THE TRANSATLANTIC MAGAZINE
THE TRANSATLANTIC MAGAZINE
Chancellor of the Exchequer Rachel Reeves has raised taxes by an extra £26 billion in a Budget that was released early by the Office for Budget Responsibility (OBR). Commenting on the documents issued early by the OBR, Sean Drury said: “The leak of the report is the icing on the cake in respect of how this entire Budget process has been run over the last 3 months in the run up Budget Day, It is pretty unprecedented that not just the economic forecast but the actual Budget items are released prior to the Chancellor speaking and this means that she is going to have to speak while the market is reacting. The stress that has been caused by leaking throughout this process more than the traditional 3 week notice through which Budget purdah is enforced has been a disaster and has caused undue stress to a number of people in society. It should be called the Office of Budget Irresponsibility.”
He added: “The main tax items which the chancellor will need to explain (with no opportunity for rabbit out of hat are:
Fiona Fernie said: “The yield from council tax increases will be minimal and cause additional admin costs. The freezing of the thresholds will mean many additional relatively low-income individuals will be brought into the tax net, including people who will have to file tax returns for the first time. This will put further pressure on HMRC to deal with the compliance associated with those returns, which is likely to cause a further dip in service levels. Any new staff being recruited – as previously announced will need a period of training so will not really be much use in alleviating the problem in the initial stages.”
Neil Insull said: “For many individual investors, the announcement to raise income tax rates on dividends, property and savings income from 2027 will swing the pendulum in favour of investing through a company. I expect to see personal and family investment companies being used more. With the freezing of the personal allowance, it's crazy to think that 100% of pensioners will be taxpayers, and significantly more young people on minimum wage will be bearing tax on their wages.”
Mark Cunningham said: “We believe capital allowance main rate falls from 18% to 14% from April 2026. Full expensing and AIA remain”
Heather Powell said: “Income tax on rents – an increase of 2% on the basic rate band (20 to 22%); and higher rate bands (40 to 42%, 45% to 47%) is likely to be the very final straw for many landlords who own their buy to let properties personally – restrictions on the percentage of interest paid that can be deducted from rental income when calculating tax liabilities, increasing legislation including the Renters Reform Bill, and a significant slowing in the growth in the value of houses and flats will ensure even more investors to sell. Potentially good news for first time buyers, but a major issue for those who rent their home. The mobility of the UK workforce is likely to be significantly impacted, impacting on productivity for the UK”.
She added: “Planning reform changes are to be welcomed, but the Chancellor needs to look beyond the headline – houses will be built if there are buyers – the fall in demand for homes has led to the fall in new homes built in the UK in the last year – not issues with the planning system.”
Simon Gleeson said: “Middle-England has ultimately been squeezed with Labour breaking its manifesto by now freezing personal tax allowances and adding 2% tax, going after savings for the future as well as investment incentives which frankly can go down as well as up which is the usual required disclaimer when promoting such investment schemes.”
Fiona Fernie said: “The Chancellor speaks about rebuilding the economy and blames the inherited "black hole" but she is still increasing the black hole with her increases in expenditure”
Malli Kini said: “A 2% rise in dividends won’t just raise revenue – it will change behaviour. More money will stay locked in companies or be diverted into planning structures instead of being reinvested in the economy.”
“Dividend rate increases of 2% will be a direct tax rise on entrepreneurial reward. Dividends are how most founders are paid once they’ve taken commercial risk and paid corporation tax. Scrapping salary sacrifice for pensions dismantles one of the UK’s most effective and widely used saving mechanisms. Over 7 million employees rely on it to boost pension contributions and reduce National Insurance, while employers depend on it to manage payroll costs efficiently.
“Crucially, salary sacrifice is also one of the only practical and legitimate planning tools available to taxpayers trapped in the £100,000 tax cliff edge, where the withdrawal of the personal allowance creates an effective 60% marginal tax rate between £100,000 and £125,140. Removing it would trap thousands of senior professionals including NHS consultants, senior public sector staff, finance professionals and business owners. They will be in punitive tax territory with no realistic route out other than asking for lower pay!”
