UK Budget: no change for corporate taxes but employers’ NICs increased to 15%

The rate increase, coupled with a reduction to the threshold at which employer contributions become payable from £9,100 to £5,000, is expected to raise over £23.7bn in 2025-26, according to government figures.

The government also published a corporate tax ‘roadmap’ (28-page / 227KB PDF) alongside the Budget documents, setting out its commitments across the corporate tax system for this parliamentary session. The roadmap focuses on “delivering predictability, stability and certainty for the tax system” and the government said that it had been “designed to give businesses the certainty they need and confidence that the UK intends to maintain its competitive position among major economies”.

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Eloise Walker, corporate tax expert at Pinsent Masons, said that the overall picture for businesses following the Budget was “an odd mix”.

“On the one hand, the corporate tax roadmap provides plenty of reassurance for businesses. The focus is on maintaining stability, capping tax rates, and providing certainty – be it maintaining the current losses regime, the new R&D regime and capital allowances, providing greater clarity and simplification (of the Capital Allowances Act 2001), or consulting on advance clearances (for investors in major projects and on R&D). On the other hand, though, increasing employment taxes on businesses is being used to fill the Treasury’s multi-billion black hole,” she said.

The various commitments in the corporate tax roadmap include: capping the headline rate of corporation tax at 25%; maintaining the permanent full expensing capital allowances; maintaining other core features of the UK’s capital allowances regime including the £1 million annual investment allowance, writing down allowances and structures and buildings allowance; maintaining the research and development tax relief rates and the patent box; and preserving the UK’s competitive regime for intangible fixed assets.

The roadmap also commits to consulting on widening access to advance clearances – both in relation to a new process that will give investors in major projects increased advance certainty about the taxes that will apply and in the context of R&D tax reliefs. Consultations are expected to be published in Spring 2025.

However, Walker said businesses should be “cautious about some of the statements in the roadmap”.

“The exploration of how to provide greater clarity on what qualifies for different capital allowances may not be everything business might wish it to be. The proposed consultation on changes to modernise transfer pricing legislation includes potentially pushing medium sized companies into, not out of, the regime and introducing yet another requirement for multinationals to report information to HMRC, this time cross-border related party transactions – adding to the ever-increasing tax compliance burden faced by businesses,” she said.

Significant changes to capital gains tax (CGT) rates were also announced by the chancellor. The main rates will increase from 10% and 20% to 18% and 24% respectively. The changes take effect for disposals made on or after 30 October 2024. The rate of CGT for Business Asset Disposal Relief and Investors’ Relief is increasing from 10% to 14% for disposals made on or after 6 April 2025, and from 14% to 18% for disposals made on or after 6 April 2026. The lifetime limit for Investors’ Relief will reduce from £10 million to £1 million for qualifying disposals made on or after 30 October 2024.  No changes will be made to the CGT rates that apply to residential property gains.

Tax increases for carried interest were also announced. The tax rate on carried interest returns will increase from 28% to 32% from April 2025, pending full reform of the regime in April 2026.

“Although the main CGT rates have now gone up, some private equity houses will still be looking to exit live investments ahead of April 2025, when the rate for carried interest increases to 32% – and certainly ahead of April 2026 when they get pulled into the income tax framework. It could, of course, have been much worse, and a short-term boost to deal-flow can only be a good thing for those in that sector,” Walker said.