Autumn Budget key business highlights

Why another budget?

Normally, the UK government provides two updates on the UK’s finances each year – the Spring Budget and the Autumn Statement. The Chancellor of the Exchequer delivers them to Members of Parliament (MPs) in the House of Commons.

In an election year, when there’s been a change in government, the new Chancellor will usually introduce a budget. Even if the outgoing chancellor has already delivered one.

That’s what happened this year.

A budget gives an update on the overall health of the UK economy, and any progress made since the previous budget or statement.

It confirms the government’s plans for the economy, including any changes to taxation and spending.

On the same day, the independent Office for Budget Responsibility (OBR) publishes its own report on the nation’s finances and the state of the economy. It covers changes it wants to make to spending and taxation. The Chancellor responds to the OBR’s report as part of their statement.

What’s been announced in the Autumn Budget for SMEs, and what’s the impact?

As expected, taxes will rise by £40bn. Most of the measures talked about in the weeks leading up to the Budget were confirmed.

There were two surprises:

• fuel duty – the freeze in fuel duty, and the 5p cut, will continue for another year
• income tax thresholds – these will increase in line with inflation after 2027.

In terms of spending, the NHS and education were the big winners. Spending on them will increase by around £70bn a year. Of which two-thirds is on current spending and one-third on capital.

• The biggest of the tax raises was the increase in employer National Insurance contributions (NICs). They’ll increase to 15%, a rise of 1.2%. More importantly, the threshold for paying NICs was reduced from £9,100 to £5,000.  This measure will raise £25bn per year.  However, the NIC employment allowance for SMEs (which allows businesses to reduce their National Insurance liability) will rise from £5,000 to £10,500 to provide some relief from this rise.
• Business rates relief for retail, hospitality and leisure will be extended for another year. But, at a discount rate of 40%, down from 75%, with a cap of £110,000.  The Budget also stated that it ‘aims to support the transition to permanently lower tax rates for retail, hospitality, and leisure (RHL) properties’. This will be introduced from 2026-27.
• Minimum wage for over 21s will increase by 6.7% to £12.21 per hour. It will increase by 16% to £10 per hour for 18–21-year-olds.
• Duties (excluding fuel) were all increased. Tobacco increased to Retail Price Index (RPI) +2%, and alcohol (excluding draught) increased by RPI.
• All of these will add to costs for SMEs. This doesn’t include the Workers’ Rights Bill, which government analysis has said will have an impact of around £1-5bn.

On top of this, there were further changes to capital gains tax, inheritance tax, carried interest, non-dom status, and energy windfall tax. There was an increase in VAT on school fees, and the removal of the winter fuel allowance.

This was a budget that the OBR described as ‘the largest fiscal loosening in any fiscal event in recent decades’. 

This has consequences for inflation. It’s now forecast to be higher, affecting the path for interest rates and SMEs wanting to borrow. 

The OBR has forecasted that growth will be 2% next year as the stimulus from spending feeds through. This will then drop to around 1.5% by the end of the forecast period in 2028-29.

Growth could be higher over a longer period if investment as a share of GDP is maintained. 

It remains to be seen how the markets will react to all of this, but it’s clear that the impact of these policies on households and businesses will be long lasting.

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