Robert Salter said: “The decision to limit salary sacrifice arrangements for employee pension contributions from April 2029 will create additional costs for both employees and employers. The sad reality is that it will also result in reduced contributions on a going forward basis and increase the 'savings crisis' that is already threatening the long-term retirement of British workers.
“The extension of fiscal drag – i.e. the freezing of tax allowances and thresholds until April 2031 – is in reality a direct tax rise on nearly all workers (and indeed many pensioners too). It means that the tax bands will have been raised for 10 years at the end of this period and it is particularly punitive for the lowest paid, who are being drawn into income tax in ever increasing numbers.”
Neil Insull said: “The stamp duty holiday for IPOs in the UK will help liquidity and sentiment, but on its own it won’t fix the UK’s IPO problem. Founders need certainty, stability and capital incentives — not just temporary tax holidays. This is a helpful start but not bold enough”.
Sean Drury said: “The mansion tax from £2m will require a huge amount of work. There is going to be a huge impact in the London boroughs and it will be interesting to see what year they will work towards as the London property market is up and down. There will be an industry in putting in devaluations (liens on property for example) so will be incredible to see how they will proceed – the last valuation was caused by Poll Tax Crises in 1991 and no-one has faced up to this.
“Pension salary sacrifice issue is going to be huge – the employer NIC charge is significant (and they said they would not impose more issues for business in this arena) what will happen is company will not be able to fund their contributions as much (it would cost them double the saving they had – I can explain this) therefore lower investments and disincentive to save.
“Cash ISA restriction expected (though I think she got it wrong way round in her statement!!!), however looking over periods of time ISA go down as well as Up – however it will force us down a more US route which does create liquidity, but I did not hear anything about the requirement to invest in UK rather than higher growth overseas structures. I would have thought the £8000 should also have required to be invested in UK equities.”
Heather Powell said “The increase in the tax payable on investment income can be mitigated by the wealthy through the use of Family Investment Companies – but the working man will be paying more tax on interest earned on bank accounts opened to save for deposits for homes, family holidays and a new car – is this fair?”
Nimesh Shah, CEO of Blick Rothenberg said: “Even before Rachel Reeves stood up to deliver her Budget 2025 speech, this is already one of the most damaging Budget statements in living memory and will leave a lasting impact for a generation. The 2% increase to dividend tax rates, property and savings (raising over £2 billion) presumably breaks Labour’s manifesto pledge not to increase Income Tax.
“The reduction in the cash ISA limit to £12k will cost a higher rate taxpayer over £140 in income tax (assuming interest rate of 4.5% and no personal savings allowance). The ISA regime has just been made (even more) unnecessarily complicated by having a different regime for over-65s. I understand the logic but this is making a mess of ISAs.
“The changes to salary sacrifice pensions from 2029 are another damaging blow to business after last year's employer's NIC increase. This will be inflationary and lead to further job losses.
“It was a certainty that personal tax allowances and thresholds would be frozen in today's Budget. I wasn't expecting it would be for another 3 years and will drag almost 1 million people into higher rate (40%) tax.
“Changes to dividends, property income and savings introduces new rates into the personal tax system which add further complexity into the already complicated regime.
“The real impact of frozen tax allowances and thresholds. Someone earning £20k is almost £600 worse-off today; they will be over £1,000 worse-off in 2031.”
Artur Vorobyev said: “The Chancellor confirmed that the full £20,000 ISA allowance will remain, but £8,000 of this will now be ring-fenced exclusively for investment purposes. This change is likely to please wealth managers and asset managers, as it encourages greater allocation to Stocks & Shares ISAs. However, the proposed pension reform specifically the cap on National Insurance relief for salary-sacrificed contributions above £2,000 could have the opposite effect. It may discourage higher pension contributions, reducing inflows into pension funds and negatively impacting assets under management (AUM). A more detailed scenario analysis will be required to assess the overall impact on the sector”.
No new bank levy changes, but the overall tax burden continues to rise, creating a risk of competitiveness erosion compared to EU and US peers.
Positive: ISA reforms and higher dividend tax rates are likely to push savers toward investment products, benefiting asset managers.
Negative: Changes to National Insurance on salary-sacrificed pensions could reduce pension contributions, while fiscal drag from frozen tax thresholds will squeeze disposable income, limiting inflows.
