Autumn Budget 2025: Private equity

Various new measures aimed at reducing tax avoidance and fraud were announced at Autumn Budget 2025, including a headline-grabbing new reward scheme for informants on high value tax fraud.

Summary

As previously trailed, the government will now pay rewards of up to 30% of the additional tax collected where informants provide information to HMRC and over £1.5m of tax is recovered as a result. Rewards under existing arrangements for smaller value cases will continue.

Promoters of tax avoidance schemes face further sanctions, as will tax advisers who facilitate non-compliance. The government has decided against regulating tax advisers but remains committed to raising standards in the tax advice market.

Tax evasion on the high street, including fraud through electronic sales suppression, faces a further clampdown from HMRC, through a new small business evasion and enforcement team of 350 officers. A new recklessness criminal offence, in relation to direct taxes, will also be consulted on in early 2026. 

Further investment of £25m is planned, allowing recruitment of more insolvency service staff to disqualify more rogue directors.

Tax conditionality, where registration with HMRC is required to legally operate, will be extended to the waste and animal welfare sectors, and additional transport licenses. 

The government also announced reforms in other areas of tax anti-avoidance, relating to share reorganisations and offshore personal tax and inheritance tax, with further detail to follow. 

Finally, the government will also consult on giving HMRC new powers to ensure errors made by taxpayers in their tax returns are corrected, and the framework for publishing details of deliberate tax defaulters will be strengthened.

Our comment

With a tax gap in 2023/2024 of approximately £47 billion, further measures to crack down on tax avoidance, evasion and non-payment were inevitable. 

Whistleblowers who have information about high value tax fraud stand to be handsomely rewarded under a new US style scheme, with payments of up to 30% of amounts recovered over £1.5m. Expect the HMRC fraud hotline to get hotter, as those with knowledge of tax crime look to cash in.

Further measures to combat tax evasion in small businesses specifically are unsurprising, given HMRC estimates 60% of the tax gap is attributable to them. This includes extending the programme of making particular trading licenses conditional on tax compliance. The introduction of mandatory e-invoicing for VAT invoices, albeit from 2029, will further enhance HMRC’s compliance programme. 

The level of fraud through rogue directors, particularly relating to Covid support fraud, has inevitably led to the government’s plan to strengthen the insolvency service. 

The decision not to regulate tax advisers might be seen as surprising by some, and it remains to be seen as to what other measures might be considered in future to increase standards in the tax advice market. 

At the Autumn Budget 2025, the government announced a new 40% first-year allowance (FYA) for expenditure by all businesses on new qualifying plant and machinery that does not already qualify for FYAs. We also saw a reduction in main rate writing down allowances (WDAs) from 18% to 14%. 

Summary

The Autumn Budget 2025 saw a number of changes to the capital allowances regime, for both corporate tax and income tax paying entities, as well as confirmation that the existing FYAs, including the 100% full expensing allowance, will remain. 

From January 2026, a new 40% FYA will come into effect for new qualifying plant and machinery expenditure incurred by all businesses, including sole traders, partnerships, trusts and companies. This FYA will cover expenditure previously ineligible for the 100% full expensing, including assets held for leasing, however expenditure on cars and second-hand assets will be excluded.  

From 1 April 2026, for corporation tax and 6 April 2026 for income tax, we will see a reduction in main rate writing down allowances from 18% to 14%, applying to existing pools carried forward as well as current expenditure not eligible for FYAs.

Our comment

We are pleased to see a partial extension of the FYAs, to include assets held for leasing and expenditure incurred by unincorporated entities, who have previously been excluded from such relief. 

However, the trade-off is the reduction of main rate writing down allowances, which will limit tax relief on carried forward pools and investment in used assets and impact property acquisitions. 

The changes to capital allowances in the 2025 Budget are generally positive and will be seen as a boost to new investment. 

The changes to FYA will be particularly welcomed by individuals, including partnerships, who were previously excluded from claims for full expensing, for unclear reasons.

It is good to see that incentivising capital expenditure is still an important part of the government’s plans.

Businesses will be pleased that the government has stayed true to its 2024 corporation tax roadmap and not increased direct corporation taxes. Other administrative changes have been announced that aim to tackle tax avoidance and prevent money laundering, however.

Summary

The government has kept its promise not to increase corporation taxes, so the main rate remains at 25%, or 19% for small profits, with the marginal rate also untouched.

