On Wednesday 26 November, after weeks of speculation (and an unprecedented early leak by the Office for Budget Responsibility), the Chancellor finally revealed their second Budget.
The lead up to Autumn Budget 2025 included many rumoured initiatives – from wealth taxes and exit taxes to pension reform and even the possibility of Labour breaking its manifesto pledge and increasing Income Tax. However, a lot of this speculation proved to be just that, rumours.
In this article, Tom Golding, a Partner in PKF Littlejohn’s Tax team, considers some of the main tax changes that were announced and what these may mean for insurance brokers.
Freezing thresholds
One of the few pre-Budget rumours that turned out to be accurate involved the extension of the freeze on multiple tax thresholds.
The Chancellor announced that the freeze on personal tax thresholds will be extended for a further 3 years from 2028/29 to 2030/31. As a result, the Income Tax personal allowance, the higher rate and the additional rate thresholds will remain at £12,570, £50,270 and £125,140 respectively.
In addition, the employee and employer National Insurance Contribution (NIC) thresholds will be frozen over the same period.
The fiscal drag effect will be felt by employees, business owners and businesses alike, bringing more individuals into higher rates of tax as well as freezing the point at which employers pay NICs. Let’s not forget that this threshold for employers was reduced from £9,100 to £5,000 and the rate of NIC increased to 15% just 12 months ago.
Salary sacrifice pension contributions
Another widely anticipated measure was the cap on salary sacrifice pension contributions that an employee can make.
From April 2029, salary sacrificed pension contributions above an annual £2,000 threshold will no longer be exempt from NICs. These pension contributions will be treated as ordinary pension contributions and will therefore be subject to both employer and employee NICs.
Although this change will not be felt immediately, it will affect many brokers that have previously operated salary sacrifice arrangements with employees, reducing both the employee’s pension contributions and EBITDA and profits as a result of increased employer contributions.
Given the lead time, employers could look to replicate the tax benefits of salary sacrifice by reducing future wage growth and instead providing employees with higher employer pension contributions, with ordinary employer pension contributions remaining exempt from NICs.
Capital allowances
From April 2026, the writing down allowance main rate will fall from 18% to 14%, reducing annual relief available on capital expenditure that does not qualify for full expensing.
Typically, this includes assets bought for leasing, second-hand assets and certain cars. Given the availability of full expensing on other qualifying assets and the types of capital expenditure usually incurred by brokers, this change is not expected to have a significant impact for businesses in this sector.
National Minimum Wage and Living Wage
From 1 April 2026, the National Living Wage will increase from £12.21 to £12.71 per hour. The National Minimum Wage for 18-20 year olds will also increase from £10 to £10.85 per hour and for 16-17 year olds and apprentices from £7.55 to £8.00 per hour
Enterprise Management Incentives (EMI)
Changes announced to the EMI scheme eligibility limits are likely to be good news for the sector. From April 2026:
- The limit for the number of employees is increased to 500 from 250
- The gross asset limit is increased to £120 million from £30 million
- The total value of options granted under the scheme is increased to £6 million from £3 million
- The holding period form EMI options will be increased to 15 years from 10, including for EMI options already in place.
The relaxation of the gross asset limit to £120 million, in particular, will have an impact on intermediary businesses. The previous £30 million limit could be breached much sooner than in other sectors, with client money on a broker’s balance sheet contributing to its gross assets.
This change should see brokers continuing to be able grant qualifying EMI share options for a significantly longer period of time.
Venture Capital Trust (VCT) and Enterprise Investment Scheme (EIS)
Further changes that may be of benefit to the industry came in the form of changes to VCT and EIS thresholds. From April 2026:
- Company investment limits will rise to £10 million (previously £5 million), and to £20 million for Knowledge Intensive Companies (KICs) (previously £10 million)
- Lifetime company investment limits will increase to £24 million (previously £12 million), and £40 million for KICs (previously £20 million)
- The gross assets test will increase to £30 million before share issue and £35 million after (up from £15 million and £16 million respectively).
By increasing these limits, brokers should be able to attract additional levels of investment at an early stage in their life from these types of investors.
Note, however, that these changes are in part offset by a notable reduction in the investor relief, with VCT Income Tax relief falling to 20% (from 30%).
Cross border VAT grouping
Whilst it was not a change of VAT law, HMRC did announce a welcome change of policy that will reduce irrecoverable UK VAT costs for many businesses that have had to grapple with EU regulations (and often set up a European regulated company with a branch in the UK).
HMRC has confirmed that it is no longer its policy to seek to collect VAT under the reverse charge on charges made by an overseas company or branch to a UK VAT group where:
- one or more of the members of the VAT group is a branch of an overseas company or a is a UK company with an overseas branch
- the overseas company / branch makes inbound charges to the UK VAT group
- the charges are inbound from certain countries such as Belgium, Denmark and Sweden.
In addition, HMRC has invited refund claims for any such reverse charge VAT paid to HMRC in the past four years.
This contrasts with the announcement last week from the Irish Revenue that it is taking the opposite view with effect from 19 November 2025, such that businesses operating in VAT-exempt sectors expect to incur irrecoverable 23% Irish VAT under the reverse charge in future.
And much more…
The Chancellor also unveiled a Council Tax surcharge on properties worth £2 million or more, a mileage based charge on electric cars and HMRC’s approach to closing the tax gap by introducing administration, compliance and debt collection measures.
Not all changes announced at this year’s Budget are due to come into effect immediately. It is therefore important that brokers plan ahead to understand what these changes may mean for them so that they can consider how they best respond.
This article was originally published in Insurance Age. For more information, please contact Tom Golding.
