November 27, 2025 Opinion: Budget 2025 – More Tinkering Around the Edges
Maybe it’s just me, but I was hoping that a new government after 14 years would enact some structural reforms to the fiscal system. If they were so minded, it would have been expedient to have done so in their first year, carried by the wave of optimism after winning a general election (notwithstanding that this government’s vote share is the lowest of any majority party on record). Having failed to do so last year, it was vanishingly unlikely that they would do so this week, and yet I still stand disappointed.
The UK press likes to talk of ‘Broken Britain’, and we’re bombarded with sensationalised pictures of hospital beds lining corridors and small boats crossing the channel. I’m not qualified to make suggestions about how to fix those problems, but I am qualified to talk about tax. Here are my thoughts.
It still doesn’t always pay to work. Single parents (especially those with more than one child), are often disincentivised to work – for many people, the numbers just don’t make sense. When a high-earning individual hits £100k, their marginal tax rate shoots up to 60% and childcare benefits are withdrawn immediately. This cliff edge can cost a family with a single high earner an extraordinary amount of money, so many carefully and artificially reduce their income via salary sacrifice or simply by cutting their hours (and consequently their productivity). Whilst this only impacts the top 4% of earners, fiscal drag will mean these rules will impact 2.3 million people by 28/29. Far from defending high earners, I’m questioning a system that discourages people from earning more.
On the other end of the earnings spectrum, the minimum wage is such that people earning minimum wage often qualify for government support. In effect, the taxpayer continues to subsidise lower-paid jobs via universal credit. Perhaps I’m naive, but wouldn’t cutting Employer NICs and increasing minimum wages in lockstep empower individuals and reduce the administrative burden?
Given the strong rumours that National Insurance Contributions (NICs) would be introduced on earnings from LLPs, it’s clear that the government has bowed to lobbying pressure from the legal and accountancy industry (for whom LLPs were designed). Yet, the rate of income tax on dividends will increase by 2%, disproportionately hitting entrepreneurs and small business owners operating through limited companies. I see no reason why one business structure should be treated more favourably than the other.
I agree with the rules limiting cash ISA contributions to £12k per year, but I’m yet to find anyone who can understand the policy decision behind exempting over-65s. If the reasoning is that they should not be forced to weather stock market volatility in their twilight years, the same grace should be extended to younger people saving for house deposits whilst also burdened with student loan payments and childcare costs. Instead, the government will consult on scrapping the Lifetime ISA, a savings benefit that was in place to help the younger generation.
So, what do I like? I welcome plans to combat fraud and the new ‘hidden economy team’ because there’s clearly a lot of work to be done in closing the tax gap (which is particularly acute amongst small businesses). E-invoicing will help, but the government missed an opportunity to also lower the VAT registration threshold, which is more than double the European average.
Permanently lower multipliers used to calculate business rates and the extension of small business rates relief will help Britain’s high streets. If only they had immediately scrapped the £135 customs duty exemption immediately (rather than committing to do so by 2029). This currently distorts the competitive market in favour of offshore FMCG businesses such as Temu and Shein at the expense of UK markets and high streets. It might also help to reduce the amount of clothes-based plastic waste. Entrepreneurs will welcome the expansion of the Enterprise Management Incentives (EMI) regime so that it now applies to larger businesses, and the increase in Enterprise Investment Scheme (EIS) / Venture Capital Trust (VCT) limits so more businesses can seek tax-incentivised investment.
And, it is difficult to be too sympathetic towards those impacted by Mansion tax. If anything, I think they should have gone further and introduced more council tax bands. I would also have welcomed Stamp Duty incentives for downsizing, given the clear economic benefits of a property market that facilitates people moving homes to take up better jobs.
In writing this blog, I’ve struggled to hide my frustration in respect of the lack of real change. Ever since I’ve worked in Tax, successive governments have failed to address structural issues in our tax regime. It’s probably not realistic to expect any government to risk political capital to enact such changes, but I’m hopeful that the tide will change towards simplicity, towards fairness and towards incentivising work.
Dhruv Patel is Director of Tax and Accountancy. He is dual-qualified as a Chartered Accountant and Chartered Tax Advisor and holds a law degree. He has worked in senior tax roles at top-tier professional services firms and in-house at a large international PLC.
