Bearing the burden: The changing balance of business taxes

In summary

• CBI research shows businesses are bearing an increasing share of the tax burden 
• Not only are business taxes growing, but the balance between different business taxes is changing 
• National insurance is now soaring ahead of corporation tax as the major source of business tax revenue, hitting large employers 
• Business rates and environmental taxes are other key areas seeing big changes, impacting the industries paying most 

The Autumn Budget 2025 has pushed the UK’s tax Burden to a record high. According to forecasts from the Office for Budget Responsibility, the tax-to-GDP ratio will reach 38.3% in 2030-31, an “all-time high”. 

For many businesses, however, the Budget came as a bit of a relief. In large part, that’s because of the rumours swirling around the Budget in its long run-up. Fortunately, many didn’t make it into the announcement. Moreover, much of the tax raising was focused on personal taxes, with close to a third coming from the three-year extension of the freeze on personal tax thresholds.  

Even before the impact of this Budget, the tax burden on individuals, particularly on high earners and the wealthy, has been growing for decades. The OECD recently noted that over 10% of GDP in the UK was raised from taxes on personal income and capital gains, putting it behind only Italy and Canada in the G7.  

Or, as The Telegraph headline put it: “Britons paying more income tax than the French.” 

But British businesses are more than paying their way. They didn’t entirely escape at the most recent Budget, sharing, for example, the costs of the cap on salary sacrifice pension contributions through increased employer national insurance contributions. More significantly, previous Budgets have put increasing demands on businesses.  

In September 2025, before the Autumn Budget, the CBI published its analysis of the business tax contribution in 2024/25. It showed that businesses paid £308.6 billion in taxes in that tax year. Growth in revenue from businesses for the year, up 5.5%, significantly outstripped overall tax revenue growth of 3.8%.  

As a result, businesses in the UK paid 30.5% of all tax revenue – the highest in a century on a like for like basis, according to the trade group. It’s also projected to increase further in 2025/26, reaching 32%.  

“Business taxes in recent years have grown more quickly than the overall tax revenue, with the widening gap showing that businesses are shouldering a larger share of the tax growth. 

As the analysis shows, the top three contributors to revenue are corporation tax, employer national insurance contributions and business rates. The first two alone account for 64% of the business tax take, while adding business rates brings it up to almost three quarters (73%) of the total. 

The balance is shifting, though. It’s not just that businesses overall are shouldering a greater share of the tax burden; some are being particularly hard hit. And it’s not always those with the “broadest shoulders” who will pay.  

Three trends stand out. 

The first is the changing balance between the two big taxes. According to the CBI, corporation tax raised £99.9 billion in 2024/25, while employer NICs raised £96.5bn. That’s a fine balance, and it’s likely to tilt only one way in coming years. 

As well as committing to not raising taxes on working people, the Labour manifesto before the 2024 election also promised to “cap” corporation tax at the current rate of 25%, keeping it the lowest in the G7 “for the entire parliament”.  

There are also relatively few opportunities for planning around corporation tax. As a result, dramatic changes look unlikely, although they’ll vary with corporate profits. Employers’ NI, on the other hand, is another story.  

Already in 2024/25, the CBI found the growth in employer NICs close to double that of corporation tax (7.2% compared with 3.7%). That trend is set to accelerate in coming years, with the rise in employer NICs introduced in the October 2024 Budget and implemented from April 2025. The OBR forecasts that NIC contributions (employer and employee) will rise to £200.6bn in 2025/26 and to £226.2bn by 2029/30. Even in 2023/24, employer NICs accounted for 63% of NI revenue, according to the IFS. 

Applying even this proportion to the OBR forecasts results in an employer NI tax take of £126.4bn in 2025/26 and £142.5bn in 2029/30. The OBR forecasts for corporation tax revenues in the same years are £95.8bn and £115.8bn, respectively. This doesn’t include corporation tax for offshore businesses in the oil and gas sector, but these forecasts do little to change the story.  

This has obvious implications for the businesses and sectors that will pay a greater share of tax in coming years. Large employers are already feeling the burden, particularly those in sectors such as hospitality that employ lower paid and part-time staff. They’ve been impacted by not just the rise in NI rates in the October 2024 Budget, but the reduction in secondary Class 1 contributions threshold from £9,100 to £5,000, draggint thousands for workers into NI for the first time.  

