BEIGE BUDGET! REALLY?
The run-up to this year’s Budget was relatively subdued compared with recent years. There were announcements in advance designed to reassure the markets, including confirmation that the main rate of Capital Gains Tax would not increase. The Government also reiterated its commitment not to increase Income Tax, National Insurance or VAT, in line with Labour’s 2025 manifesto.
For the new Chancellor, this was an important opportunity to set out how the Government intends to strike the difficult balance between raising revenue, supporting economic growth and maintaining confidence.
The Budget was being dubbed the “Beige Budget”, with expectations of a steady approach focused on fiscal discipline rather than sweeping changes. The Chancellor emphasised this at the start of his speech, suggesting that a series of smaller measures would provide some breathing space for individuals and businesses amid continuing global uncertainty.
The Chancellor outlined three core themes:
- Giving Britain some breathing space on the cost of living and the cost of doing business.
- Backing British enterprise to unleash innovation and growth in every postcode.
- Tackling major challenges around energy, national security, public sector procurement and transformation, and housing.
GROWTH, SPENDING AND THE COST OF THE BUDGET
We would usually begin by looking at the Government’s economic forecasts. However, with global uncertainty affecting energy costs, financial markets and inflation, etc, how reliable can these forecasts really be?
The headline figures were hardly spectacular, with average annual growth forecast at around 1.5% over the next five years. There is little here to suggest a significant boost to economic growth, particularly when so much depends on factors outside the Government’s control.
So, was this really a Beige Budget? At first glance, perhaps. There were few sweeping announcements, but the smaller giveaways and technical changes made the detail more interesting than the speech might have suggested. These included a £100 energy payment for households in Council Tax bands A to D, alongside several other changes that could affect individuals and businesses.
As usual, our Budget summary focuses on the announcements we believe will be most relevant to our clients. You can read the full summary HERE.
WHO IS PAYING FOR THE GIVEAWAYS?
The cost of the measures will need to be funded, and the burden falls in part on banks, landlords and savers.
The banking sector will face a temporary Corporation Tax surcharge of 6%, a measure that had been leaked ahead of the Budget. This was announced alongside praise from the Chancellor for the role banks are playing in supporting households under financial pressure, in paying the charge.
Landlords and savers will also face higher Income Tax rates on rental and savings income. Rates are due to increase by 2% from 6 April 2027, following a 2% increase in April 2026. That means a cumulative increase of 4% over two years.
Not quite so beige for those affected.
BUSINESS OWNERS: ANOTHER REDUCTION IN RELIEF
There had been speculation ahead of the Budget that Business Asset Disposal Relief (BADR), formerly known as Entrepreneurs’ Relief, might be abolished. It survived, but its value has been reduced again.
The tax rate has increased from 10% two years ago to 18%, and from April 2026, the lifetime limit on qualifying gains will now fall from £1 million to £500,000 from April 2027.
For business owners planning an exit, this is another unwelcome change. The reduction could increase the tax payable on a qualifying disposal, making the timing and structure of a sale even more important.
Backing British enterprise? The headline message may be encouraging, but the tax position for some entrepreneurs is becoming less attractive.
FOUNDERS’ RELIEF: EXCITING HEADLINE, CHALLENGING DETAIL
We were more encouraged by the announcement of a new Founders’ Relief, offering a 10% Capital Gains Tax rate on qualifying disposals, subject to a proposed lifetime limit of £10 million. The intention is to encourage entrepreneurship, risk-taking and investment.
Sound familiar?
However, once we looked beyond the headline, the picture became less straightforward. The detailed conditions remain subject to consultation, but the proposed eligibility requirements appear demanding. They include minimum shareholdings, holding periods, UK residency, business turnover and employee thresholds, together with specific growth or research and development criteria.
Our initial view is that relatively few of our clients will qualify if the rules are implemented as proposed. The relief could be valuable for eligible founders, but the conditions may significantly limit its reach.
We set out the proposed requirements in our full Budget summary.
A FEW WELCOME CHANGES
There were some positive announcements, too.
The proposed abolition of the R&D Claim Notification Form is welcome. Since its introduction, the requirement has resulted in some companies missing the opportunity to claim relief because they failed to meet the notification deadline. Removing this requirement should make the process less onerous for affected businesses.
There are also changes to employee share schemes and other tax administration measures that may benefit some employers and taxpayers.
For individuals within Self-Assessment who make Payments on Account, the Government is proposing more regular in-year payments towards their final tax liability from 2029. The details remain subject to consultation, but the direction of travel raises an obvious question: could quarterly or even monthly payments become the norm for some taxpayers?
More regular payments might help spread the cost of a tax bill, but they could also create additional cash-flow and administrative considerations.
WHAT ABOUT EXTRACTING CASH WHEN SELLING A BUSINESS?
One area that attracted attention ahead of the Budget was the potential taxation of cash extracted from a company on a sale.
There had been speculation that measures might be introduced to prevent excess cash held within a business on a sale (cash above what is needed to settle its liabilities) from being extracted at generous Capital Gains Tax rates, and being taxed as income.
The Chancellor made a brief reference to the future alignment of the tax treatment of profits extracted from companies. However, at the time of writing, we have not identified detailed measures in the published Budget documents that address the concerns raised ahead of the announcement.
We will continue to monitor developments and update clients if further details emerge.
It is worth noting that, in recent Budgets, the Overview of Tax Legislation and Rates (OOTLAR) has typically been published shortly after the Chancellor's speech. However, this document provides only a summary of the measures. The detailed policy papers supporting individual announcements are taking longer to appear. Last year some of the detailed papers being posted the next day.
As a result, the full implications of some announcements may not become clear immediately.
OUR VIEW: BEIGE ON THE SURFACE, SIGNIFICANT IN THE DETAIL
This may not have been a Budget of dramatic headlines, but it would be a mistake to dismiss it as uneventful.
For business owners, landlords, savers and taxpayers, the cumulative effect of smaller changes can be just as important as a major announcement. The reductions in relief available to business owners, increases in tax rates on savings and rental income, and proposed changes to tax administration all deserve attention.
Our full Budget summary highlights the measures we believe are most relevant to our clients. Some announcements remain subject to consultation, and all will depend on the final legislation, so the details may change before the measures become law.
YOU CAN READ OUR FULL BUDGET SUMMARY HERE
If you would like to discuss how any of these announcements may affect you or your business, please contact our office.
