Autumn Budget: What could it mean for businesses?

For weeks what the Budget could mean for individuals dominated the headlines, though last week’s International Investment Summit and growing speculation that the Government is considering a rise in employer's National Insurance (NI), has brought back into focus what it could deliver for businesses. There are a number of business tax announcements we’re anticipating, potential updates on open policy areas hanging over from the previous Government, and no doubt the odd surprise too.  

In this article we explore what could be in store for corporates, including the eagerly anticipated business tax roadmap.  

What may be included in the business tax roadmap? 

The Government hasn’t shied away from the narrative that there are tough fiscal choices to be made, reducing any expectation that there will be room for further business tax incentives to be announced in the Budget. Instead, the main business tax offer is anticipated to be a tax roadmap for businesses, which the Government has confirmed will be outlined on 30 October.

Certainty is expected to be the central pillar of the business tax roadmap, with the ambition that it “encourages investment and gives business the confidence to grow”.  While regularly referred to as a tax roadmap for business initially, suggesting it may cover the range of taxes which impact businesses, Rachel Reeves’ speech at last week’s investment summit referred to it as a corporate tax roadmap, indicating it will have a narrower focus. 

So what could we see included in the roadmap?

International tax 

Labour’s manifesto includes support for the OECD global minimum rate of corporate taxation and backs international efforts to make sure multinational tech companies pay their fair share of tax, the latter presumed to refer to Pillar 1.  Since coming into power Labour have committed to introduce the Pillar 2 Undertaxed Profits Rule for accounting periods beginning on or after 31 December 2024, and it’s likely this will be reconfirmed at Budget, along with the inclusion of legislation in the next Finance Bill.

Beyond that there are a number of policy items hanging over from the last Government, including exploring how best to establish a framework for corporate re-domiciliation to the UK and HMRC’s consultation simplifying Diverted Profits Tax, transfer pricing and permanent establishment legislation. Prior to the election it was intended that a technical consultation on draft legislation would take place in 2024, however, the next steps and timing currently remain unclear following the change of Government.

Employment taxes

Labour’s manifesto includes a pledge that they wouldn’t increase NI, though it's now understood that the pledge only relates to employee NI and there is speculation that an increase in employer's NI could be announced on the 30th . Speculation began that the Government may be considering rises to employer NI because the Chief Secretary to the Treasury was quoted referring specifically to employee NI when reiterating the original pledge. With Reeves, Starmer and the Business Secretary (Jonathan Reynolds) all indicating that the pledge is limited to employee NI, speculation has only intensified since. Along with rises to employer NI rates, it’s also been speculated that the Government is considering introducing NI on employer pension contributions.  In recent analysis by the Institute for Fiscal Studies they estimate that this has the potential to raise substantial sums, if employer NI was levied on employer pension contributions at the full rate (13.8%) their analysis indicates it could raise £17 billion per annum.

Beyond NI, on other areas relevant to employers it’s worthwhile noting that the 'non-dom' rules also underpin the operation of short-term tax reliefs for employees coming to work in the UK and we’re expecting reform in this area, which we explore in this separate Insight. 

Digital agenda

Clamping down on tax avoidance and closing the tax gap (the difference between the amount of tax that should, in theory, be paid to HMRC and actual receipts) was identified in the Labour manifesto as a way to raise additional funds. They identified a net circa. £5 billion of further revenue could be raised by 2028/29 and in their April 2024 Plan to Close the Tax Gap paper drew out the importance of digitalisation in reducing the tax gap, especially from carelessness and errors.

Since coming to power we’ve seen a focus on digitalisation with the announcement in late September that HMRC will soon launch a consultation on electronic invoicing to promote its wider use, and the promise of a digital transformation roadmap to be published in Spring 2025.  It isn’t expected that we’ll hear much more on these at Budget, but these will be interesting developments to keep an eye on and we may even get an update on the future of making tax digital for corporation tax. 

Business rates

Labour have pledged to replace the current business rates system with one that levels “the playing field between the high street and online giants”.  A big ambition, but with little clarity so far on how it will be achieved, and an area we may hear more on at Budget. With business rates a devolved tax in Scotland, Wales, and Northern Ireland, it’s worthwhile noting that this pledge on the face of it would only apply to England. 

Other taxes

It shouldn’t be overlooked that there are a number of taxes on individuals for which reform is being speculated on that have the potential to impact owner-managed businesses and shareholders. These are outside the scope of this article but we have a series of Insight articles on other taxes which can be found here.

What comes next?

We now wait for the Budget, and the promised business tax roadmap, which will hopefully bring some clarity on the future of the UK tax landscape.

 For more insight and guidance, get in touch with Abigail Agopian.