Autumn Budget 2025: what does it mean for the financial services sector?

Corporate tax rate retained, no increase in bank surcharge

The good news is that the Chancellor chose to keep corporate tax rates unchanged. This is a relief to financial services businesses, which already incur sector-specific taxes such as bank surcharge and insurance premium tax. The rates of these taxes will also remain unchanged.

Cross border VAT grouping changes

An opportunity for VAT recovery may arise from a Budget announcement, which is of particular relevance to financial services businesses as they are often partly exempt. The UK has reversed (with effect from 26 November 2025) its previous, reluctant, implementation of EU-driven rules (based on the CJEU judgment in the Skandia case), which could require VAT to be accounted for between branches and/or head offices of the same legal entity, where the overseas establishment was in a certain type of EU VAT group.

This will affect businesses with a UK services company that has overseas branches. The overseas branches will once again be a part of the UK VAT group, and services supplied to the UK entity by one of these branches will not be subject to reverse charge VAT.

There is now the potential, as recognised by HMRC, for reclaims covering the past four years to be made in respect of tax paid in line with the previous guidance. However, to the extent that the previous treatment allowed additional VAT recovery on outbound transactions, we expect that this would also need to be reversed out.

The policy paper “Revenue and Customs Brief 7” confirms this, and states that HMRC now considers that an overseas establishment of a business VAT grouped in the UK should be treated as part of that UK VAT group, regardless of the VAT grouping rules in the relevant EU member state where it is based.

40% first-year allowances for leasing

A new first-year allowance should support the asset finance sector. The changes to capital allowances to be introduced in the Finance Bill 2025-26 mean that the main pool writing down allowances will fall from 18% to 14% per annum from 1 April 2026 for corporates. Alongside this reduction, a new 40% first-year allowance is introduced from 1 January 2026, which, unlike full expensing, will be available for new assets used for leasing. It will not apply to cars or second-hand assets. This means that banks and asset finance companies writing short leases (with terms up to 7 years) of new equipment will be able to obtain the 40% first-year allowance. This could encourage new investment via the asset finance sector, by accelerating relief in the year of investment. The accelerated relief should improve the yield for lessors and so can provide competitive pricing for lessees.

Economic Crime Levy: increased charges

Financial services businesses which are subject to anti-money laundering (AML) regulation come within scope of the Economic Crime Levy if their annual revenue exceeds £10.2 million. Changes to the Economic Crime Levy will take place in the financial year 2026-2027. The charge in the ‘very large’ band (UK revenue above £1 billion) will double to £1,000,000. A new band (UK revenue between £500 million and £1 billion) has been created with a charge of £500,000. The charge for the medium band (UK revenues £10.2 million to £500 million) will rise by £200 to £10,200.

The Government emphasises that despite the changes, no business will pay more than 0.1% of its revenue. However, this does not soften the significant increases faced by larger firms.

£2,000 cap on salary sacrifice 

Many financial services businesses reacted to last year’s increase in employers’ national insurance contributions (NICs) by applying salary sacrifice or bonus waivers, whereby salary or bonuses were forgone and instead were paid into the employer’s pension scheme. From April 2029, there will be a £2,000 annual cap on pension contributions made via salary sacrifice so that employers’ and employees’ NICs become due on payments above this limit. Currently, salary sacrifice enables employees to participate in the pension scheme in the most cost-effective manner by ensuring they receive both income tax and Class 1 NIC relief on the salary sacrifice value. 

This change will mean that based on current NIC rates for each £100 contribution above the £2,000 limit, the employee will pay £8, and the employer £15. From an employer's perspective, this increase is likely to be a substantial cost which will have to be funded. These costs can mount up, particularly in firms where salaries and bonuses are high. While it is welcome that there is a 3-year delay before the change take effect, financial services firms may wish to plan ahead, by modelling now what these changes will mean to their NIC costs.

Corporation Tax: increased late filing penalties

Increased penalties for late filing of company tax returns were announced for returns due on or after 1 April 2026. The penalties have been doubled for each category, increasing the incentive for companies to submit their CT returns on time, to avoid the penalties.

Taxation of investors

The Government announced various changes to the UK taxation of investors. These could change investor behaviour and consequently affect financial service firms.

ISA allowances

Despite overall ISA allowances remaining at £20,000, the Chancellor announced changes from April 2027 to the cash ISA allowance, now reduced to £12,000 for investors aged under 65. This could lead to a modest boost for asset managers if investors place the remaining £8,000 into equity-based ISAs. That said, other options, such as Premium Bonds and short-dated gilts, provide alternative tax advantaged options if long-term investments fail to provide adequate stability for some investors.

