With the public finances showing structural cracks, thanks to an estimated £20 billion to £30 billion hole in next year’s budget, Chancellor Rachel Reeves is facing an unenviable challenge. The Office for Budget Responsibility has flagged rising debt, pension obligations, and hefty costs associated with the climate transition as daunting risks to Britain’s fiscal health. Markets are nervous, gilt yields are creeping up, and voters are bracing for some unwelcome news.

And what is the quick fix? Tax rises. With Labour pledging not to raise headline rates of income tax, VAT, or National Insurance on working families, the palette remains muted, but a few remaining options could still sting.

Stealth tax via fiscal drag

Freezing income tax and National Insurance thresholds in real terms is a favourite trick. Each year, pay rises push more people into higher bands. Extending the freeze beyond 2028 could raise £9 billion to £10 billion annually by 2029 to 2030. But pensioners on modest incomes may also be hit. Freezing the personal allowance means many could unexpectedly cross the £12,570 threshold, triggering a stealth income tax rise.

Pension and ISA reforms

The Chancellor might revive plans to cap the tax-free lump sum or reduce tax reliefs for higher earners. That could plug a gap of up to £15 billion a year. There may also be changes to ISA limits, a shift in how capital gains are taxed, or the introduction of a flat 30% pension relief model. None of these changes is likely to be popular, particularly among older voters.

Wealth taxes, levies and property tweaks

Pressure is growing from within Labour to increase taxes on the wealthy. Some have floated a wealth tax on assets over £6 million or £7 million, potentially generating £10 billion or more each year. While Reeves has described such measures as bold, that boldness might clash with fiscal rules and the need to reassure the markets.

There is also talk of adjusting council tax bands to better reflect property values or introducing a health or defence levy. Freezing the inheritance tax threshold, possibly with tighter reliefs on business or agricultural property, could also return to the agenda.

Business contributions

Although Labour’s manifesto ruled out raising corporation tax, there may still be scope to increase employer National Insurance contributions or apply targeted levies on banks and insurers. These moves raise revenue without directly affecting household take-home pay, but they still have broader economic consequences.

Why it matters-and the tension ahead

All of these potential measures rest on a knife edge between political risk and economic necessity. Each tax change could affect Labour’s public support, business confidence, or voter trust. The Office for Budget Responsibility has highlighted the limited fiscal headroom available, and investors are likely to expect at least £10 billion in new measures to maintain confidence.

Proposed changes to Inheritance Tax (IHT) are causing alarm in the UK farming community. If introduced as expected from April 2026, new rules could see agricultural estates over £1 million subject to 20% IHT, even when the land or business is still being farmed by the next generation.

This potential shift in the tax regime has triggered protests and demonstrations across the UK countryside. Farming families are worried that, without the current reliefs in place, it will become much harder to pass on farms without either selling off land or taking on significant debt.

Under the current rules, Agricultural Property Relief (APR) and Business Property Relief (BPR) can reduce the taxable value of a farming estate by up to 100%. This allows family farms to be passed down with minimal or no IHT liability, provided certain conditions are met.

The proposed changes would likely involve the reduction or removal of these reliefs for some types of land or property, particularly where the farm includes diversified business activity, such as holiday lets or renewable energy generation. There is also speculation that unused land, or land leased out under long-term arrangements, may no longer qualify.

For farmers and rural business owners, the implications are significant:

• Land valuations are high, especially in the South and East of England. Even small farms can exceed £1 million in value, making them vulnerable to the new rules.
• Succession planning becomes harder. With a 20% tax charge on top of probate and legal costs, the younger generation may find it financially unviable to continue the family business.
• Borrowing to pay tax could increase pressure on margins, particularly in years with poor yields or falling commodity prices.

So, what can be done?

The key is to start planning early. Succession should be reviewed well before April 2026. This might include:

• Restructuring the ownership of the land or business
• Reviewing whether assets currently qualify for relief
• Transferring ownership gradually during lifetime
• Making use of trusts or lifetime gifting strategies where appropriate

Every farm is different, and tax planning in the agricultural sector requires a bespoke approach. The important thing is not to assume that the current rules will remain in place. The political and fiscal climate is shifting, and reliefs that have long been taken for granted may no longer apply.

If you are involved in farming, rural business, or own land used for agriculture, we strongly recommend a conversation about your current IHT position. Early advice can prevent future problems and help protect the legacy you plan to pass on.

The UK economy is showing signs of fatigue. Figures released at the end of June confirm that economic growth slowed to 0.7% in the first quarter of 2025. For small business owners, this is more than just a headline as it signals a shift in consumer behaviour, business confidence, and access to finance.

The Office for National Statistics (ONS) reports that household real incomes are falling. Disposable income is down by 1%, and personal saving rates are at their lowest since 2020. In plain terms, consumers have less money in their pockets. For businesses in retail, hospitality, or services, this may already be translating into weaker sales and a rise in price sensitivity.

