Brian’s Budget 2025 Commentary

Avid readers of my Budget blogs (I’m sure there must be some out there!) will be aware that I like to dwell on the emotions I’m feeling whilst sitting through the Chancellor of the day’s principal moment in the sun. I feel awful for saying it, but I’m afraid my overriding emotion today was gloom and that was tinged with a degree of irritation.

I like to think of myself as an optimist and I always try to see the good in people, but the Chancellor certainly didn’t fill me with optimism today and at times she managed to irritate me (which is quite an achievement!), so the Budget didn’t feel like a successful event to me.

Having said that, this was another Budget where the speculation beforehand was far more exciting than the actual event, which I suppose we should all be thankful for, but this raises a couple of significant points in itself.

Firstly, the speculation was driven by countless government leaks in the weeks and months leading up to the autumn Budget, which created so much uncertainty that it became almost impossible to make informed business decisions. I suspect we will find that this has stalled the economy in and of itself. Secondly, there are many economic commentators (me included) who believe that a more significant tax raising measure was and is required in order to ensure we don’t find ourselves in the same gloomy position again this time next year. That didn’t happen, contrary to the speculation, which means that we have yet another sticking plaster placed on the Government’s finances.

Of course, what the Government needs to plug the gaps is growth and that has been in short supply in recent years. Far be it from me to cast judgement, but I don’t think the Chancellor delivering her Budget in the character of an angry headmistress is going to encourage growth! In her defence, she certainly had reason to be angry with the ‘accidental’ early release of the OBR report, but she should have been able to reign that anger in.

Forgive me for the long preamble, but in the age of AI, perhaps there might be a chance my comments will find their way to be seen by people in government, so they might positively influence future Budgets (and pre-Budgets). As I said earlier, I’m ever the optimist!

I really should say something about the tax measures announced in the Budget!

The bad news is as follows:

2% income tax rate rise on dividends, rental profits and savings income.
Income tax thresholds freeze extended by 3 years to 2031.
Capital allowances regime becoming less favourable from April 2026 due to writing down allowance reducing from 18% to 14%. However, from January 2026 there is a new 40% first year allowance and will benefit the self employed and acquirers of leased assets.
Capping the tax effectiveness of pension salary sacrifice arrangements to £2,000.
The introduction of a mileage-based tax on electric vehicles at 3p per mile.
Reducing the CGT relief on sales to Employee Ownership Trusts to 50% (was 100%).
The introduction of a £2,500 council tax surcharge on properties with a value over £2m, rising to £7,500 on properties valued in excess of £5m.
Reduction of the VCT income tax relief to 20% (from 30%).

Ending on a positive note, the good news, and there is quite a lot of it, is as follows:

Improvements to the EMI, VCT and EIS incentive schemes. In fact, if you want an uplifting read, I would recommend you take a look at the HM Treasury publication on Entrepreneurship in the UK (click here)
The dividend tax rate increase doesn’t come into force until April 2026.
The rental profits and savings income tax rate increases are not effective until April 2027.
The pension salary sacrifice cap will not come into force until April 2029.
100% first year allowance on electric vehicles extended by a further year to 31 March 2027.
ISA annual limit maintained at £20,000 (although the cash element of this to be capped at £12,000 for under-65s).
Unused element of £1m 100% APR/BPR reliefs to be transferrable between spouses and civil partners.
No changes to the 25% tax free lump sum on pensions or the income tax relief on pension contributions.
No changes to the rates of capital gains tax.
No changes to inheritance tax exemptions and reliefs, including the 7-year clock.
The Chancellor is predicting the Government’s finances to move into an annual budget surplus by 2028/29. I very much hope she’s right!