It’s Budget Day, and the speculation machine has been in overdrive for weeks but today Rachel Reeves finally sets out her plan to plug what the Treasury estimates is a £20–30bn hole in the public finances.
What we do know is that Reeves has spent the last fortnight managing expectations. First, she warned of potential income tax rises during a hastily arranged press conference; then she rowed back slightly as better-than-forecast OBR numbers suggested the hole may be closer to £20bn. Even so, economic headwinds remain strong, fiscal drag is already squeezing households and businesses, and Labour has boxed itself in with pledges not to raise taxes on “working people”.
For the North’s tech, digital, media, and agency sectors, the stakes are high.
What Northern business leaders told us ahead of the Budget
Energy costs, business rates, and capital allowances top priorities
Tom Klouda, private capital tax partner at BDO in the North West, told Prolific North that pragmatic support could make a material difference — particularly in a region where mid-sized companies form a critical economic backbone.
“In our most recent Economic Engine survey of 500 mid-sized business leaders, 26% of North West companies told us the single tax measure that would most support their business in 2026 was targeted incentives to cut energy/input costs, such as efficiency grants,” he said.
This was closely followed by simplifying or reducing business rates (24%) and improving capital allowances (20%). Three in five businesses (59%) said that if the Budget fails to support them, they will pause or slow expansion next year — a warning shot from a sector crucial to regional growth.
BDO expects potential changes including:
- Continued business rates reform, likely raising rates for large online warehouses while maintaining high-street reliefs
- Possible extensions to 100% first-year capital allowances to include patents and licences — a big shift for digital and tech-heavy firms
- A possible delay in withdrawing high-street and hospitality support if the Treasury fears an inflationary hit
Tax uncertainty dominates conversations among freelancers and small business owners
Tax complexity is the other big concern, especially for freelancers, creatives, and sole traders. Mike Parkes, technical director at Manchester-based GoSimpleTax, said the convergence of fiscal drag, frozen thresholds and looming digitalisation deadlines was already hitting self-employed workers well before Budget Day.
HMRC’s 200,000 letters sent out this month signal big changes ahead of Making Tax Digital for Income Tax, landing in April 2026 for anyone earning over £50,000 in self-employed or landlord income. Parkes advised sole traders to start planning now — particularly around compatible software and real-time tax tracking.
Tech founders want clarity on NI, R&D and export incentives
Rob Illidge, CEO at AI-driven branding platform Vulse, said the Budget could either unlock momentum or apply the brakes to the UK’s growing SaaS and data-driven ecosystem.
He outlined a wishlist including:
- Employer NI relief to accelerate hiring
- Expanded R&D tax credits
- Stronger export incentives
- Cybersecurity and AI-compliance funding
- Investment in digital skills
Stronger R&D incentives, he said, would directly accelerate innovation in firms like Vulse, while hiring support could speed up engineering and product team growth.
But Illidge also highlighted the need for resilience, noting that his company is “building flexible financial models for multiple budget outcomes” and diversifying its tech stack across major cloud providers.
Small business founders brace for tougher headlines
Steve Price, MD at Manchester advisory BWP Inspired, believes the burden is likely to fall hardest on entrepreneurs, SME leaders, and digital founders — not the multinationals.
“It’s far easier politically to target business owners and landlords,” he warned on his Freedom Fix channel, pointing instead to “major corporations using transfer pricing” and “ultra-wealthy investors parking assets offshore”.
Price called for:
- Genuine wealth taxes
- Higher rates on passive investment income
- Tighter enforcement of corporate loopholes
But he cautioned against measures that could suppress the dynamism of the North’s startup and agency communities: “When you over-tax mobile capital and entrepreneurial talent, you get capital flight, reduced innovation, and a shrinking tax base.”
What could be coming for agencies: Alto Accountants’ view
A pre-Budget analysis by Alto Accountants suggests marketing agencies and creative companies may be among the first to feel the impact of Reeves’ fiscal tightening. Based on the Chancellor’s “debt control, productivity, fairness” themes, Alto says agencies should prepare for:
Possible 2p rise in income tax
A move from 20% → 22%, 40% → 42% and 45% → 47% could raise more than £17bn. A director earning £80,000 would pay £1,600 more per year.
Changes for LLPs
- Stricter salaried member rules
- Rental income pulled into NIC scope
- New NI treatments for partners
CGT alignment with income tax
If rates rise from 20% to 42% for higher-rate taxpayers, the cost of selling an agency could jump dramatically.
Salary sacrifice restrictions
Particularly affecting pension contributions.
Possible VAT threshold shift (currently £90,000)
Even a small downward move could pull more small agencies into VAT registration, impacting pricing and cash flow.
Other areas to watch: inheritance tax reforms, EV taxation, changes to creative industry reliefs.
For agencies already absorbing April’s employer NI rise (13.8% → 15%), the cumulative effect could be significant.
What to expect today — and what we’re watching for
As Reeves stands up at 12:30pm, Prolific North will be watching especially for:
- Income tax changes affecting freelancers, creatives, directors and tech founders
- Any movement on employer NI
- Decisions on R&D tax credits and the creative reliefs
- Business rates and capital allowance reforms impacting Northern SMEs
- Measures for energy efficiency and digital transformation
- Any restructuring of LLP rules
- Making Tax Digital enforcement timelines
- Support (or lack of it) for the high street, agencies and startup ecosystems
