From my perspective, it wasn’t dramatic but it’s more important than it looks.
When the Budget landed, I found myself thinking: “Well, nothing too unusual here.” And that’s true, there were no shock announcements or sweeping reforms.
But for those of us in professional services, the detail really matters. And once you dig beneath the surface, there are some meaningful shifts that will affect margins, partner drawings, remuneration planning and perhaps surprisingly, unlock new advisory opportunities.
Here’s my take on what this year’s Budget really means for our sector.
RISING EMPLOYMENT COSTS & FISCAL DRAG: A QUIET SQUEEZE ON MARGINS
Let’s start with the one we’re all feeling: rising employment costs.
With tax thresholds frozen, more of our people are being dragged into higher tax bands, reducing their take-home pay. Combine that with wage inflation and NIC changes, and firms are under pressure to review pay and benefits to stay competitive – this can push overall employment costs higher.
For professional services firms, where people represent both our greatest strength and our biggest cost, this creates margin pressure.
What this really translates to is:
- Higher payroll costs eating into margins
- Employees expecting salary reviews just to keep pace
- Potential calls for adjustments to partner profit allocations
It’s manageable, of course, but only if we’re intentional. This is a good time for firms to review salary banding, reward packages and workforce planning, to make sure they still stack up in the current environment.
DIVIDENDS & PENSIONS: OUR TRADITIONAL REWARD MIX IS LESS EFFICIENT
Remuneration planning for partners and senior leaders is under pressure.
For limited companies, the reduction in the dividend allowance and changes to pension rules mean the traditional mix of salary, dividends, and pension contributions is no longer as tax-efficient as it once was.
For LLPs and hybrid models, the picture is different but equally challenging:
- Partners face higher personal tax bills on profit shares
- Take-home pay falls unless drawings or structures are revisited
- Corporate members in hybrid models face more complex extraction strategies (e.g., dividends from the corporate member after corporation tax)
Pension changes also matter across both structures – annual allowance limits and tapering rules can restrict how much can be sheltered tax-efficiently, making planning harder.
In short, it’s time to modernise remuneration frameworks. This isn’t about radical change – it’s about adapting what we have so it works harder for both firms and their people.
EOT CHANGES: SUCCESSION PLANNING NEEDS A FRESH LOOK
EOTs have been a big conversation point in our sector, especially for firms thinking about succession over the next few years. They’ve offered a tax-efficient, culturally aligned way to transition ownership.
However, this Budget introduced additional scrutiny and tightened the rules around how EOTs operate and qualify.
They’re still a viable option; however, they’re no longer the straightforward answer many had hoped for.
If your firm was considering an EOT, now’s the time to pause and reassess:
- Does an EOT still align with our long-term goals?
- Do we understand the new governance expectations?
- Should we explore alternatives like MBOs or partner buy-ins?
The key message here is simple: don’t assume the old guidance still applies.
WHAT YOU SHOULD BE THINKING ABOUT NOW
Here’s a quick checklist I’d encourage every professional services firm to work through:
- Stress-test partner drawings
Scenario-planning now avoids unpleasant surprises later.
- Review remuneration structures
Both for staff and partners, small tweaks can make a big difference.
- Take a fresh look at succession planning
Especially if you’ve been considering an EOT.
HOW I SEE IT
While this year’s Budget did make the headlines, though mostly for the wrong reasons after that early OBR leak, the detail itself didn’t bring many big surprises.
It creates important shifts for our sector, particularly around people costs, tax efficiency and long-term planning. The good news? With some thoughtful adjustments and a proactive approach, professional services firms can navigate the challenges and capitalise on the opportunities.
As always, if you’d like help unpicking any of this, whether it’s remuneration, succession, or planning for the year ahead, my team and I are here to support. Get in touch if you have any questions.