2% on property, dividend and savings income

A 2-point rise from April 2026 on the ordinary and upper tax rate of dividend income, plus from April 2027, an income tax rate rise on all savings income tax bands has been announced by the Chancellor. Entirely new property income tax bands have also been introduced for April 2027. Aimed at smoothing the gap between tax on work and tax on investment income, the Government estimates that these rate increases will affect less than 10% of UK taxpayers. However, the increased rates risk undermining the Government’s attempt to stimulate investment as investors seek alternative options.

Stamp Duty Reserve Tax (SDRT) relief for new listings

The Chancellor also announced a three-year relief from the 0.5% Stamp Duty Reserve Tax (SDRT) charged on the transfer of securities in newly listed companies, running from the date the company lists on a UK regulated market. This will mean that holders of securities in newly listed companies will not suffer SDRT on electronic transfers of shares and securities. The Government hopes this will encourage UK and foreign companies to list in the UK, and enhance the UK as a financial services centre, including as a dual listing destination for global companies.

Modernisation of stamp taxes on securities transfers

In another announcement, the Government will legislate in Finance Bill 2025-2026 to empower the Treasury to introduce a new “Securities Transfer Charge” which will replace Stamp Duty and SDRT. The aim is to modernise and simplify the system, so that it becomes a digitalised self-assessment system, reported electronically via a digital service.

Venture Capital Trusts (VCT) and Enterprise Investment Schemes (EIS)

Under the 2025-2026 Finance Bill, EIS and VCT limits are increasing in April 2026 to raise the attractiveness of the schemes. The maximum gross asset allowance will be increased to £30 million before the issue of shares and securities, and £35 million immediately after the issue. Furthermore, the annual investment limit and lifetime investment limit will increase, respectively, to £10 million and £24 million and to £20 million and £40 million for knowledge-intensive companies. However, the rate of income tax relief on VCT investments will be reduced to 20% from 30%. These changes provide greater access to investments through the schemes, however the lower rate of income tax relief on VCT investments will make them less attractive.

Taxation of crypto assets

Crypto assets are increasingly part of the financial services landscape. Reporting obligations for service providers are increasing, while some permissive tax treatments for investors are under consideration.

Crypto Asset Reporting Framework (CARF)

The UK has already adopted the OECD’s CARF, effective from January 2026, requiring UK crypto asset service providers to collect and report tax-relevant data about their clients, with the first returns due in May 2027. Finance Bill 2025–26 will amend Regulation 6 of the crypto asset Reporting Regulations 2025, to require UK Crypto Asset Service Providers (CASPs) to report not only their non-UK users but also UK-resident users and controlling persons. This is a much broader reporting obligation for CASPs, reflecting the original policy intention. The move reflects growing regulation of crypto assets, adding complexity but promoting international consistency.

Taxation of crypto-assets DeFi: consultation outcome

In response to HMRC’s consultation on the taxation of decentralised finance (DeFi) activities, such as crypto lending and staking, stakeholders called for reforms to reflect economic reality and simplify compliance. The current rules often treat these transactions as disposals, leading to complexity and unexpected tax liabilities. HMRC is therefore considering a “no gain, no loss” approach for certain transfers. DeFi is increasingly embedded in fintech and investment products; clearer tax rules would reduce compliance risks, enhance operational certainty, and support innovation in a rapidly growing sector. No timetable for legislation is set out, but HMRC will continue to engage with stakeholders.

Conclusion

Overall, the announced changes from the Autumn Budget deliver a mixed impact on the financial services sector. The stability in corporate tax rates, insurance premium tax and bank surcharge is very welcome. The introduction of first-year allowances for leasing is a positive move for asset finance, providing opportunities for competitive pricing and further investment, while the ability of some firms to recover VAT on branch/head office transactions is also good news. The three-year relief from SDRT on new listings is an attractive boost for companies listing in the UK and their investors.

However, the doubling of the Economic Crime Levy for larger firms, and the new salary sacrifice cap will increase the tax burden on financial services firms. ISA reforms, dividend and savings tax rate rises and the adjustments to VCT and EIS relief may require financial advisers and asset managers to alter their strategies for retail investments. Meanwhile, crypto asset service providers must be ready to implement the CARF from January 2026.

Financial services firms should be alert to these opportunities and threats, and should change their product offerings and compliance strategies accordingly.