Autumn Budget Rewards Risk-Takers But Creates Two Classes Of Founder

nuse.

Chancellor John Healey’s first Budget will hand high-growth founders the most generous tax relief since 2020 but halves the lifetime limit on the relief many other business owners rely on, according to accountancy and business advisory firm Johnston Carmichael.

From 6 April 2027, qualifying founders of high-growth, innovative companies will benefit from a new 10%, compared with the standard 24% rate, on up to £10m of lifetime gains. Eligibility will be set following a technical consultation, but the conditions are likely to be stringent.

On the same date, the lifetime limit for Business Asset Disposal Relief (BADR), which reduces the CGT rate to 18%, is halved from £1m to £500,000. A founder who qualifies for the new relief on the full £10m could save up to £1.4m while those who rely on BADR will see their maximum saving fall from £60,000 to £30,000. The Treasury says three in four BADR claimants will be unaffected.

Alex Docherty, Partner and Head of Private Client Tax at Johnston Carmichael, said:

“Ahead of the Budget, we said founders needed a relief that properly rewards the risk of building a business. For high-growth, innovative companies, the Chancellor has delivered exactly that. A 10% rate on up to £10m tells anyone building the next big British business that the UK wants them to do it here."

“But this Budget has created two classes of founder. The engineering firm, the hotel, the family business that sustain jobs in local communities – these are the backbone of the economy, and most are unlikely to count as high-growth and innovative. The cut to Business Asset Disposal Relief affects exactly the owners who spent a lifetime building something substantial. The consultation on who qualifies for Founders’ Relief must address that divide.”

On business tax, the government reaffirmed its Corporate Tax Roadmap. The main rate of corporation tax remains capped at 25%, and full expensing continues for qualifying expenditure. But the balance of capital allowances has shifted. The main First Year Allowance rises from 40% to 50% for qualifying expenditure from 1 January 2027, while the main Writing Down Allowance falls from 14% to 12% from April 2027.

John McAuslin, Partner and Head of Corporate Tax at Johnston Carmichael, said:

“Keeping the 25% cap and full expensing gives businesses planning significant capital investment some continuity. But spending that doesn’t qualify for full expensing will now be relieved more slowly. Any business contemplating material capital expenditure should look carefully at the timing and nature of that investment, and at whether it can qualify for full expensing or the enhanced First Year Allowance.”

David Ward, Partner and Head of Tax at Johnston Carmichael, urged owner-managed and family businesses to watch a potentially significant reform of how company distributions are taxed. The proposals aim to stop profit extraction being structured to obtain more favourable tax treatment, with draft legislation due for consultation in 2027 and the new rules expected from April 2028.

He said:

“The government has committed to protecting capital treatment for genuine changes in ownership, including family business succession, and intends to expand demerger relief in some circumstances. These commitments are welcome, but the detailed rules will be critical in determining how effectively legitimate succession, shareholder exits and commercial reorganisations are protected.”

David also pointed to the sector-specific taxes funding targeted support. The Bank Corporation Tax Surcharge doubles from 3% to 6% for 15 months to help pay for lower energy bills, while Machine Games Duty on higher-stake machines rises from 20% to 25% from April 2027 to help fund a real-terms freeze in business rates for retail, hospitality and leisure properties in England.

It remains to be seen whether Scotland will follow. The Scottish Government will receive an additional £600m through the Barnett formula over the Spending Review period and sets its own Budget on 3 December.

David added:

“The Chancellor has promised breathing space now and fresh hope for the years ahead. But what businesses need most from a Budget is long-term certainty, and once again the rules have changed for people trying to plan ahead. Business Asset Disposal Relief is a case in point. Since 2020, the lifetime limit has gone from £10m to £1m and now to £500,000, and the rate has nearly doubled from 10% to 18%."

“Businesses are built over a lifetime, not a single Parliament. Owners need to plan succession years in advance, and repeated changes to the tax treatment of business disposals make that planning more difficult."

“Moves such as asking Ofgem to scrap gas standing charges are welcome, but they’re tinkering at the edges. A tax system set for the long term and then left alone would do far more for investment and growth than another round of adjustments.”

For more information on Johnston Carmichael, please visit  here.

Categories

Aug 1, 2025

4 min read

The UK manufacturing sector showed tentative signs of stabilisation in July, but the underlying picture remains fragile as demand softens and cost pressures mount.

Manufacturing output was broadly flat in the three months to July, according to the latest CBI Industrial Trends Survey. Although declines were recorded across a wide range of sub-sectors, these were largely offset by stronger activity in the motor vehicles & transport equipment and food, drink & tobacco sectors. However, manufacturers expect output to fall slightly over the coming quarter to October.

Demand conditions continued to weaken. Total new orders fell during the past quarter, primarily due to a drop in domestic orders, while export orders remained unchanged. Looking ahead, firms anticipate declines in both domestic and overseas orders through to October.

