Autumn Budget 2025: predictions for business owners

Chancellor Rachel Reeves is facing significant pressure to raise taxes to address a large government deficit. This comes as the National Institute of Economic and Social Research (Niesr) estimates the deficit sits around £40 billion.

In the upcoming Autumn Budget, the Chancellor may need to make difficult decisions on tax to try and make up the deficit. But with Labour pledging to not raise taxes on ‘working people’ and categorically ruling out rises in income tax, national insurance or VAT – the government will look to find the money elsewhere.

Speculation around how the government plans to fill the hole in its finances has led some to believe tax for businesses could change. So what taxes could change? And what can small business owners expect from the upcoming Autumn Budget?

Autumn Budget 2025 date

There isn’t a date for the Autumn Budget 2025 yet, but it will probably take place in late October or early November. Some experts have speculated that November is more likely as this could give the economy time to recover from slow economic growth in May and June.

The Budget is a time for the government to outline their approach to spending and borrowing over the coming year as well as providing tax updates. And it follows the Prime Minister’s Questions just after midday.

Will taxes increase for your business?

The government’s focus on not raising taxes on ‘working people’ has led some economic commentators to believe that the tax burden on businesses could increase. But the government’s manifesto pledges not to raise VAT or corporation tax, which means that finding funds won’t be as simple as raising taxes.

The Chancellor also promised that day-to-day government costs won’t be covered by borrowing, but by income tax. Niesr insists in their report that taxes must rise for the Chancellor to meet these self-imposed borrowing rules.

One recommendation Niesr gives to the government is to consider changing the scope of VAT.

What could changing the scope of VAT mean?

While the government has pledged to not change the rate of VAT (currently 20 per cent), they could change the scope of VAT.

The most obvious tweak the government could make is changing the VAT threshold –if they lower the threshold then more businesses might need to pay VAT.

Alternatively, the government could move items between the current rates. There’s the standard rate of VAT (20 per cent), the reduced rate (five per cent), and the zero-rate (zero per cent). The government could move goods or services from one category to another.

For example, the government could:

move a reduced-rated item to the standard-rate, which would make more tax revenue
move a zero-rated item (like some food products or children’s clothing) to the standard rate, which would raise more tax revenue but have a knock-on effect on the price consumers pay

Or the government could change what’s considered exempt or outside the scope of VAT. Certain services, like education, healthcare, and financial services, are currently exempt from VAT.

The government could amend legislation so some of those services are no longer exempt. This is distinct from zero-rated, as businesses with exempt supplies can’t reclaim VAT on their own costs.

Further tweaks to capital gains tax?

The threshold for business asset disposal relief increased to 19 per cent in April. But with growing pressure on the Labour party to tax the most wealthy people in the UK, we could see capital gains tax (CGT) change further.

There are a few different ways the government could tweak capital gains tax to increase tax revenue, for example:

increasing the rates – they could raise the rates of CGT, making gains more expensive for all taxpayers. This is a straightforward way to increase tax revenue
change the rates for different assets – altering the rates on specific high-value assets is more targeted to higher earners
align with income tax rates – a more radical change would be aligning CGT rates with income tax rates. This would significantly increase the tax burden on higher and additional-rate taxpayers
change Hold-Over Relief eligibility – this relief allows an asset to be gifted without paying CGT. The government could change the conditions for when this relief applies

End the fuel duty freeze?

In the 2024 Autumn Budget, the chancellor committed to extending the current rate of fuel duty (52.95 pence a litre) until March 2026. But with the government’s finances getting tighter, and fuel duty frozen since 2011, some changes could be on the way.

Jonathan Portes, professor of economics and public policy at King’s College London, said “it is long past time to raise fuel duty”, suggesting it should move more in line with inflation.

But it’s a balancing act for the government when deciding how much to raise it by. Raise fuel duty too much and fuel costs spike, risking higher inflation, and leaving everyone paying more at the pumps.

And the potential knock-on effect of higher fuel costs could harm economic growth as people travel less and costs for goods and services soar.

But a small rise could increase tax revenue enough while not harming the economy.

Will the income tax threshold freeze continue?

Extending the freeze on income tax thresholds further could increase revenue without directly raising tax. If the thresholds are frozen, more people are dragged into higher tax brackets as wages rise – this is commonly called a ‘stealth tax’.

The chancellor said that income tax thresholds will rise in line with inflation from the 2028-29 tax year. But the Treasury could consider extending the freeze to raise more revenue.

This is particularly relevant to sole traders whose business profits are subject to income tax.

Inheritance tax reforms on the way?

The chancellor is considering reforms to inheritance tax to help plug the UK deficit, according to a report in the Guardian.

Rules on gifting money and assets could be tightened to help the government raise revenue.

Currently gifts and assets given seven years before someone dies aren’t subject to inheritance tax. Will we see a change in this process announced on Budget day?

Bank and gambling levies on the way?

The need to raise other tax rates will be based on how significant the heavily rumoured bank and gambling levies are. With many publications reporting that taxes on the gambling industry look very likely.

Former Prime Minister Gordon Brown said “The government can fulfil today’s unmet needs by taxing an undertaxed sector (the gambling sector).” He’s pointed out that the UK taxes the industry far less than other European countries.

And to be consistent with not raising taxes for working people, some suggest the government considers a windfall tax on banks. Potentially raising up to £11 billion in tax revenue.

A levy on the banks could mean the government could raise tax revenue without harming public perceptions. These are potentially two big sources of tax revenue for the government and will dictate how strongly businesses are taxed in the upcoming Budget.

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