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a year of talent and skills

An overview of the Budget for tech

by Claire Fletcher

UK Tech Cluster Group’s policy expert has shared a brief summary of last week’s Budget.

If you are still trying to digest the Budget delivered last week by Chancellor of the Exchequer, Rachel Reeves, here is a brief overview of the salient points for UK tech and digital businesses. This has been prepared and shared by a policy specialist within the UK Tech Cluster Group and the points covered are not localised. The summary covers implications for economic development, digital tech and innovation, as well as some points relating to personal taxes and expenses towards the end.

Scene-setting

The Chancellor’s first Budget focused on dealing with the immediate pressures on the public finances in what will be the last fiscal event of the Financial Year.

The Budget also contained an indicative Spending Review for 2025-26, ahead of a multi-year Spending Review being completed in ‘late’ Spring 2025.

This multi-year Spending Review will be the most significant fiscal event in terms of departmental spending on government priorities for the Parliament. It will coincide with the publication of the Industrial Strategy – to be underpinned locally, by Local Growth Plans agreed by HM Government and local leadership.

Local and Regional Economic Development

  • A Devolution White Paper (expected in December) will set out more detail on Devolution (including Local Growth Plans) and also consider a simplification of structures to support efficiency and respond to the needs of local people.
  • Trailblazer Deals: Greater Manchester and West Midlands will receive integrated  settlements from 2025/26; and a year later, these powers and responsibilities will be extended to Combined Authorities in West Yorkshire, South Yorkshire, the North East and Liverpool City Region. This is a significant development.
  • Local Growth Funding: Government committed to ‘reform the local growth funding landscape at Spending Review, rationalising the number of funds, moving away from competitions, and better supporting local leaders to drive growth’.
  • UK Shared Prosperity Fund to continue at a reduced level (£900m) for a transition year, in advance of wider funding reforms.
  • Investment Zone and Freeport commitments maintained; with Freeports to be aligned to the Industrial Strategy. Similarly, The Long-term Plan for Towns will be retained and reformed into a wider regeneration programme
  • Local Government Funding: £1.3billion addition to Local Government in England; additional funding to the Scottish government through the Barnett Formula.
  • North East: £25million for NECA to remediate the Crown Works Studio site.
  • Made Smarter: Funding for Made Smarter Digital Adoption programme to double to £16m in 2025/26, enabling continuation and expansion into every English region.

Research, Innovation and Technology

  • R&D: Confirmation that Government will set 10-year R&D Budgets at the Spending Review (though no detail on design, institutional arrangements or delivery priorities). However, R&D funding has been protected – at least in line with inflation.
  • Innovation Accelerators in Greater Manchester, West Midlands and Glasgow City-Region are to be extended, though no detail is provided on either additional funding or extension of the model to other areas.
  • A review of technology adoption will report into the Industrial Strategy. This will focus on highlighting the barriers businesses face in adopting both established and novel tech. This seems to succeed earlier Whitehall interest in a digital adoption review, and is something which tech ecosystem leaders and innovation partners may wish to feed into.
  • Spin-outs: £40m over five years to support commercialisation and drive more spin-outs from universities through ‘proof of concept funding’; and ‘improvements’ to the support for researchers spinning out. Again, partners may be interested in identifying what good support looks like, to support more spin-outs.
  • National Data Library: Confirmation that this will be delivered
  • R&D Missions: At least £25m in 2025/26 for a multi-year R&D Missions programme – though little detail as yet on design or delivery.
  • Government and Digital Innovation: DSIT to lead as the Digital Centre of Government, on driving tech innovation in public services as well as overseeing £80m investment in the transformation of corporate functions.
  • Long-term Sectoral Funding: Provided for a series of sectors related to Industrial Strategy delivery; including Automotive; Aerospace; Life Sciences and Manufacturing
  • R&D Tax Relief: scheme to be retained
  • Visual affect tax relief: scheme to be introduced

Wider Business Taxation

  • Capital Gains Tax: To be increased from 10 to 18% on Lower Rate and from 20 to 24% on the Higher Rate; though retaining the levels on residential property.
  • Employer National Insurance contributions: to increase by 1.2% to 15%, as well as reductions to the secondary threshold and increases to the Employment Allowance; which will collectively raise around £24bn per year.
  • Corporate Tax: A ‘Roadmap’ was published alongside the Budget, to cap the rate of corporation tax to 25% in the current Parliament.
  • Carried Interest: This will increase to 32%, which will impact some Venture Capitalists as its reforms are integrated within the income tax framework.
  • Entrepreneurs Relief (including Business Asset Disposal Relief and Investors Relief Rates): Remains under review, though rises to 14% in 2025 and 18% in 2026.

Personal Taxes and Earnings

  • Income Tax: Freezes to most tax thresholds retained until 2028 – meaning Government increases revenue through ‘fiscal drag’ as wage inflation moves more people into higher tax bands – though thresholds will increase in line with inflation after 2028. This was a significant announcement, as pre-budget speculation suggested the Chancellor may have extended the freeze.
  • Inheritance Tax: Freezes to thresholds have been extended by a further two years until 2030, and unspent Pension Pots will now be subject to IHT. There will be tapered and differential rates for agricultural land.
  • National Living Wage: increases to £12.21 per hour for with a single adult wage level to be phased-in (initially increased to £10 for 18-20 year olds).
  • Stamp Duty for second homes to be increased from 2% to 5%.
  • Dividend Allowance: reduced to £500, with individuals then subject to taxation based on their income tax bracket.
  • Air Passenger Duty: increases to all rates from 2026, including £2 added to short-haul flights and a 50% increase for Private Jets.
  • Vehicle Excise Duty: increased on all but the lowest emission bands to encourage switch to Electric vehicles.
  • Mineworkers Pension: transfer of the Investment Reserve to the scheme trustees
  • Vaping Duty: introduced from 2026
  • Non-domiciled tax scheme: to be closed
  • Private Schools: Introduce VAT on Private School fees from January and remove their charitable status for Business Rate relief.

You can read the Budget in full here.