RCK's 2025 Budget Summary

^{2025 Budget Summary:}

RCK’s 2025 Budget summary, in relation to our service lines is available below.

RCK's service lines were all mentioned in this year's Budget, with Business Rates being the most impacted. There were some unanticipated changes to the Capital Allowances scheme, and contrary to the most recent budgets, the R&D tax credit scheme was least impacted, with no changes to rates or eligibility, but instead with the introduction of a pilot advanced assurance scheme.  

^{Business Rates}

The government has confirmed a series of major changes to the Business Rates system in the UK, with a focus on supporting high street recovery following Covid-19 and boosting local economic growth.   

^{Reduced Business Rates for retail, hospitality, and leisure (RHL) properties:} 

• A core component of the reform is the introduction of permanently lower business rate multipliers for retail, hospitality, and leisure (RHL) properties, benefiting around 750,000 UK businesses.
• This policy is valued at almost £900 million per year and is aimed at supporting companies within these sectors.      
• The RHL multipliers will sit 5p below national equivalents, resulting in a small business RHL multiplier of 38.2p and a standard multiplier of 43p in 2026–27.
• These reductions will be funded through a higher Business Rate applied to properties with a rateable value above £500,000. This threshold captures around 1% of properties nationwide and primarily impacts large commercial sites such as major online retail distribution warehouses.

^{Film studio relief}

• In support of the UK’s creative industries, eligible film studios in England will continue to receive a 40% reduction on gross Business Rates bills until 2034. A commitment that was first announced in the 2024 Spring Budget.  

^{Transitional relief}

• To support ratepayers facing large bill increases at the revaluation, the government is introducing a redesigned Transitional Relief scheme worth £3.2 billion over the next three years, providing more generous support for those paying higher tax rates due to the revaluation.  

^{EV charging}  

• The government will introduce a 10-year period of 100% Business Rates relief for EV charge points and EV-only forecourts, meaning they will incur no Business Rates liabilities during this period.    

^{Business Rates Retention Scheme (BRRS) pilot}

• The Business Rates Retention Scheme (BRRS) pilot has been extended to 2029, enabling councils to continue retaining all of locally collected Business Rates as an incentive for economic growth.      
• Outside of this scheme, councils collect rates which are transferred to the Exchequer and redistributed nationally to equalise funding for local services.
• In line with the Fair Funding Review, the government is improving the Business Rates retention system to more consistently support mayors in driving regional growth and enabling more tax to be spent where it is raised.

As outlined, there are significant changes to Business Rates that align with the recent conversations surrounding Business Rates reform. We are of the view that these reforms could have been more significant and instead focused on streamlining the appeals process. On Budget Day, the new rating list was released, which we will share out in due course. Overall, these changes offer greater stability for ratepayers, and our team will continue to guide clients through the implications for their properties. 

^{R&D Tax Relief:}

R&D tax relief, in contrast to previous years, did not receive much attention in this Budget. The stability that was promised by the government for the scheme appears to have been upheld in this recent Budget, which is a welcome update after several years of change and uncertainty.

This Budget signals government confidence in the R&D scheme, which sets businesses in good stead to be able to forecast with greater certainty and maintain confidence when investing in innovation. The Budget sets out that Research and development (R&D) drives economic growth, with each £1 of public R&D investment returning £8 of economic benefits, which is why annual government investment in R&D will grow to £22.6 billion by 2029-30.  

^{Advanced assurance:}

• Looking ahead, the government will introduce a pilot targeted R&D advanced assurance service from spring 2026. RCK contributed to the consultation to discuss this measure, which allows SMEs to gain upfront clarity from HMRC on key elements of their R&D tax relief claims before submitting them offered on a voluntary basis. We will provide an analysis of the responses to the consultation separately.
• After years of shifting R&D rules and increased compliance, advanced assurance would provide SMEs with more certainty and confidence to better plan their R&D activities.  
• Through advance assurance, SMEs will be able to get pre-approval and clarification from HMRC, before filing on the following:

1. whether their projects qualify as R&D for tax purposes cost category clarification specific to their circumstances
2. cost category clarification specific to their circumstances
3. whether the approach to subcontractors and EPWs is compliant
4. expectations from HMRC regarding the claim
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• This will enable SMEs to gain confidence before claiming. This also has the additional benefit of, in theory, reducing enquiries.    