Exporters, in particular, are grappling with growing headwinds. More than half of manufacturers—56%—cited pricing as a key constraint on exports, up significantly from 38% in April. This likely reflects a combination of higher US tariffs and the appreciation of Sterling against the US dollar. In addition, one in five firms reported that quotas and licensing issues are limiting export potential, a level rarely seen since the 1980s.

Cost pressures intensified further. The growth in average costs accelerated for the third consecutive quarter, reaching the fastest pace since January 2023. While both domestic and export prices rose, they failed to keep up with rising unit costs, pointing to a continued squeeze on manufacturers’ profitability. Firms expect domestic prices to rise at an above-average pace over the next three months, while export prices are anticipated to remain flat.

Business sentiment has continued to decline. Optimism among manufacturers deteriorated again in July, with little sign of recovery in investment appetite. Spending plans for the year ahead remain weak across the board, including in buildings, plant & machinery, training & retraining and product & process innovation. Firms highlighted that investment is being held back by uncertainty around future demand, inadequate returns, and persistent labour shortages.

The jobs outlook also remains subdued. Manufacturing employment fell for the third quarter in a row and is expected to decline slightly further in the three months to October. Shortages of skilled labour remain a pressing issue, with more than one quarter of firms citing this as a constraint on output in the next three months.

Ben Jones, Lead Economist, CBI, said: “Conditions in UK manufacturing remain challenging, with many firms reporting subdued and unpredictable demand. High input costs, labour shortages and global supply chain disruptions are continuing to put pressure on margins and capacity."

“Rising labour costs have undermined manufacturers’ external competitiveness. While some exporters are finding opportunities overseas, overall sentiment is cautious, with economic and policy uncertainty weighing heavily on investment decisions."

“What manufacturers really need now is stability—starting with predictability in the tax environment, alongside delivery at pace on the government’s industrial strategy, skills reforms and steps to bring down energy costs. As we look ahead to the Autumn Budget, government must work to reassure businesses to avoid additional uncertainty that could further weaken investment prospects.”

The survey, based on the responses of 304 manufacturing firms, found:

Output volumes were broadly unchanged in the quarter to July, after falling sharply in the quarter to June (weighted balance of -2%, from -23% in the three months to June). Firms expect volumes to fall slightly in the three months to October (-6%).
A broad range of sub-sectors reported lower output volumes (12 out of 17 sub-sectors), but this was largely offset by higher output in the motor vehicle & transport equipment and food, drink & tobacco sub-sectors
Total new orders fell through the quarter (balance of -17%, from 0%), driven by a decline in domestic orders (-16%), as export order volumes were flat (0%). Manufacturers expect the total volume of new orders to decline in the three months to October (-18%).
Business sentiment continued to deteriorate in July (balance of -27%, from -33% in April). Export optimism for the year ahead also weakened (-26%, from -35%).
Manufacturers’ competitiveness has deteriorated in both EU markets (balance of -13%, from -7%) and non-EU markets (-23%, from -18% in April), with the latter falling at the fastest pace since 2005 in the three months to July. Competitiveness is expected to worsen again in the three months to October (-10% and -13%, respectively).
Investment intentions for the year ahead are weak. Manufacturers expect to reduce investment in buildings (-28%, from -38% in April), in plant & machinery (-15%, from -33%), in training & retraining (-13%, from -20%), and in product & process innovation (-6%, from -22%).
The main constraint on investment was uncertainty about demand (cited by 50% of manufacturers, close to the long run average), followed by inadequate net return (27%), and labour shortages (21%).
Average costs rose in the quarter to July, at the fastest pace since the quarter to January 2023 (+63%, from +48% in April; long run average of +19%). Costs growth is expected to slow in the quarter to October (+41%).
Average domestic prices rose at their fastest pace since January 2023 in the quarter to July (+33%, from +13% in April), and export prices also rose (+19%, from +3%). Domestic prices are expected to rise at a slower pace in the quarter to October (+21%), whereas export prices are anticipated to be unchanged (+1%).
Stocks of work in progress fell in the three months to July (-12%, at the fastest pace in four years). Stocks of raw materials were broadly flat (-1%) and stocks of finished goods rose marginally (+3%).
Manufacturers expect stocks of work in progress (-21%, the weakest expectations since January 2021), of raw materials (-19%) and of finished goods (-6%) to all fall in the three months to October.
Numbers employed fell in the quarter to July (-11%, from -16% in the three months to April). Manufacturers expect numbers to fall again, albeit marginally, in the quarter to October (-5%)

n.

nuse.

Autumn Budget Rewards Risk-Takers But Creates Two Classes Of Founder

nuse.

Most Read

Categories

Most Read

Categories

Recent Posts

Become a digital subscriber and support our publication enabling us to continue to share more news, each and every day.