As part of the announcements on tackling tax avoidance or evasion, and closing the tax gap, the government announced a doubling of late filing penalties for corporation tax returns with a filing date on or after 1 April 2026. The immediate late filing penalty of £100 will increase to £200, and a return more than three months late will suffer a further £400 penalty (previously £200). Higher penalties arise if there have been three successive late returns.

The government also announced a change to the economic crime levy (ECL). This levy was introduced in 2022, with anti-money laundering (AML) regulated entities required to pay an annual charge designed to increase the government’s funding to tackle money laundering. The former large band for the ECL, which included regulated businesses with UK revenue between £36m and £1bn, will be split from 1 April 2026. Businesses in band B (£36m - £500m revenue) will face an annual charge of £36,000, while businesses in band C  (£500m - £1bn revenue) will have an annual charge of £500,000. The levies for the other bands will also increase. Those with revenue between £10.2m and £36m will now pay £10,200, and those with revenue over £1bn will pay £1m.

Our comment

Late filing penalties for corporation tax returns were introduced to encourage companies to file their returns on time. These were originally set in 1998 and have been largely unchanged since. The government hopes that doubling these penalties will encourage businesses to file their corporation tax returns on time and could be seen as an easy win to increase HMRC’s takings where behaviour is unchanged.

The government has again made various announcements setting out its intention to bridge the tax gap and tackle tax avoidance and evasion. The change to the ECL banding double the charge to £1m for very large regulated businesses with turnover over £1bn. While this may be limited in scope, it will have a significant impact on those suffering the charge, particularly as the levy cannot be deducted from their computation of taxable profits.

The Chancellor has announced:

• Plans to modernise the taxes applicable to transfers of shares and securities, introducing a digital self-assessment system and uniting the taxes applicable to paper and electronic transfers under a single regime
• A three-year exemption from stamp duty reserve tax for companies choosing to list in the UK

Summary

Currently, share and securities transfers can give rise to a 0.5% charge of either stamp duty or stamp duty reserve tax (SDRT), broadly depending on whether they are effected via paper or electronically. The government has announced plans to replace both taxes with a single securities transfer charge (STC) and to digitalise the reporting process. Further details of the proposed new STC will be announced in due course.

In addition, the Chancellor announced a new exemption from the 0.5% SDRT charge for transfers made on or after 27 November 2025. Where a company newly lists its shares on a UK-regulated market, transfers of its securities will be exempt from SDRT for a period of three years from the listing date. There are a few exceptions to this exemption, however. For example, SDRT will still apply to some mergers and takeovers. 

Our comment

The modernisation of the stamp taxes regimes is welcome and should ultimately reduce compliance costs for taxpayers. Of particular interest will be whether or not any changes are made to the current acquisition relief and reconstruction relief rules for stamp duty. These can apply to some corporate restructures where there is no change to the ultimate shareholders, and which currently require complex claims and copy documentation for HMRC. The response to the 2023 consultation also indicated an intent to remove the £1,000 price threshold under which stamp duty is not chargeable. This Autumn Budget did not indicate whether or not this is still intended. 

The government has stated that it will continue to evaluate stamp taxes on shares to ensure that the UK is well positioned for the future, so more reliefs may follow. 

In a well trailed change to salary sacrifice for pension contributions, the Chancellor confirmed that a £2,000 limit will be imposed on the amount of salary sacrifice pension contributions that will benefit from relief from national insurance contributions (NIC). This change will be implemented later than expected, at the start of the 2029/30 tax year.

Summary

While contributions above the £2,000 cap will continue to attract income tax relief, from the start of the 2029/30 tax year both employees and employers will pay NIC on salary sacrifice contributions made above this limit.

Our comment

Pension salary sacrifice has long been one of the ‘protected’ salary sacrifice schemes. It appeared to only be a matter of time before this was reconsidered, due to the perception that predominantly higher earners benefit the most from its easements.

Following the changes, it is expected that a higher rate taxpayer contributing £12,000 to their pension via salary sacrifice will be £200 per year worse off and their employer £1,500 worse off, based on current NIC rates.

While the changes are still more than three years away, employers should consider commencing their preparations now to understand the potential additional employer NIC costs. The impacts this could have on total reward packages for existing employees, and how to structure pension contributions for new joiners to the business between now and April 2029, will also need to be considered.

From 1 April 2026, national minimum wage (NMW) and national living wage (NLW) rates will be increasing. The NLW will rise by 4.1% to £12.71 per hour. Younger employees will receive an even greater increase with the 18–20 years’ rate rising by 8.5% to £10.85 per hour.

