Our submission to the Autumn Budget 2025

Building a competitive tax system

As frequently highlighted, Britain has a growth problem, and the solution is to increase investment. To attract the levels of investment required, we must ensure that our country is internationally competitive on the costs of doing business. This includes the cost of complying with regulation, attracting talent, and the costs of taxation.

Tax policies should be developed and implemented to improve the international competitiveness of UK corporate and personal taxation. This is necessary to prevent the UK from falling behind other international financial centres in the race to attract greater and more diverse streams of business, capital and talent.

Exploiting the many growth opportunities that exist for UK based financial and related professional services is the best way to ensure that our industry – already the country’s largest taxpayer – continues to contribute strongly to the exchequer and public services in the years ahead.

We recommend that the government use the 2025 Budget to begin to build a more competitive tax system, based on the following key principles.

• Stability and predictability - UK tax policy should promote stability and predictability, to support long-term business and investment planning. A broad-based statement of principles including a clearly stated commitment to competitiveness should help prevent the months of damaging speculation ahead of every major fiscal event.
  This is particularly important in pensions and retail investment. If we are to encourage individuals to plan more effectively for their retirements, take more responsibility to build up their pension pots and invest more in UK businesses and assets, it is vital that they can rely on a predictable tax regime for the treatment of pensions and investments.
  
  
• Clarity and coherence - UK tax policy should be long-term and strategic, and aligned to broader policy objectives. Reforms should be coherently designed with a clear policy objective in mind so that any rules are clear, streamlined, simplified, and easy to apply in practice. We need greater clarity about the respective roles of HM Government in setting fiscal policy and HMRC in applying it through guidance.
  
  
• Attracting and retaining talent - The collective impact of personal taxation and mobility rules should not be detrimental to the UK’s ability to attract and retain the best homegrown and international talent.

To begin to make these principles a reality, we recommend that HM Treasury adopts the following approach.

1. In this Budget

In the short term, there should be no sector-specific tax increases targeted at our industry. This commitment is vital to maintain the size and competitiveness of the financial and related professional business services industry in the UK economy. We are a service industry, not one committed to fixed capital assets and therefore comparatively mobile. The global environment is increasingly competitive, and other jurisdictions are competing with growing aggressiveness and ambition on both tax and regulation to attract highly mobile business, capital and, in particular, talent.

We note heightened speculation about taxation of bank deposits placed at the Bank of England. We ask the government to be categorical in ending this speculation, which is damaging to both the banking sector and the international credibility of the UK’s monetary policy process. Such a policy would inevitably undermine the UK’s competitiveness in banking, and the capacity of the sector to support growth.

2. Looking towards the 2026 Budget

In the medium term, the government should reconsider how the tax treatment of financial services can support the government’s Financial Services Growth and Competitiveness Strategy. Specifically:

• Initiate and publish a review of VAT treatment for financial services. A proactive review of VAT levied on financial services is needed to deliver a long-overdue revision of the regime to better align it with the broader objective of supporting economic growth. The current VAT regime for financial services has not materially changed in half a century. It is not fit for purpose and undermines the attractiveness of the UK as an international financial centre.
  
  
• Initiate and publish the promised review of the funds regime through tax and regulation. Meaningful and considered reform of VAT treatment of fund management is needed to encourage onshoring of funds into the UK and stimulate fresh economic activity, which is not occurring under the current EU-based regime. To the contrary, recent actions by HMRC under the guise of guidance are encouraging many fund administrators to consider offshoring.
  
  
• Initiate a wholesale review of stamp duty on UK equities to understand how changes in this internationally unique transaction cost will affect the government’s tax revenue and overall income from trading. In the short-term, to boost retail investment and encourage a pipeline of Initial Public Offerings (IPOs), the government should consider a three-year exemption from Stamp Duty Reserve Tax (SDRT) for UK equities of companies completing a public offering on the UK main market and/or suspending stamp duty on UK equity trading within ISAs, as part of any wider ISA reforms.
  
  
• Improve the international tax competitiveness of banks invested in the UK by phasing out the bank levy and surcharge. Phasing out could commence with a statement of preferred direction of travel and a commitment not to raise the levy or surcharge in this Parliament. These are key elements of the UK’s increasingly internationally uncompetitive effective tax rate compared to our major international competitors in Europe and the United States. If UK banking business were to exit the UK, this would have negative knock-on impacts on the UK’s strength and reputation as a full service international financial centre.

3. Across the parliament

In the medium-to-long term, the government needs to rethink its approach to tax. A good tax regime is not just about rates, but about how tax policy is approached and the appropriate role for, and balance between, legislation, policy and guidance.

