Key Budget Changes Impacting Businesses (UK, 2025)
1. Rising Employment Costs
- Employer National Insurance Contributions were increased to 15% from April 2025—adding financial pressure on businesses. Retailers are warning this, paired with wage rises (minimum wage at £12.21/hr), will force price hikes of 4–5% in the near term.
- Result: margin pressures, inflationary pressure, and cost-push challenges for businesses.
2. Business Rates Restructured
- The reduced business rates relief for retail, hospitality, and leisure sector reduced to 40% (cap £110k) from April 2025 (previously 75% relief.
- Small independent businesses may face up to 80% increases in rates, while chains could see rate decreases of around 40%—creating uneven burdens across the high street.
- More than 100 large stores, including Sainsbury’s, Tesco, and Morrisons, are at risk of closure due to the revised business-rate structure.
- Outcome: Smaller businesses may struggle to stay open; larger stores face significant rent and tax shocks.
3. Tax Reforms & Compliance
- Tax compliance intensified: HMRC is investing in enforcement, including hiring 500 more staff now and 600 debt-management officers in 2026, plus boosting fraud detection tech—raising audit risk and compliance costs.
- Regulatory simplification is also underway across sectors, particularly in financial services. The “Leeds Reforms” aim to reduce red tape, loosen banking regulations, and streamline mortgage affordability checks—seeking to unlock greater capital flows.
4. Support for Growth & Investment
- The National Wealth Fund now under the UK Infrastructure Bank umbrella is boosting its industrial investment mandate. It’s being capitalised with £5.8 billion (down from £7.3bn pledged pre-election).
- The Spending Review 2025 includes a £2 billion investment in AI, plus expanded credit capacity via the British Business Bank to £25.6 billion—aimed at supporting small businesses.
- Construction and housing investments: A £625m workforce training support and a £2 billion affordable housing plan are expected to create opportunities for businesses in construction, training, and local supply chains.
5. Productivity & Tax Reform Drive
- With OBR warning that weak productivity could remove budget headroom, the Treasury is pushing for tax reforms to support growth—simplifying SDLT, income tax, VAT thresholds, and encouraging broader asset deductions. These are expected to complement business-friendly policies while maintaining fiscal balance
- However, forecasts report halved economic growth for 2025, with budget watchdogs citing the initial NI tax rise as a brake on wages and business investment.
6. Speculative Future Tax Measures
- Discussions are underway around potential tax changes like a wealth tax or tighter inheritance tax rules. While politically sensitive, these could affect high-value business owners and investment decisions
- B&Q is urging action against the “de minimis” import tax exemption (under £135), arguing it undermines UK retailers competing with subsidised overseas e-commerce
