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Budget tax changes to increase costs for businesses, warn accountants
Despite mission to deliver growth in every postcode, tax experts say Budget measures will have ‘little impact on new investment’ and will increase costs.
Tax experts have given a mixed verdict on the business measures in chancellor John Healey's first Budget, welcoming efforts to simplify R&D relief while raising concerns that cuts to BADR and capital allowances will increase costs for many firms.
One tax change criticised by many advisers was the decision to reduce the lifetime limit for capital gains eligible for business asset disposal relief (BADR) from £1m to £500,000 from April 2027.
While the Treasury said only a quarter of BADR users would be affected, the reduction is likely to be felt far more widely among owner-managed businesses already facing significant tax changes, including reforms to business property relief and inheritance tax.
At the same time the chancellor also announced a new founders’ relief tax break with a reduced rate of capital gains tax (CGT), but this will apply to a very small number of rapid growth startups.
Simon Thomas, managing director of Ridgefield Consulting, said: ‘While the government is introducing a generous new relief for a relatively small group of high-growth founders, it is reducing BADR for everyone who relies on it.
‘Halving the lifetime limit means established business owners could face a considerably higher CGT bill when they come to sell the company they have spent years building.’
The announcement was quickly met with warnings that changes could prompt a wave of businesses selling up or moving abroad.
‘A key question will be whether the changes to BADR will encourage more business owners to leave the UK when they sell their business,’ said Zena Hanks, partner at Saffery.
However, Lucy Mangan, partner and head of tax services at Menzies LLP, said: ‘Halving BADR thresholds will hit owners planning their exit less than many headlines suggest, as previous relief only saves a seller at most around £30,000 up to £500,000 of lifetime gains.
‘This is still a significant sum for most people, particularly those with EMI share options but rarely material when selling a business.’
A swathe of changes in the 2024 Budget, could make family investment companies ‘increasingly attractive’ to those looking to hold and reinvest assets over the longer term, said Adrian Hackett, partner and joint head of tax at Freeths.
He added: ‘Although extracting profits can trigger further tax, a family investment company allows income to be retained and reinvested at corporation tax rates. That flexibility may become more valuable under the new regime, particularly for families taking a long-term approach to managing and passing on wealth.’
The reduction in the BADR lifetime limit was not the only measure to prompt concerns over the tax burden facing businesses. While the Budget introduced incentives for high-growth founders, it also reduced the main rate writing down allowance from 14% to 12% from April 2027.
‘The changes are presented as strengthening the incentive to invest, but the measure is expected to raise over £1bn a year by 2029-30, so overall it is likely to increase the tax burden for many businesses,’ said Charlotte Sallabank, tax partner at Katten Muchin Rosenman LLP.
Similarly, Rob Williams, partner, at WTS, said reducing the writing down allowance would have ‘little impact on new investment’.
‘It will increase the corporation tax burden on businesses that invested heavily in qualifying expenditure prior to the introduction of the full expensing regime,’ he added.
The latest cut in the allowance follows a similar reduction at last year’s Budget. Brian Carey, tax partner at UHY Hacker Young, said: ‘The writing down tax allowance, designed to incentivise businesses to invest in capital, has now been reduced from 18% to just 12% in only two years.
‘Many companies invested on the assumption that they would be able to write down those investments over a reasonable period, but that is no longer the case.’
While the reduction in the writing down allowance drew criticism from advisers concerned about higher corporation tax bills, the Budget's changes to the R&D tax relief regime was widely welcomed.
Rather than increasing R&D tax relief rates, the chancellor opted to cut red tape by abolishing the claim notification form from April 2027 and simplifying the additional information form from autumn 2027.
‘The change represents a welcome simplification of the claims process and a shift towards compliance measures that focus on the quality and substance of claims rather than procedural requirements,’ said Jack Williams director of R&D tax at HaysMac.
On the soon to be abolished forms, Williams said: ‘The removal of the claim notification form is a sensible and pragmatic reform. Whilst introduced with the legitimate objective of tackling abuse, the requirement often acted as an administrative hurdle for genuine claimants.’
On the simplifications to the additional information form from Autumn next year, Nigel Holmes, director of R&D at Ryan, said: ‘Hopefully one simplification will be to avoid repetition where the information contained therein is also in a more detailed R&D report submitted with the claim.’
Budget 2026 at a glance | 2 Nov 2026
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