Autumn Budget 2025: Where does the food and agribusiness sector stand?

Going through the supply chain how might the budget impact the food supply system? 

The UK will be feeling the squeeze after another revenue raising budget with ongoing flat-lining productivity, high costs and rising inflation. It will be even more important that supply chains are honed to reduce costs wherever practicable. Although it is hoped with raised fiscal headroom to £22bn this may now lead to a period of greater stability and more muted policy speculation. 

The main area of increased costs will come from frozen thresholds and increased national insurance contributions (NIC) which, when combined with rising input costs, risk further squeezing margins and hitting labour-intensive businesses hardest.

For farming, Defra’s resources are likely to be increasingly stretched and there are concerns in the event of budget overspend and some schemes closing in 2025, that the 2026 allocation may be too limited to allow meaningful expansion when the Sustainable Farming Incentive reopens.

The investment in infrastructure for business will be desperately needed however overheads and food inflation remain in major contention. The increased taxation may well slow volume growth with consumers feeling the increased expense of their food trolley and eating out which means less investment for the future resilience of the food system.  

Food and agribusinesses will need to look at both cost reduction measures as well as capitalising on their most profitable areas. It will require a risk assessment review of their supply chains and where areas of loss can be trimmed and efficiencies brought in.  

Reformulation and portion control are also areas that may be examined by business.

The mantra ‘cost is king’ will be even more important for the cautious consumer in both the retail and out of home sector and so businesses that can prioritise their costs savings and pass that on; as well as businesses that can provide a premium value, such as origin, welfare, authenticity or health and nutrition claims. One area we may see an uptake would be within well priced speciality or treat foods via the ‘Lipstick Effect’, when consumers still spend money on small indulgences when cash-strapped.

Sugar tax

The soft drinks industry levy, (SDIL), or ‘sugar tax’ was proposed at last year’s autumn budget and formed part of the Government’s new approach to ‘prevention’ in its upcoming health plan. Read our blog about this here.  

The sugar tax aimed to help tackle obesity, and currently applies to drinks containing 5g of sugar per 100ml. Following a public consultation, this threshold will now be lowered to 4.5g per 100ml and is due to take effect from 1 January 2028. This is stated would raise £40–45 million a year in extra revenue. The OBR estimates expect the figure to be slightly higher, around £50 million a year by the end of the forecast period. The current exemption for milk-based drinks, such as milkshakes and coffees, will also be removed.

The consultation estimated that the expanded Soft Drinks Industry Levy (SDIL), due to take effect from 1 January 2028, would raise £40–45 million a year in extra revenue. The OBR estimates expect the figure to be slightly higher, around £50 million a year by the end of the forecast period.

The use of tax for so called ‘less healthy’ food has been controversial and rates of calorie reduction have been disputed as obesity rates have continued to rise since the introduction of the SDIL in 2018. It is stated the encouragement for business to reformulate may be the main objective however the use of tax for this purpose sets a concerning precedent, particularly where we see the progressive raising of taxes across each budget.

Key takeaways for the sector

• Freezing personal tax thresholds for both income tax and national insurance contributions (NICs) for employees and self-employed individuals for a further three years—from April 2028 through until April 2031 – putting less money into consumers’ pockets.  
• Increasing the national living wage (NLW) by 4.1% to £12.71 per hour for eligible workers aged 21 and over. The national minimum wage for 18 to 20-year-olds will also increase by 8.5% to £10.85 per hour and for 16 to 17-year-olds and apprentices by 6.0% to £8.00 per hour – increasing costs of employment for businesses.
• Increasing tax on dividend income by two percentage points at the ordinary and upper rate from April 2026.
• Increasing tax on property income and savings income by two percentage points at the basic, higher and additional rates from April 2027.
• Reducing capital gains tax relief on qualifying disposals to employee ownership trusts from 100% to 50% from 26 November 2025.
• Introducing electric vehicle excise duty (eVED), but this would not initially apply to vans, buses, motorcycles, coaches and HGVs.
• Introducing a high value council tax (HVCT) surcharge in England from April 2028 on residential properties valued at or over £2mn.
• Changes to fuel duty, including cancelling the planned uprating for 2026/27; extending the 5p cut in rates to 31 August 2026, then increasing the duty by 1p from 1 September 2026, 2p from 1 December 2026, and 2p from 1 March 2027.
• Increasing eligibility for the enterprise management incentives (EMI) scheme to allow scale-ups, as well as start-ups, to access the scheme from April 2026. A new 40% first year allowance allowing new businesses to write off more of their upfront costs, and the extension of some business rate pilot schemes until 2029.
• A national licensing framework designed to back late-night venues and pubs. It is hoped that the new framework will make it easier to convert empty shops into hospitality venues and protect pubs, clubs and music venues from noise complaints by new developers. 
• Lower tax rates for certain retail, leisure and hospitality properties.
• There was no cut in the 20% VAT rate, which the hospitality industry had called for to help reduce the burden on hospitality and leisure businesses.
• The Food Standards Agency (FSA) has been asked by the UK Government to develop a new national system of regulation for highly compliant large food businesses in England. A national level approach for the largest businesses could give those in local authority food teams more time to focus on those local shops and restaurants that need more hands-on support. Proposals will be put to the FSA Board at its meeting in March 2026. Read more here. 
• Reviews of Autonomous Tariff Quotes (ATQs) will see current fish and seafood ATQs maintained, while the raw cane sugar ATQ review is ongoing and could see an increase for 2026