Of course, hospitality businesses are among those meant to be helped by the changes announced in the most recent Budget to business rates, the next biggest revenue source. How that will play out, however, is a lot less clear.  

The 2025 Budget confirmed lower business rates for retail, hospitality and leisure (RHL) properties, with RHL multipliers 5p below their national equivalent, but higher rates for properties with values of £500,000 and above. 

Even with the new RHL rates, hospitality businesses won’t necessarily pay less, however. Revaluations due in April 2026 of rateable values will reflect a 2024 commercial market, rather than that of 2021 in the middle of Covid. That could see many benefiting from the new multipliers still facing business rates rises, albeit tempered by transitional relief, which limits changes to rates resulting from revaluations. 

Following complaints over unaffordable rises, last month the government announced further support for pubs and music venues. They will benefit from a 15% cut to their business rates bills from April, plus a two-year real terms freeze in rates following this. It should mean that most pubs see a cut in their rates for 2026 to 2027, followed by rises no greater than inflation.  

Others, though, including other hospitality businesses will have to wait for the valuations to know what they’ll pay, with rises limited to the transitional relief announced at the budget.  

Overall, the OBR forecast that the impact on business rates receipts from the Budget (before the relief for pubs was announced) would be “broadly neutral” by 2030/31. It even expected reduced receipts by about £1.2 billion on average between 2026-27 and 2028-29. There will, however, be winners and losers, and the former won’t necessarily be those the headlines suggested the changes would help. 

What’s certain is that all businesses face a business rates regime that is now significantly more complicated, with many more rates, transitional reliefs and new rateable values. We’ve yet to see where the weight of this burden will land.  

On the other hand, where there is certainty, some might wish it were otherwise.  

While business rates are the third biggest single source of revenue in the CBI’s analysis, they come behind a group of other business taxes, which includes irrecoverable VAT, insurance premium tax and environmental levies. As the CBI notes, the last of these is seeing the most striking growth.  

“In the past five years, new taxes such as the plastic packaging tax and the energy profits levy have added £3.7bn more to the burden,” it notes.  

Environmental taxes raised £54.3 billion in the UK in 2024, according to the ONS. Much of this is energy taxes and falls on households. Among businesses, the energy sector (electricity, gas, steam and air conditioning supply) is the largest contributor, responsible for 28% of total environmental tax revenue in 2022, £8.8bn of tax revenue. In the same year, transport and service industries contributed around £6bn each. Excluding households, the service sector also accounts for almost half of the revenue from transport taxes, , such as motor vehicle duties and air passenger duty.  

Crucially, though, while taxes may be paid by energy companies, they’re borne by other businesses as their customers. They pay many environmental taxes indirectly, with charges like the climate change levy added onto their energy bills.  

These, though, have been relatively stable, (even if energy prices have not been).  

By contrast, taxes on waste are rising. Landfill tax rose sharply in April 2025 to account for inflation between 2022 and 2024. That saw the standard rate shift jump from £103.70 a tonne to £126.15 and the lower rate from £3.30 to £4.05. It will continue to track the Retail Prices Index in 2026 and beyond. Extended producer responsibility (EPR), meanwhile, introduced in 2025, is expected to cost the retail sector £2bn annually, according to the British Retail Consortium.  

The complex array of fees for EPR taxes is significantly higher for many businesses than the plastic package tax (PPT), where compliance is often more expensive than the direct cost of the tax.  Nevertheless, they’re still small compared with businesses’ energy bills. But both the EPR and PPT reflect a broadening of the environmental tax base to a wider range of businesses than the traditionally energy intensive targets of environmental taxes.   

The same is true even for carbon-related taxes. Confirmed in the 2025 Budget, from January 2027, importers of aluminium, cement, fertiliser, hydrogen and iron and steel products face the new Carbon Border Adjustment Mechanism (CBAM). It aims to ensure carbon intensive goods imported into the UK face a comparable carbon price to that paid by UK manufacturers. Importers of the covered goods will need to submit quarterly returns with HMRC and pay any CBAM charges due. 

The tax targets the sectors directly affected but also others, such as construction and infrastructure that rely on these materials. Again, for many, compliance may be as much as a cost as the tax itself.  

Moreover, with the plastic packaging tax, EPR and CBAM, we’ve seen three new environmental taxes in just five years. The direction of travel seems clear. It would be unwise to bet on these being the last.

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