Persistent inflation and wage pressures will increase claims costs, requiring pricing model recalibration and tighter risk management.
The digitalization agenda (e.g., digital gilts) continues, but there is no major deregulatory boost. IPO activity may see a modest lift from SDRT tweaks, though macro headwinds remain significant.
Compliance costs are rising, and many clients are already voicing concerns about the burden of regulation, which could dampen investment appetite.
Winnie Cao, a Partner at Blick Rothenberg, said “The 2% income tax increase for dividend, property and savings income means that more people will be encouraged to use Family Investment Company structure to hold assets, reducing the ongoing income tax on a personal level.
“Given the introduction of the high value council tax surcharge, this will further hit the prime central London market. Could this be a good timing for investors to find a bargain, or restructure their property portfolio?
“While it was encouraging to hear the Chancellor talk about making the UK an attractive destination for entrepreneurs, it is disappointing that no measure comes with it to back up her claim. It would have been simple to switch back to the £10million Business Asset Disposal Relief (previously known as Entrepreneur's Relief), rewarding entrepreneurs create and grow businesses in the UK who will bring the much needed vibrancy to the country”.
Robert Salter said: “It is interesting to note that the OBR Report for the Budget highlights that the increase in Employer's NIC costs that arose from the last Budget - and came into effect from April 2025 - have been a significant factor behind the increase in unemployment in the last 12 months.”
Neil Insull said “Employee ownership trusts were brought in with much fanfare in 2014 to simplify succession planning and bringing corporate ownership to employees. It is therefore disappointing to see a removal of the CGT exemption on sales and bring 50% of gains into charge. This will almost certainly jeopardise the wish for entrepreneurs to pass their shares to employees in the future.”
David Livitt said “US taxpayers will now reconsider holding income-producing assets in the UK vs US and favour US mutual funds/ETFs (avoiding UK funds because of PFIC rules, and consider shifting investments toward growth assets as less current income. Does this make UK reporting more complex...”
Michael Holland, a Partner at Blick Rothenberg, said: “The loss of tax free pension salary sacrifice means Americans in the UK have one less opportunity to mop up excess Foreign Tax Credits. Overall it is encouraging for Transatlantic Businesses/US Expansion businesses that the USA as a key partner is mentioned in the first 60 seconds and that boosting international trade is later referenced as part of positive growth story.”
Bal Lota said “Increases to the UK income tax on personal investment income is unwelcomed news to American's. This is lightly to result not just higher tax costs on investment income when looking at the worldwide tax cost (most likely to be UK&US), but also a frustration that they might have foreign tax credits which are wasted if not used within 10 years.”
Heather Powell said: “Is HMRC going to start a recruitment campaign to build a team to help the +90 year olds who are off line who will be required to file personal tax returns from 2027? If they start now the personnel should be in role and trained in time to ensure that our elderly pensioners can comply with their filing requirements.”
Malli Kini said “Scrapping salary sacrifice for pensions dismantles one of the UK’s most effective and widely used saving mechanisms. Over 7 million employees rely on it to boost pension contributions and reduce National Insurance, while employers depend on it to manage payroll costs efficiently.
"Crucially, salary sacrifice is also one of the only practical and legitimate planning tools available to taxpayers trapped in the £100,000 tax cliff edge, where the withdrawal of the personal allowance creates an effective 60% marginal tax rate between £100,000 and £125,140. Removing it would trap thousands of senior professionals including NHS consultants, senior public sector staff, finance professionals and business owners. They will be in punitive tax territory with no realistic route out other than asking for lower pay!”
Fiona Fernie said: “Council tax surcharge is thought to likely affect 100,000 homes – mostly in the South East. The OBR estimates it will raise around £0.4billion. This is a very small amount, particularly given that there will be a huge additional administration burden to revalue properties in bands F, G and H to determine if they are now valued above £2million and if so where they sit within the price bands which will determine the amount of the additional tax. That admin burden will inevitably eat into the amount collected.
"The proposals also just emphasise the North South divide that Labour claim to want to “level up” since the higher valued home in the South already drain their owners' resources with bigger mortgage payments.”
