What tax changes could mean for UK businesses under a new Prime Minister

The arrival of a new Prime Minister and Chancellor raises questions for businesses, entrepreneurs and private clients.

Major tax announcements may come later, but the current political and economic climate already gives businesses a sense of where tax policy could be heading in the years ahead.

The government has focused on economic growth, investment and improving living standards, while also making clear that public finances must remain under control. This creates a difficult balancing act. Funding public services and supporting growth, while maintaining market confidence, is likely to put further pressure on the tax system.

For taxpayers, the key question is not whether tax policy will evolve, but where those changes are most likely to occur.

What we know already

The government has made it clear that growth remains a priority, with continued support for business investment and infrastructure development. At the same time, the UK’s public finances remain under pressure, with the Office for Budget Responsibility (OBR) forecasting that the overall tax burden will continue to rise as a percentage of GDP over the coming years.

Importantly, governments do not always need to increase headline tax rates to raise additional revenue. Significant funds can be generated through:

• Freezing thresholds and allowances.
• Restricting tax reliefs.
• Expanding anti-avoidance legislation.
• Increasing HMRC compliance activity.
• Reforming capital and property taxes.

In many cases, these measures can generate substantial revenues whilst attracting less political attention than headline rate increases.

The Treasury’s challenge

The government is seeking to stimulate growth, support households and fund public services, whilst continuing to meet fiscal targets. The OBR and Institute for Fiscal Studies (IFS) have both highlighted ongoing pressures on the UK’s public finances, including higher borrowing costs, demographic pressures and increased spending demands.

As a result, policymakers may increasingly focus on targeted tax measures rather than broad-based tax rises.

Capital taxes remain under the spotlight

One area that we continue to watch closely is the taxation of capital.

Recent measures have already introduced changes affecting:

• Capital Gains Tax reliefs.
• Inheritance Tax planning.
• Agricultural Property Relief.
• Pension wealth within estates.

Whilst no further changes have been announced, capital taxation remains one of the few areas where governments can raise revenue without increasing taxes on earnings.

Business owners considering an exit, shareholders planning disposals and families undertaking succession planning should therefore continue to monitor developments carefully.

Business owners should expect a pro-growth message

The government’s economic narrative remains strongly focused on growth and investment.

As a result, we believe future tax policy is more likely to seek to encourage investment than discourage it.

Potential areas of continued focus include:

• Business investment incentives.
• Capital allowances.
• Infrastructure and manufacturing investment.
• Regional growth initiatives.
• Research and innovation.
• Share incentive schemes.

Recent enhancements to Enterprise Management Incentive (EMI) schemes demonstrate a continued willingness to support entrepreneurial and growing businesses.

For owner-managed businesses, this may create planning opportunities alongside any future tax changes.

More change may come through tax administration

An area often overlooked is tax administration.

Current consultations and policy initiatives are focusing on:

• Digital tax reporting.
• E-invoicing.
• Debt collection procedures.
• PAYE administration.
• Tax compliance requirements.
• Enhanced HMRC enforcement powers.

For many businesses, administrative reforms can have a greater practical impact than changes in tax rates themselves.

HMRC’s continued focus on reducing the tax gap suggests compliance activity will remain a key area of attention.

What we expect to be the priorities

Our expectation is that future tax policy will continue to focus on three core objectives:

1. Supporting economic growth.
2. Demonstrating fiscal credibility.
3. Raising additional revenue through targeted measures where necessary.

As a result, we believe the greatest risks are unlikely to come from significant increases in headline tax rates.

Instead, businesses and private clients should pay close attention to:

• Capital taxation.
• Inheritance Tax planning.
• Property taxation.
• Tax reliefs.
• Anti-avoidance measures.
• Compliance requirements.
• Threshold and allowance freezes.

The detail of future fiscal announcements is likely to matter far more than the headlines.

Looking ahead

Political and economic change inevitably creates uncertainty, but it also creates opportunity.

For business owners, entrepreneurs and private clients, now is a sensible time to review existing structures, succession plans, remuneration arrangements and investment strategies to ensure they remain fit for purpose.

Those who plan ahead are generally best placed to respond when tax policy changes.

How Gerald Edelman can help

At Gerald Edelman, we are closely monitoring developments across tax policy, fiscal strategy and HMRC administration.

Whether you are running a business, planning an exit, managing family wealth, investing in property or navigating international tax issues, our specialists can help you understand the risks and opportunities emerging from from the evolving tax landscape.

Early planning remains the most effective way to protect value and identify opportunities in an increasingly complex tax environment.

If you have any questions, please contact our expert Tax team by emailing hello@geraldedelman.com.