The government should reinstate a clear distinction between tax policy, which is a core part of HM Treasury's remit, and implementation, which falls under HMRC. The current blurring of this distinction is leading to unnecessary and duplicative layering of tax policies and the effective creation of tax policy within HMRC, which remains unaccountable. The government should ensure that HMRC adopts an approach similar to that set out in HMT’s Regulatory Action Plan, by taking a more strategic, long-term view of the mechanics and costs of implementing taxation and by removing unnecessary and duplicative layering of tax policies.

We hope the government will see that these proposals are pragmatic and proportionate and support the wider mission to kickstart economic growth. Of course, TheCityUK is conscious of the difficulties in the UK’s public finances and the need to promote economic growth whilst supporting the delivery of public services and maintaining the government’s fiscal rules. We are aware of the government’s desire to close the ‘tax gap’ as one way to improve the government’s net tax take. We also know that many of our major competitors are seeking to differentiate themselves through the simplicity, ease of use and predictability of their tax systems. We believe there is strong potential to increase net UK tax revenue without increasing rates, by reducing the costs of compliance for industry and the costs of collection for government. This is a win-win opportunity that requires genuine collaboration between industry, HM Treasury and HMRC to identify specific areas where excessive complexity in the tax system (through layering and duplication) could be removed to reduce collection and compliance costs.

We recommend that the government announce in the Budget HM Treasury’s intention to build a stronger working relationship with industry and HMRC to work together to explore further ways these aims can be achieved.

Tackling the regulatory burden

The government have rightly spoken about the need to regulate for growth, and not just the elimination of all risk to consumers, and we welcome the personal interventions that you, and the Prime Minister, have made. Changing this culture will require clear direction and reform across tax and regulatory policy. A Budget is the perfect way to deliver this in a coherent package.

We welcomed the publication of HM Treasury’s Regulation Action Plan and the Prime Minister’s personal commitment to reducing the administrative costs of regulation by 25 per cent by the end of this Parliament. Along with building a competitive tax system, tackling the regulatory burden in this way will be key to enhancing the UK’s international competitiveness. The government’s proposals to streamline the Senior Managers and Certification Regime (SM&CR) and overhaul the Financial Ombudsman Service (FOS) framework as part of the Leeds Reforms, plus efforts by the FCA and PRA to make the regulatory framework more streamlined and proportionate, provide a valuable foundation for further refinement and alignment.

TheCityUK, working in partnership with PwC, has engaged with compliance professionals to identify ways to reduce the compliance burden. There is a clear desire to focus regulatory and supervisory interventions on reducing the burden and driving simplification without compromising the principles or strength of the system. There remain significant concerns about the increasing cost of compliance with 84 per cent of survey respondents believing that their cost of regulatory compliance had increased or increased significantly over the past five years.

Developing a robust and systematic measurement framework that provides a quantified baseline of the administrative costs of regulation in financial services is an essential foundation for delivering on the government’s commitment outlined above.

We therefore recommend that the government use the Budget as an opportunity to set out the government’s baseline and associated methodologies through which it will track progress against the government’s commitment throughout the rest of this Parliament.

The industry is committed to working with the government and regulators to ensure that resources devoted to regulatory compliance are proportionate and aligned with desired policy outcomes. This is vital if we are to strike the right balance between informed risk-taking and effective oversight.

Partnering for growth

Public-private finance models can provide a vehicle to fund the delivery of major policy priorities and take advantage of the large capital pools available in the UK.

Governments around the world are pursuing large-scale public-private finance initiatives which are successfully attracting investment both nationally and internationally. Closer to home, the government should work effectively with private investors to de-risk and increase the flow of productive investment across a range of sectors in the UK, including renewable energy, housing, health and infrastructure. A combination of the right financial structures and enablers could mobilise significant private investment. 

We welcome the establishment of the National Wealth Fund and the recent report by the National Wealth Fund Taskforce but believe it is important that public bodies are effective in crowding-in private capital rather than inadvertently crowding it out.

We recommend that the government use the Budget to draw on the expertise of the UK financial and professional services industry to address barriers to attracting private investment and co-create blended finance solutions that will be effective in improving investor confidence and crowding in private capital.

One good example of this work that is already underway, with the creation of the Strategic Investment Opportunities Unit (SIOU) within the Office for Investment (OFI). With the support of TheCityUK the new unit seeks to upskills public sector partners, support the matching of available capital with fledgling opportunities, and bring private sector expertise to the aid of policymakers.

Drive growth by creating a policy and regulatory environment that fosters innovation

We have been impressed with the government’s positive attitude towards new technology and innovation to improve productivity and deliver world leading public services. This shared enthusiasm for positioning the UK at the forefront of technology and innovation policy should continue to be a central foundation of the deepening partnership between the industry and government.

Government should continue to adopt a proportionate approach which regulates based on outcomes, not the technology used. This will deliver effective and flexible protection for consumers and financial stability without impeding the pace of innovation, investment and development.

