Chancellor Rachel Reeves delivered her long-awaited Autumn Budget today following the accidental release of key details by the Office for Budget Responsibility (OBR). She did so amid weak business confidence, sluggish economic growth and prolonged policy uncertainty. According to the latest Institute of Directors (IoD) survey, boardroom confidence has fallen to its lowest level on record, driven by economic uncertainty and rising costs.
With welfare spending set to increase and the £30bn fiscal gap continuing to widen, Reeves turned to a package of tax measures to shore up revenues. Most notably, she abandoned her proposed rise in income tax – which would have been the first increase in rates since 1975 – instead relying on more discreet, though still substantial, tax changes to steady the public finances.
The OBR said the budget will raise taxes by £26bn by 2029-30 – bringing the “tax take to an all-time high” of 38% of GDP in 2030-31. An increase in tax revenues by has given the chancellor a more comfortable fiscal headroom of £20bn. However, the OBR and Treasury disagree in their forecasts for the public finances. The OBR estimates the UK economy will grow by 1.5% in 2025, an improvement on its March projection, but has downgraded growth expectations by around 0.3% per year from 2026 onwards.
“It is clear that this is not a budget to provide an instant boost to economic growth,” says Professor Joe Nellis, an economic adviser at MHA, the accountancy and advisory firm. “OBR’s projections would see the UK grow modestly compared to long-term trends, and could always be knocked off track by unforeseen events and external shocks. The margin of error is small.”
Reeves pledged to “rebuild the economy” and drive long-term investment. But as many speculated, the budget has highlighted tough economic conditions and delivered fresh challenges for UK businesses to face. Here is what the commitments might mean for business leaders.
Rising labour costs
Reeves has frozen income tax and national insurance thresholds for another three years from 2028. This will likely bring more people into higher tax bands, increasing the cost of employment.
Increases to the minimum wage have also been confirmed and will come into effect April 2026, meaning millions of workers will receive a pay rise next year. The hourly rate for those aged 21 and over will increase by 50p to £12.71, while 18 to 20-year-olds will see an 85p rise to £10.85.
From April 2029, National Insurance will be charged on salary-sacrificed pension contributions above an annual £2,000 threshold.
Some argue it is too early to determine whether employers might adjust wages in response to this. “As the new rules will not take effect until 2029, employers have ample time to review and restructure their arrangements accordingly to ensure they are prepared,” says Doug Mullen, partner in the employment and pensions team at Anthony Collins.
Others fear these changes could destabilise an already fragile job market. Frances Li, founder of Biscuit Recruitment, argues that capping one of the few remaining tools employees use to manage their income would hit morale, slow career movement and pile new pressure on employers. “Salary sacrifice used to be one of the few ways to make income go further. Now that space has narrowed. Salary alone will not retain talent. Employers will need to strengthen career development, flexibility and wellbeing support to keep people motivated.”
Investment and business support
The chancellor announced an expansion of entrepreneurial investment schemes alongside new support for UK stock market listings, including a three-year stamp duty exemption aimed at encouraging more companies to go public.
A consultation will also be launched on how to attract and support more entrepreneurs, with Reeves reinforcing the message that “if you build here, Britain will back you.”
Businesses will gain a new 40% investment allowance to write off more upfront capital costs. Around 750,000 retail, hospitality and leisure firms will also receive permanent business-rates relief, funded by higher rates on large commercial properties valued at over £500,000, particularly major warehouse sites.
Business leaders question Reeves’ growth plan
However, concerns remain within the business community. Andrew Harding, CEO of the Chartered Institute of Management Accountants, welcomed the infrastructure investment, entrepreneurship support and sector-specific rate relief, but warned that the overall increase in taxation and added complexity of the tax system risks undermining growth.
“Today’s budget missed the opportunity to take bold action to address strategic problems facing the economy: spiralling public sector costs, an over complex tax system, a lack of investment in skills and growing costs being forced onto businesses operating in the UK,” he says.
Similarly, Shevaun Haviland, director general of the British Chambers of Commerce, expressed relief that the chancellor has “listened to our calls and made the right choice by not piling major new tax rises on businesses’ shoulders, which will calm nerves”. But adds that “many will be disappointed that this budget did not provide a more compelling blueprint to deliver transformational growth.”
Simon Massey, a managing partner at Menzies, a UK accounting firm, goes further, stating that the budget has delivered a recipe for stagnation. “The Chancellor has served up a tax smorgasbord that will leave firms with nothing but indigestion as they wade through it all,” he says. “While the OBR report offers a glimmer of hope and the purported enhancement of entrepreneurial tax breaks is welcome, the chancellor’s words have not always translated into action.”
Chancellor Rachel Reeves delivered her long-awaited Autumn Budget today following the accidental release of key details by the Office for Budget Responsibility (OBR). She did so amid weak business confidence, sluggish economic growth and prolonged policy uncertainty. According to the latest Institute of Directors (IoD) survey, boardroom confidence has fallen to its lowest level on record, driven by economic uncertainty and rising costs.
With welfare spending set to increase and the £30bn fiscal gap continuing to widen, Reeves turned to a package of tax measures to shore up revenues. Most notably, she abandoned her proposed rise in income tax – which would have been the first increase in rates since 1975 – instead relying on more discreet, though still substantial, tax changes to steady the public finances.
The OBR said the budget will raise taxes by £26bn by 2029-30 – bringing the “tax take to an all-time high” of 38% of GDP in 2030-31. An increase in tax revenues by has given the chancellor a more comfortable fiscal headroom of £20bn. However, the OBR and Treasury disagree in their forecasts for the public finances. The OBR estimates the UK economy will grow by 1.5% in 2025, an improvement on its March projection, but has downgraded growth expectations by around 0.3% per year from 2026 onwards.