Summary

At the Autumn Budget 2025, the Chancellor announced that the government had fully accepted the recommendations of the low pay commission resulting in a further increase to the NMW rates. This means that for pay reference periods beginning on or after 1 April 2026, the following rates should be applied by employers: 

• NLW for those aged 21 years and over: £12.71 per hour, an increase of 4.1% from the current rate of £12.21 per hour
• NMW for those aged 18-20 years: £10.85 per hour, an increase of 8.5% from the current rate of £10.00 per hour
• NMW for those aged 16 or 17 years, or individuals completing an apprenticeship that are aged under 19 years or aged 19 years or over and in the first year of their apprenticeship: £8.00 per hour, an increase of 6.0% from the current rate of £7.55 per hour
• Accommodation offset rate for those provided with accommodation by their employer: £11.10 per day, an increase of 4.1% from the current rate of £10.66 per day

Our comment

While the headline NMW increase is smaller than increases in recent years, it still represents an above-inflation increase in costs for employers already grappling with significant recent increases in employment costs.

In the space of four years, the headline NMW rate will have increased by 33.8%, up from £9.50 per hour in April 2022 to £12.71 per hour from April 2026. Following the change in rates from 1 April 2026, an employee working 40 hours per week on NMW will be entitled to an equivalent salary of £26,437, an increase of £1,040 compared to April 2025.

The NMW increases create a greater risk of inadvertent non-compliance with the NMW rules. Many entry level and graduate roles, which often come with overtime and training requirements, are now being paid at, or close to, NMW. These roles, which have historically been paid well above NMW, often do not come with stringent monitoring of working time. However, as entry level role salaries start to converge with NMW, employer processes to track all working time are increasingly becoming necessary to remain compliant.

The Autumn Budget 2025 included increases to several important statutory limits for tax-advantaged enterprise management incentive (EMI) employee share options.

Summary

From 6 April 2026 (other than for Northern Irish companies):

• The maximum market value for tax purposes of the shares in a company over which tax-advantaged EMI options can be granted will increase from £3 million to £6 million
• The limit on the value of the gross assets of a company, together with those of any subsidiaries, which can qualify for EMI options over its shares, will increase from £30 million to £120 million
• The limit on the number of full-time employees of a company and its subsidiaries that can qualify for EMI options over its shares will increase from 250 to 500
• The maximum term of an EMI option will increase from ten years from the date of grant to 15 years. It will also be possible for companies and option holders to agree to extend the terms of EMI options granted before 6 April 2026 to up to 15 years without losing EMI tax reliefs in respect of those options

Our comment

These changes will substantially expand the scope for companies with qualifying trading activities to grant EMI options, which offer the most generous tax reliefs of the UK’s four types of tax-advantaged employee share schemes. 

The changes are likely to be welcome to many companies that either cannot currently grant EMI options or have limited scope to do so under the existing restrictions.

Northern Irish companies seem to have been excluded because of the continuing relevance of EU state aid requirements (applicable to EMI options before Brexit) and the commitment to maintain an open border with the Republic of Ireland.  

At the Autumn Budget 2025, the government announced that the exemption from capital gains tax (CGT) on the sale of a controlling interest in a company to an employee ownership trust (EOT) would be restricted to 50% of a seller’s chargeable gain.

Summary

With effect from 26 November 2025, on the acquisition of a controlling interest in a company by the trustees of an employee ownership trust (EOT):

• The exemption from CGT will apply to only 50% of a seller’s chargeable gain, rather than to 100%, as it did before that date
• A seller will not be able to claim business asset disposal relief (BADR) or investors’ relief in respect of their disposal of shares to the EOT trustees
• The EOT trustees’ CGT acquisition cost for the shares they acquire will be the total consideration paid for them less the 50% of the seller’s chargeable gains exempt from CGT. This is an improvement from the trustees’ perspective, as previously a disposal to an EOT was deemed to be made on a no-loss, no-gain basis, with the EOT trustees assuming the CGT base cost of the seller(s).  

Our comment

With the scheme on course to cost £2 billion, 20 times beyond the original costings when the scheme was announced in 2013, it is somewhat unsurprising that CGT relief has been restricted. These changes will clearly make a disposal to an EOT less tax-efficient and, as result, somewhat less appealing as a possible exit route for shareholders. 

Sales to EOTs seem likely to continue to interest company owners, given that the effective CGT rate for a higher rate taxpayer on a sale to an EOT will now be 12%, rather than 24%. This compares favourably with the 14% effective CGT rate, capped at £1 million of lifetime gains, for disposals qualifying for BADR.

