Yesterday’s Autumn Budget, presented by Chancellor Rachel Reeves, brought few surprises, but tax changes may present challenges for businesses, especially for those in the tech sector that rely on agile growth and innovation.
Adam Chick, technology and media expert at Buzzacott, comments on how Labour’s £100 billion investment plan aims to balance business challenges with long-term growth.
Chick says, “Key announcements include the “7 key pillars of growth” which prioritise green investments and economic stability, supported by initiatives like the National Wealth Fund and over £70 billion in private investment, Labour aims to establish the UK as a leader in tech-driven sustainability.”
“However, it looks like businesses large and small are shouldering the impact of Labour’s increased spending commitments, while the focus shifts to easing the burden on the everyday worker.”
Capital Gains Tax (CGT)
“Rumours of a drastic CGT increase were mostly alleviated, with the highest rate only seeing a 4% increase. This means an additional £40,000 for every £1 million of gain which is unlikely to disrupt financial planning significantly.”
Business Asset Disposal Relief (BADR)
Reeves also announced that BADR, which supports entrepreneurs, will remain with the current lifetime allowance (£1 million) taxable at 10% until April 2025 when it becomes 14%, and then 18% in April 2026. When combined with the increases to CGT, Chick anticipates that this change may accelerate activity in the M&A market as owners look to sell before these increases take effect.
“This will put pressure on the market and likely lead to more activity in the M&A space in the short term as tech founders and investors look to exit ahead of the tax hikes. There may be more opportunities for buyers to secure deals if they can meet tight deadlines.”
Business property relief and inheritance tax (IHT)
Chick says, “From April 2026, business property relief reforms will limit IHT-free status to the first £1 million (in addition to the usual normal IHT allowance), with amounts over this subject to a rate of 20% via 50% relief mechanism. This could particularly affect tech entrepreneurs and investors with larger portfolios, making early succession planning vital for family businesses.”
Employers’ National Insurance contributions
“The employers’ national insurance increase was less than anticipated at 1.2% but with the threshold dropping to salaries over £5,000 per year rather £9,100, the cost to an employer will be significant. The new £10,500 allowance will offset costs for smaller tech startups, but for others, this rise, coupled with a higher minimum wage, will add to payroll expenses.”
“Tech companies may need to reconsider compensation structures, especially given the anticipated £5 billion increase in total business costs from wage and labour policy changes.”
Commenting on the question of how entrepreneurs should pay themselves, Chick notes, “The timeless question of whether to take income through dividends, salary, or a mix of both, is one that many will revisit, especially as rising employers’ NI contributions change the calculation.”
Corporate tax stability and support for key industries
Labour committed to capping corporate tax at 25% and maintaining reliefs like full expensing, annual investment allowances and R&D incentives.
“This stability is expected to benefit the tech sector, which relies heavily on R&D.”
“They also pledged to invest £765 million into aerospace and £2billion into the automative sector over the next 5 years. Additional funds will support life sciences and creative industries, highlighting the UK’s push to keep the UK competitive in global tech innovation.”
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