^{National insurance threshold freezes:}  

• The Budget confirmed that the employer National Insurance threshold will be frozen, meaning employers will pay higher NICs as wages rise. As an employer, NIC costs are a claimable cost under the R&D scheme, which will in turn increase claim value for qualifying companies in the staffing cost category.  

^{Support for R&D intensive industries:}  

• R&D intensive industries to receive a mention were nuclear, defence and AI which will all benefit from further government investment.

^{Creative Industries and R&D: administrative measures:}

• Further, legislation will be brought forward in Finance Bill 2025–26 to define the Corporation Tax treatment of intra-group payments for surrendered R&D Expenditure Credit (RDEC), Audio-Visual Expenditure Credit (AVEC) and Video Games Expenditure Credit (VGEC), applying to transactions made on or after 26 November 2025.

^{Ongoing HMRC scrutiny and upcoming compliance reforms:}  

• Continued HMRC scrutiny reinforces that accuracy and documentation keeping are essential and are aimed at closing the tax gap.
• At the Budget, the government announced reforms aimed at simplifying reporting requirements and improving HMRC services. Further measures to streamline processes and enhance the taxpayer experience will be outlined in spring 2026. These reforms build on HMRC’s Transformation Roadmap, which sets out the government’s vision for a more efficient, modernised and automated tax and customs system.
• Some of the changes are outlined below:  

1. Enhancing HMRC’s powers and sanctions against tax advisers facilitated non-compliance: From 1 April 2026, the government will introduce enhanced powers and sanctions aimed at addressing instances where tax advisers facilitate non-compliance. These measures will be legislated through the Finance Bill 2025–26.  
 
2. Raising standards in the tax advice market: Following consultation, the government has confirmed it will not introduce formal regulation for tax advisers. Instead, it will collaborate with the sector to drive improvements and raise overall standards within the tax advice market.
 
3. Enhancing  HMRC’s powers over tax return errors: In 2026, the government will consult on draft legislation introducing new HMRC powers that would require taxpayers to correct identified inaccuracies in their tax returns.
 
4. Behavioural penalties reform: The government is publishing a summary of responses at Budget to the ‘Reform of Behavioural Penalties’ consultation. The government intends to modernise HMRC’s inaccuracy and failure to notify penalties.  

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We will continue to provide quality R&D tax relief advice and are committed to supporting our clients in navigating the scheme with confidence.  

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^{Capital Allowances:}

This budget surprised the industry with an unexpected change to the Capital Allowances regime.   

^{Reduction in writing down allowances (WDAs):}  

• The government will reduce the main rate of Writing Down Allowances (WDAs) from 18% to 14%, effective April 2026 and is expected to raise £1.5 billion in 2029–30.
• WDAs allow businesses to deduct a percentage of an asset's value each year on a reducing balance basis.
• This measure changes the capital allowance rates for both corporation tax-paying companies and unincorporated businesses on expenditure that does not qualify for full expensing including:  
   
  • Assets purchased for leasing
  • Second-hand assets
  • Cars
• A  lower rate, therefore, diminishes the available tax relief, slowing the pace at which companies and unincorporated businesses can recover  investment costs. As a result, business investment in plant and machinery is likely to reduce.

^{New 40% First-Year Allowance (FYA):}  

• Alongside this, the Government has introduced a new 40% first-year allowance (FYA) from January 2026 for both corporation tax-paying companies and unincorporated businesses in the self-assessment regime.
• This is a new capital allowance, distinct from the existing full expensing (100% FYA) and 50% FYA for special rate expenditure and is intended to allow businesses to write off a greater proportion of qualifying investment upfront.
• In practice, the new allowance applies primarily to assets purchased for leasing, which currently do not qualify for full expensing.
• The 40% FYA, therefore, helps to offset the reduced benefit caused by the lower WDA rate for leased assets, although second-hand assets and cars remain excluded from FYAs and will continue to rely solely on the lower WDA rates.

If you have any queries about Capital Allowances, please get in touch with our Property Tax team.  

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^{To close:}

Another busy Budget Day and lots of announcements which will impact our clients. For anyone who has questions about the Budget in relation to our service lines, please get in touch.  

Interested in learning more about the Budget process and a Chancellor's experience of preparing and debriefing from the event, read our latest blog post '10 minutes with Lord Philip Hammond: Our interpretation of his behind-the-scenes insight into Budget preparation,' here.  

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