By AAT Comment Members AAT’s overview of the autumn budget 2025 5 Dec 2025 “However welcome this new funding is, the Budget has still failed to deliver for employers”. On 26 November, Rachel Reeves unveiled her second Budget against a difficult economic and fiscal backdrop and pressure from backbenchers. She positioned it as delivering the ‘fair and necessary’ measures required to address the UK’s economic challenges and put the economy on a stronger path towards economic growth. This includes a sweeping set of tax rises totalling £26 billion by 2029–30. The fiscal outlook is mixed. GDP is now expected to grow by 1.5% in 2025, above the OBR’s previous 1% expectation. Overall, however, UK economic growth forecast has been downgraded in 2026, 2027, 2028 and 2029. Meanwhile inflation is coming down faster than expected, predicted to fall to 2.5% in 2026 and returning to the 2% target in 2027. AAT’s view The Budget delivered some positive steps, particularly on apprenticeships, and included some of AAT’s recommendations, such as the government increasing the headroom against its fiscal targets. However, it fell short of providing a clear long-term tax strategy that the UK needs, with simplification and growth at the centre. We’re committed to continuing work with officials to improve the tax regime and skills landscape. We’re looking forward to engaging further in the new year, particularly on raising standards in the tax advice market. “Apprenticeships add enormous value to our economy – so it’s great to see the Budget recognise that. The announcement of new funding for under 25s seeking an apprenticeship in small businesses, as part of the Growth and Skills Levy £725m package, is really welcome… “However welcome this new funding is, the Budget has still failed to deliver for employers. With national insurance hikes from the last budget and now minimum wage increases, we risk creating a lost generation unable to get their first step on the job ladder… “What the country needs is a long-term strategy that tackles both youth unemployment and supports employers to give young people the opportunities they need.” – Sarah Beale, CEO AAT You can read Sarah’s full response on LinkedIn. Budget overview A boost for apprenticeships The commitment to fully fund SME apprenticeships for eligible people under 25 is one of the most significant announcements for AAT. The precise amount of funding is still to be clarified, as this forms part of a £1.5 billion investment in skills, including £725 million allocated to the Growth and Skills Levy package. Further detail expected to be announced shortly. The government also confirmed reforms to simplify the apprenticeship system and make it more efficient, including: removing the additional uplift to levy accounts; changing the expiry window to 12 months; changing the government’s co-investment rate to 75% for levy-paying employers once they have exhausted all their funds; and working with employers to streamline the suite of apprenticeship standards available. Alongside apprenticeship funding, the government announced the ‘Youth Guarantee: Jobs Guarantee scheme’ which will provide six-month paid work placements for eligible 18–21-year-olds on Universal Credit. A new Local Growth Fund was announced, for the Mayoral Strategic Authorities of: Greater Manchester, North East, West Midlands, South Yorkshire, West Yorkshire, Liverpool City Region, Greater Lincolnshire, Tees Valley, Hull & East Yorkshire, York & North Yorkshire and East Midlands. These strategic authorities will each receive a share of the £902 million over four years to invest in growth-driving interventions, including employment support and skills programmes. Key tax changes The Budget included many tax changes relevant to accountants and their clients, including: Income Tax & National Insurance –current thresholds extended by three years from April 2028 to April 2031. Dividends, property and savings taxes –the basic and higher rate of tax on these will be increased by 2%. Pensions –a new £2,000 cap on salary sacrifice schemes coming into effect in 2029. ‘Mansion tax’ –a new annual charge of £2,500 for properties worth more than £2 million, and £7,500 for properties worth more than £5 million. Business rates – from 2026/27 onwards,retail, hospitality and leisure sectors will benefit from permanently lower business rate multipliers: 38.2p for small properties and 43p for others under £500,000 funded by a 2.8p higher multiplier (50.8p) on properties over £500,000. Gambling –Remote Gaming Duty is being raised from 21% to 40%, while the duty on online betting is increasing from 15% to 25%. No changes are made to rates on in-person gambling and horse-racing, while bingo duty is entirely abolished from April 2026. Alcohol – Alcohol duty will be uprated with the RPI on 1 February 2026 to maintain its current real-terms value. Milkshake tax – the soft drinks industry levy will be extending to milk-based drinks and milk substitutes from 1 January 2028. Corporation tax – reducing the writing down allowance main rate to 14% and introducing a new 40% first year allowance for expenditure incurred on or after 1 January 2026. Vehicles – new mileage charge for electric (3p per mile) and plug-in hybrid cars (1.5p), payable each year alongside vehicle excise duty. Capital Gains Tax – the Employee Ownership Trust Capital Gains Tax relief will be reduced from 100% to 50%. Fuel duty – the 5p fuel duty cut will be extended until the end of August 2026 with rates then gradually returning to March 2022 levels by March 2027. Other key changes affecting accountants The government has decided not to regulate tax advisers beyond measures already announced – such as mandatory agent registration in April 2026 – following consultation. Instead, it will work in partnership with the sector to raise standards in the tax advice market. The Budget confirmed several other measures that will impact accountants and their clients: E-invoicing – the government will require all VAT invoices to be issued in a specified electronic format from April 2029. Minimum wage – the minimum wage for over-21s (also known as the ‘National Living Wage’) will rise by 4.1% and by 8.5% for 18- to 20-year-olds. Maxing Tax Digital – customers joining in April 2026 will not receive penalty points for late submission of their first four quarterly updates. The government has also announced a one-year deferral for several small groups of taxpayers. Pensions – the government confirmed those whose only income comes from the state pension will not have to pay any income tax. More detail will follow in 2026. Cash ISA – the tax-free allowance will be reduced to £12,000 for those under 65 from 2027/28. AAT Comment offers news and opinion on the world of business and finance from the Association of Accounting Technicians.