At the same time, public borrowing is creeping up. Government figures show a rise in borrowing in the early months of the 2025-26 tax year, adding to fiscal pressure on the new government. With several welfare policy U-turns removing planned savings, the Chancellor faces a difficult Autumn Budget. Tax rises, cuts to investment allowances, or delays to business incentives are all possible outcomes.

The result is a more cautious economic mood. Many small business owners are already reporting tighter trading conditions and lengthening payment cycles. For those relying on external finance, the outlook is becoming more complex. Interest rates have remained relatively high, and lenders are applying stricter affordability tests – especially in sectors deemed higher risk.

What should business owners be doing now?

1. Revisit your cashflow forecasts – Account for lower revenue assumptions, changes in repayment terms, and higher finance costs. If possible, build in contingency funds for slower months.
2. Review your cost base  – Rising National Insurance contributions and minimum wage increases from April 2025 may already be having an impact. Consider whether savings can be made without affecting quality or customer service.
3. Prepare early for borrowing – If you are planning to seek finance or refinance existing lending, start the process sooner. Banks and alternative lenders will want to see up-to-date management accounts and evidence of strong financial control.
4. Talk to us – If you are concerned about profit margins, tax bills, or capital expenditure plans, now is the time to reassess. Small changes in tax planning or investment timing can make a difference.

Although growth is expected to return later in the year, the second half of 2025 is likely to be bumpy. In uncertain times, the businesses that perform best are usually those that plan ahead, communicate clearly, and keep a close eye on the numbers.

From 2025, Companies House is rolling out new identity verification requirements for directors, people with significant control (PSCs), and anyone forming or managing a UK company. These changes form part of the Economic Crime and Corporate Transparency Act and are designed to reduce fraud and increase confidence in UK companies.

If you are involved in running a business, you may soon need to prove your identity either directly through Companies House or via a registered agent such as your accountant. Without completing verification, you will not be allowed to register a company or take up a new role as a director or PSC.

These rules apply to:

• Company directors (existing and new)
• Individuals with significant control (usually shareholders with 25% or more of shares or voting rights)
• Company formation agents
• Anyone filing information at Companies House on behalf of a business

The new system is already partially in place. Since April 2025, authorised agents can verify identities on behalf of their clients, but from a future date still to be announced, Companies House will require all key company officers to comply before filings will be accepted.

For business owners, this means a few practical actions:

• Ensure all directors and PSCs have current and valid photo ID.
• Decide whether you want to complete ID checks directly or use an authorised agent.
• Check that your company’s records at Companies House are up to date.

We expect enforcement and deadlines to follow later in the year, so it is wise to prepare in advance. If you are uncertain how these changes affect you, or how best to carry out the verification, we are happy to help.

Tensions in the Middle East have always carried global implications, but few pressure points are more critical than the Strait of Hormuz. This narrow passage off the coast of Iran is the transit route for around one-fifth of the world’s oil and a quarter of its liquefied natural gas (LNG). A closure, even temporary, would trigger a global economic ripple. For the UK, the consequences would be serious, with sharp effects on energy costs, inflation, and supply chains.

The likely impact on the UK economy

Although the UK does not buy a large share of oil or gas directly from the Gulf, global energy markets are extremely sensitive. A disruption in supply from the region would cause oil and gas prices to surge on international markets. That would feed through to UK fuel prices, electricity generation costs, and ultimately to the cost of goods and services.

Households would feel the pinch at the petrol pump and through higher heating bills. Businesses would face increased production and transport costs. Sectors such as food, manufacturing, and logistics, all of which rely on energy-intensive processes or imported inputs, could see margins squeezed or operations disrupted.

With inflation already proving stubborn, a sudden energy price shock could reverse recent progress and prompt the Bank of England to hold or even increase interest rates. That would add to borrowing costs, slow consumer spending, and potentially delay investment decisions by UK firms.

How UK businesses can respond now

While the exact course of events cannot be predicted, businesses can take practical steps now to reduce their exposure to external shocks like this one.

1. Review and diversify supply chains
   Look for alternatives to suppliers or routes that may be affected by increased shipping costs or delays. Building in more resilience can help ensure continuity.
2. Lock in energy contracts
   Businesses should explore fixed-price energy contracts or forward purchasing arrangements where possible. This can cap exposure to sudden cost spikes.
3. Build working capital reserves
   Improving cash flow and keeping a buffer in reserve will help businesses weather a temporary period of higher costs or slower trading.
4. Increase pricing flexibility
   Firms should assess where modest price rises might be accepted by customers if energy-related costs go up and have plans ready.
5. Monitor geopolitical and market signals
   Keeping informed of developments in the region and commodity markets allows for quicker reactions and better-informed decisions.

Conclusion

The UK may not be on the frontline of Middle Eastern tensions, but it is firmly within the economic blast radius of any disruption to global energy flows. With risks like a Strait of Hormuz closure hard to predict but potentially severe, sensible preparation is not alarmist, it is strategic. Businesses that plan ahead are more likely to stay resilient, competitive, and in control, whatever the headlines bring.