To implement these principles, we recommend that the government use the Budget to:

• Take further steps to implement the AI Opportunities Action Plan. While positive progress has been made, further action is needed to realise important interventions such as the National Data Library and the sustainability of AI. In particular, the government should use the planned AI Bill to clarify the liabilities and levels of risk mitigation across the AI value chain to foster a more stable operating environment and instil confidence among businesses and consumers.
  
  
• Designate the critical third parties (CTPs) to the UK financial services sector to enhance regulatory oversight of systemic providers, mitigate the risks of outages or operational failures, and support firms with greater resilience and regulatory certainty.
  
  
• Finalise the membership of the Dematerialisation Market Action Taskforce to kickstart urgent progress towards a timely and successful transition to a single, intermediated system for shareholdings that aligns with, and then leapfrogs, other jurisdictions.
  
  
• Appoint the Digital Markets Champion to lead the digitalisation of wholesale financial markets and take steps towards a concrete roadmap for delivering this.
  
  
• Swiftly implement plans for the UK Digital Gilt Instrument (DIGIT) pilot, to signal the UK is a hub for securities tokenisation, encourage investment and catalyse further industry participation and innovation.
  
  
• Encourage innovation by leveraging regional tech clusters and crowding in private investment, while assigning targeted research funding for universities. This will create fertile ground for collaboration between academia, industry and startups, support innovation, attract investment, retain high-growth firms in the UK, and drive economic growth.
  
  
• Support the dynamic work of the Financial Services Skills Commission to nurture the skills and talent for the future and ensure the UK has a high-skilled population that can meet our economy’s changing skills needs in line with technological advancements.

Making the UK a world leader in sustainable finance

Communicating a clear vision for the net zero transition is crucial to provide a clear signal to investors and reduce uncertainty. The 2025 Budget is the perfect opportunity to set out a clear, coherent and comprehensive overarching strategy for the net zero transition. This must be accompanied by sector-specific strategies and policy instruments to support delivery.

There are four further areas we hope the government will focus on in the Budget.

• Different clean and low-carbon technologies and infrastructure require different types of support depending on their maturity. We therefore recommend that the government develop a range of targeted support through blended finance solutions, price stabilisation mechanisms, and first loss positions, all of which can play a key role in attracting private investment.
  
  
• The National Wealth Fund will be a key lever in supporting the government’s mission of clean energy by 2030. For the government to deliver this ambitious mission and the legally binding target of net zero by 2050, we recommend that the government protect the £5.8bn committed to green hydrogen, carbon capture, ports, gigafactories, and green steel sub-sectors.
  
  
• There is a further opportunity for the UK to take a leading role in the development of Nationally Determined Contributions (NDCs) and support other countries in developing their own. NDCs, when designed with ambition and implemented effectively, can serve as powerful catalysts for economic growth. As a core element of the Paris Agreement, NDCs should provide the clarity and confidence investors need to mobilise private capital, spur innovation and accelerate the transition to net zero. We recommend that the government delivers on the recommendations reflected in our recent policy paper - From ambition to implementation: five key success factors to deliver an 'investable' NDC - to make the UK's NDC investable to drive climate finance and growth.
  
  
• Global coordination and interoperability on sustainability disclosure requirements is crucial to ensuring a consistent approach to the net zero transition and maintaining the UK’s position as a leading centre for sustainable finance. The UK must align its domestic approach to global standards where possible to reduce fragmentation, facilitate investor understanding and reduce reporting costs and operational burdens. The government must remain cognisant of the international landscape and ensure that the UK’s sustainable finance framework provides flexibility and interoperability. We recommend that the government show leadership through prioritising the implementation of the UK Sustainability Reporting Standards (UK SRS), aligned with the International Sustainability Standards Board (ISSB) standards. This will support global regulatory coherence and enable the UK, as an international financial centre, to build on its strengths to deliver sustainable investments in the UK and internationally.

Supporting the delivery of infrastructure

Our members play an important part in the UK's planning system, contributing at all stages. On the wholesale side, our members provide essential capital, investment, professional advice, and insurance to get major projects built. On the retail side, they make a real difference to families and small businesses by helping them save for the future, invest in their homes and manage business risks.

Given our close involvement, we have taken a keen interest in the government's plans to significantly reform the planning system. We recommend that the government announce measures in the Budget to strengthen the Planning and Infrastructure Bill to support investors and builders to continue to deliver infrastructure, homes and transport across the UK. This should be based on the following key principles.

1. Resource: Local planning authorities are under-resourced, often lacking key expertise and therefore unable to handle the increasing complexities of planning applications. Our members are already taking steps to address this. For example, Aviva has committed seed funding to a programme that is training and upskilling council planners to boost the long-term capacity of the planning system in councils across the UK. However, central government action is also required to create a long-term pipeline of talent in the system.
   
