Businesses should expect the Autumn Budget on 28 October to raise tax, even though the Chancellor has ruled out the obvious ways of doing it.

Labour’s 2024 manifesto pledged not to increase the basic, higher or additional rates of income tax, National Insurance or VAT, and the government has committed to keeping the main rate of corporation tax at 25% for this Parliament. Fiscal rules also require day-to-day spending to be funded from tax and debt to fall as a share of GDP. With growth weak and borrowing costs high, the revenue will have to come from less obvious places.

Wealth, pensions and pay

Capital gains tax rates look safe. According to media reports, the Chancellor has effectively ruled out an increase after HMRC estimated that raising the higher rate by 10 percentage points would reduce receipts by £3.6bn in 2028-29 as people change their behaviour. Changes to how existing reliefs work, including inheritance tax and pension tax relief, are much more likely than changes to headline rates.

Speculation continues around the removal of the capital gains tax uplift on death. If this treatment were abolished, beneficiaries would pay capital gains tax on a lifetime of growth, potentially on top of inheritance tax.

For employers, salary sacrifice for pension contributions is still one to watch, even after last year’s changes. Any further restriction would raise National Insurance costs for employers and employees alike.

Personal tax thresholds are likely to stay frozen, putting pressure on pay decisions as employees move into higher bands following pay rises.

Business tax, banks and energy

The government has previously indicated that it wants to provide greater stability in the corporation tax regime, although targeted changes to reliefs or incentives remain possible.

With the main corporation tax rate fixed at 25%, we expect any changes to come through reliefs and incentives. Sector-specific taxes are an obvious alternative, and banks could face increases to the bank surcharge or bank levy.

For North Sea operators, the key question is what replaces the Energy Profits Levy. The levy is legislated to end on 31 March 2030 and the government has published plans for a permanent Oil and Gas Revenue Levy to replace it. Operators will want detail on the transition and, above all, how much long-term certainty the new levy offers.

Fuel duty is the other energy tax to watch. Another freeze, or delay to any scheduled increases, would be a way of limiting pressure on businesses, particularly those with significant transport, distribution or logistics costs. In this regard, it’s worth noting that the Treasury is already collecting more revenue from fuel, because the VAT take rises with the pump price. The RAC Foundation estimates the fuel price surge after the Iran conflict raised an extra £104m in VAT in one month.

HMRC compliance and reporting

We expect more investment in HMRC, new compliance powers and fresh anti-avoidance rules. For businesses, that means more reporting and closer scrutiny. Online marketplaces could also be made responsible for collecting VAT from some business sellers on their platforms.

Policy changes that would support growth and investment

For businesses, the priority remains greater certainty and a tax system that supports investment, innovation and economic growth. Recent Budgets have brought a significant volume and pace of change, often increasing complexity and administrative burdens. Against that backdrop, there are several targeted reforms that could encourage investment and make the UK tax system more effective:

Improve the R&D intensity calculation

Amend the R&D intensity calculation so that it is based only on actual expenditure incurred by the claimant company and any UK group. At present, overseas group companies can increase total relevant expenditure without increasing qualifying R&D spend, potentially preventing genuinely innovative businesses from accessing the higher enhanced R&D intensive support rate. In addition, “costs” like share-based payment charges that are in effect an accounting valuation movement that hit the P&L, should not form part of the intensity calculation.

Strengthen support for the UK video games sector

Introduce enhanced support for lower-budget games, similar to the Independent Film Tax Credit. Smaller studios often face the greatest funding challenges and a higher credit rate for qualifying independent productions could stimulate growth and improve the pipeline of UK-developed games. Relief could also be broadened to support businesses developing enabling technologies for the sector. Many game technology companies currently rely on R&D tax relief despite operating exclusively within the games ecosystem. Bringing these activities within a games-specific incentive could provide a more tailored and sector-focused form of support and mitigate the complexities of applying the standard R&D definition.

Encourage reinvestment in UK businesses

Introduce a targeted reinvestment relief that encourages entrepreneurs to reinvest proceeds from qualifying business disposals into growing UK businesses. This could help unlock capital, support scaling businesses and stimulate long-term economic growth.

Targeted employment tax reliefs

Introduce targeted Employer National Insurance reliefs. These could include young people entering the workforce, or employees in strategically important high-growth sectors where skills shortages are constraining expansion. A targeted approach would focus support on areas most likely to deliver economic growth, while potentially being significantly less costly than reversing recent broad-based increases in Employer National Insurance contributions across the economy.

Next steps

Whatever the Chancellor announces, businesses that understand their current tax position and potential areas of impact will be better placed to respond. To discuss how the Autumn Budget could affect your business, speak to your usual Johnston Carmichael adviser or fill out the short form below.