The need to pay CGT on a disposal to an EOT will raise practical concerns about paying tax in respect of a non-cash consideration: In other words, giving rise to the possibility of a dry CGT charge since a substantial proportion of the consideration for an EOT’s acquisition of a controlling interest in the relevant company often takes the form of trustee loan notes.

Dividend tax rates are to rise from April 2026 to 10.75% (basic rate) and 35.75% (higher rate), while savings and property income rates increase to 22%, 42% and 47% (basic, higher and additional rates respectively), from April 2027. 

Allocation of personal allowances and some loss reliefs will be applied to other income, taxed at 20%, 40% and 45%, respectively, before property, savings or dividend income. Existing allowances will remain unchanged at £500 for dividends and £1,000/£500 for savings.

Summary 

Income tax rates on passive income, being rental income from property, interest on savings and dividend income from shares, will rise for taxpayers in England, Wales and Northern Ireland.  

The timing and extent of the change differs depending on the nature of the income:

• From 6 April 2026, the rates of tax on dividend income will be 10.75% (basic rate) and 35.75% (higher rate). The additional rate of tax on dividend income remains unchanged at 39.35%
• From 6 April 2027, the rates of tax on savings interest will be 22% (basic rate), 42% (higher rate) and 47% (additional rate)
• New property income tax rates will also be introduced from 6 April 2027, and will mirror the savings rates at 22%, 42% and 47%

An accompanying change will be made to the allocation of allowances and reliefs. The announcement confirms these deductions must be taken against income taxed at the 20%, 40% and 45% rates, in priority to passive investment income.

Existing savings and dividend allowances will remain. These allowances shelter the first £500 of dividend income and the first £1,000 (basic rate taxpayers), or £500 (higher rate taxpayers) of savings income.  

The deduction available to landlords for finance costs will also be increased from 20% to 22%. The proposed rate increases for property income and savings income will also apply for trustees who are subject to the rates applicable to trusts. For non-discretionary trusts, the proposed increase in rates for property income, savings income and dividend income will also be felt by trustees. 

The changes to savings and dividend rates will apply UK-wide. The separate rates of tax for property income will apply to England, Wales and Northern Ireland.

Our comment

These measures have been narrowly targeted as the Chancellor seeks to raise revenue by increasing taxes on income, without breaking manifesto pledges to raise the income tax rates for working people. The form of the change will add a degree of complexity to the future computation of tax liabilities, while necessitating the accompanying clarification of the allocation of reliefs and allowances, including the personal allowance.

The decision not to increase the additional rate of dividend taxation should moderate the impact of these changes. However, shareholders, with the flexibility to do so, should consider the merits of accelerating the payment of dividends before 6 April 2026, so that they will be subject to tax at the current rates.

Savers should ensure that they are taking full advantage of the ability to contribute funds to an individual savings account (ISA) each tax year, inside which interest and dividend returns are not subject to tax.

The government has confirmed plans to impose an additional charge on homes worth more than £2 million, to apply from 6 April 2028. The new charge will start at £2,500 per year, rising to £7,500 for homes worth more than £5 million.

Summary

The new “high value council tax surcharge” will be administered alongside council tax and will be collected by local authorities. Liabilities will fall solely on owners of homes rather than occupiers. The charge will be introduced from April 2028 and will be tiered, with initial charges as follows:

From 2029/30, the annual charges will rise in line with CPI inflation. The government also plans to conduct a targeted valuation exercise to assign properties to the relevant bands, after which homes will be revalued every five years.

Plans were also announced to consult in early 2026 on the operation of the new surcharge, including on appropriate reliefs, support schemes and how to treat homes held in companies, trusts or other structures. The government has also indicated that it will consider how to apply the charge where owners are required to live in a property as part of their job.

Our comment

The concept of a ‘mansion tax’ has been on the political agenda since former Labour leader Ed Miliband promised to introduce such a charge in the run up to the 2015 general election.

Council tax bandings are widely seen as outdated, as they are based on valuations obtained in 1991. This has led to distortions, with some high-value homes paying a relatively low amount of council tax when compared to less valuable properties elsewhere in the country.

It is therefore unsurprising that the government has introduced this measure which is anticipated to impact fewer than 1% of properties and, according to polling, enjoys broad voter support. It is encouraging that the government plans to consult, particularly on support schemes, as paying the charge may be challenging for those whose income is relatively low compared to the value of their home.