   
2. Predictability: A lack of consistency between (and within) local planning authorities is creating uncertainty and unpredictability in decision-making. One way to maximize the value added by England's new metro mayor model would be to explore allowing mayors to designate zones with a much greater presumption of planning approval. The UK's current planning regime of application and appeal is an increasingly detrimental international outlier, and its delivery has presented challenges to the building of homes and infrastructure.
   
   
3. Efficiency: To make the UK more attractive to investors and facilitate investment decisions, the planning process needs to prioritise efficiency and timely decisions. One mechanism to achieve this would be to streamline the statutory consultation process, with a greater assumption of assent from consultees who do not reply to local authorities within deadlines. As the Planning and Infrastructure Bill moves through Parliament we will continue to work with our members and policymakers to ensure our recommendations are considered. With the right reforms, our planning system should move from being a barrier to growth to a positive reason to invest in Britain.

Infrastructure and investment can also be held up by the current approach to public procurement for public expenditure on individual projects, which has been identified as a particular issue in the defence sector. This system is a barrier for investors and therefore delivery of the UK's clean energy and economic growth missions. We recommend that the government use the Budget to develop a more proportionate and cost-effective approach to avoid excessive procurement processes, reduce uncertainty for investors and deliver better value for money.

Devolving for growth

Our industry has a key role in driving growth across every region and nation of the UK. Through the provision of capital, professional advice and business services, we act as an enabler for the wider economy, from Glasgow to Gloucester. A fruitful partnership with the needs of business at the heart of devolved decision making is key to delivering inclusive growth across Britain. TheCityUK has recently engaged metro mayors and combined authorities to provide input and insight into their Local Growth Plans, the creation of which we have long supported as national policy.

To maximise the growth potential of greater English devolution, there should be greater consistency in the devolution of powers offered to different parts of the country including handing more powers to metro mayors. This would create a clearer climate in which business can thrive and invest to support regional growth. Currently, major businesses in Manchester and Birmingham benefit from direct engagement with their local metro mayors on key issues such as skills policy and trade promotion. Other areas do not have such access, and this imbalance is neither ideal nor sustainable. As devolved authorities develop, there will also be a need to invest in and support greater civic leadership through organisational and skills development, as well as improving the sharing of knowledge.

In recent years, Budgets have driven forward the devolution agenda and we recommend that the government will build on this in November by enacting the following proposals.

• Continuing to roll out the metro mayor and combined authority model to all English regions that want it, while simultaneously seeking to bring greater consistency to the powers available to different mayors.
  
  
• Strengthening the current English devolution settlement by creating a new Leadership Academy, bringing in the best expertise from leaders around the world, and from business to support political leaders and their staff in personal and policy development.
  
  
• Delivering further devolution of education policy and funding to combined authorities in future English devolution deals, with the long-term aspiration of local leaders taking a greater role in oversight of education at all phases so this can be better integrated with Local Skills Improvement Plans.

The deeper devolution deals for the West Midlands, Greater Manchester and the North East should be viewed as a starting point for future devolution settlements, with additional responsibilities coupled with a single funding pot along the lines the government has already committed to.

Championing international trade and investment

The success of the UK’s financial and related professional services industry, and its ability to fulfil its role in enabling growth across the wider economy, depends on securing and further enhancing the UK’s position as a world-leading international financial centre. The generation and export of innovative financial and related professional services requires people (skills), investment, and ideas.

What happens behind the border, whether in the UK or a trade partner’s jurisdiction, becomes just as relevant as what happens at the border. In the case of financial and related professional services, the domestic business environment and regulation take on an international trade policy dimension. Therefore, trade and investment and industrial strategies are two sides of the same coin.

We recommend that the government support the industrial and trade strategies’ objectives to boost international investment and increase export-led growth across the industry by:

• Ensuring that financial services firms choosing to locate in the UK have access to the highly skilled top talent they need to thrive by making it easier for exceptional individuals to bring their skills and ideas, including reducing visa costs and, ideally, encouraging regulators to fast-track approvals for senior individuals from comparable high quality, sophisticated international financial centres.
  
  
• Implementing the proposed new, dedicated concierge service to guide and support international investors looking to establish or grow a presence in the UK and supporting the British overseas diplomatic network to bolster the effectiveness of the UK’s commercial diplomacy in key markets.
  
  
• Working with industry to systematically benchmark the UK’s international competitiveness as an international financial centre across skills, regulatory and taxation metrics. This would be helped by the creation of a dedicated sector council – much as most of the other key elements of the Industrial Strategy have – to work with HMT, DBT and others on the implementation and evolution of the financial services sector plan.