduce Employer's NI to profits of Limited Liability Partnerships (LLP's). Furthermore, measures could also be introduced charging NI on profits earned by property investors.
Pensions tax relief
Before the 2024 Autumn Budget, there were concerns that measures would be introduced to restrict tax relief on pension contributions for high earners. Although, no changes to pensions tax relief were subsequently made. However, this time around our 2025 Budget predictions for changes that could impact pensions tax relief are as follows:
Capital Gains Tax
There is speculation a restriction on Private Residence Relief for high-value properties will be introduced. Alternatively, the Chancellor could abolish Private Residence Relief replacing it with an form of taper where any chargeable gain is reduced based on the length of occupation.
Additionally, Capital Gains tax rates could be aligned with income tax rates. As a result this would increase the tax rate charged on capital gains from 24% to 45%. Furthermore, this will be concerning if you are crypto investor with significant unrealised gains.
Inheritance Tax
Lifetime giving could face fresh restrictions. Additionally, a new lifetime cap or longer cumulation period may be on the cards
Normal expenditure out of income could lose its exemption. Consequently, this would eliminate a key planning tool for those with surplus income. As a result, it would limit your ability to make cash gifts in excess of the IHT annual allowance.
Additionally, the government may also decide to extend the freeze of Nil Rate Bands beyond 2030.
VAT
The VAT registration threshold may be reduced, as a result capturing more small businesses. Furthermore, the government might introduce a new higher VAT applicable to luxury goods. Equally importantly, this would be considered less controversial and sit well with the public at large.
Summary
The list of potential tax changes introduced by the 2025 Budget are far reaching and shaping up to be highly controversial .
Therefore, individuals, businesses, and investors should be prepared for dramatic changes. As as a result of these changes this could reshape your tax planning strategies for many years to come.
Naturally, we’ll continue to monitor announcements closely and share updates with as soon as more details become available.
For more useful information, check out our Ebooks here.
And if you'd like to know how we can help you with all of this, or with anything else, feel free to give us a call on 01202 048696 or email us at [email protected].
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