The government’s 2025 Spending Review outlines a major funding boost for healthcare, defence, housing, and infrastructure to support long-term recovery and growth.

The 2025 Spending Review was published on 11 June 2025 and outlines the government's plans to support the country’s recovery by investing in security, health, and the economy. It sets budgets for government departments up to 2028–29 for everyday spending, and up to 2029–30 for long-term projects like infrastructure. Overall, departmental budgets will grow by 2.3% during this period. The review also sets funding levels for the devolved governments in Scotland, Wales, and Northern Ireland.

This includes a £29 billion investment to revitalise the NHS. The funding aims to modernise the health service, address backlogs, and future-proof care delivery. Specifically, up to £10 billion will be used towards digital transformation and technology. This will include measures to expand GP training to deliver millions more appointments, enhance mental health services in schools.

Beyond healthcare, the Spending Review also set out substantial investments in defence, infrastructure, housing and energy security. This includes £15 billion for a nuclear warhead programme and £6 billion for munitions manufacturing. Border security and asylum processing are also set for major upgrades.. Border security and asylum processing are also set for major upgrades.

The government will also channel billions into local transport, rail links, and regional regeneration projects, while launching the largest social and affordable housing programme in a generation with £39 billion over ten years. The devolved administrations will receive their largest real-terms settlements since devolution began in 1998 to help ensure that locally tailored priorities are funded robustly.

Corporation Tax rises with profit levels. Marginal relief bridges the gap, easing businesses from the 19% small profits rate to the 25% main rate.

The Corporation Tax Main Rate applies to companies with profits exceeding £250,000 and is currently set at 25%. For companies with profits up to £50,000, a Small Profit Rate (SPR) of 19% is applicable.

For profits between £50,000 and £250,000, a marginal rate of Corporation Tax is used to smooth the transition between the lower and upper limits. The lower and upper thresholds are also adjusted proportionately for short accounting periods of less than 12 months and for companies with associated entities.

Marginal relief gradually increases the effective Corporation Tax rate from 19% at profits of £50,000 to 25% at profits over £250,000. To calculate the Corporation Tax due, you multiply your profits by the main rate of 25% and subtract the marginal relief. For the current 2025 fiscal year, the marginal relief fraction is 3/200.

Streamline your VAT reporting with fewer returns and smoother cash flow. The Annual Accounting Scheme makes VAT easier to manage for eligible small businesses.

The VAT Annual Accounting Scheme is designed to simplify VAT reporting for smaller businesses with an annual taxable turnover of up to £1.35 million. One of the main advantages of the scheme is that it requires businesses to submit only one VAT return per year, significantly reducing the administrative time and costs typically associated with preparing and filing quarterly returns.

Helping to meet the needs of small businesses, the scheme can be used alongside either the VAT Flat Rate Scheme or standard VAT accounting. It also allows for regular interim VAT payments throughout the year, helping businesses smooth out their cash flow and avoid large, unexpected VAT bills.

To be eligible to join the scheme, a business must be solvent, new to the scheme, and up to date with all VAT payments. However, it cannot be a division of a larger company or part of a VAT group.

Once enrolled, a business will make interim payments based on the previous year’s VAT liability. For newly VAT-registered businesses, these payments are calculated using an estimated annual VAT liability. At the end of the 12-month VAT accounting period, a final balancing payment is made when the annual VAT return is submitted. This final return can often be completed in tandem with the business’s annual accounts, streamlining year-end reporting.

The final balancing payment must be submitted within two months of the end of the accounting period. Businesses can continue to use the scheme provided their taxable supplies remain below £1.6 million and they continue to meet the scheme’s other eligibility requirements.

Chancellor Rachel Reeves delivered her first Spending Review to Parliament last week, setting out the government’s financial priorities for the next three years. Her approach signals a shift away from austerity towards a strategy of state-backed investment, aimed at boosting growth and productivity while maintaining fiscal credibility.

The review promises a substantial increase in capital spending, with key allocations for transport infrastructure, energy security, housing, and green technology. The government pledged a multi-year uplift in NHS and defence funding, while committing to invest heavily in rail, roads, and nuclear energy projects.

Day-to-day departmental budgets are set to grow modestly in real terms, but the largest gains will be in capital allocations. The spending framework also relies on projected efficiency savings of £14 billion, which will be used to fund some of the more ambitious commitments.

For UK businesses, the implications vary by sector. Construction and engineering firms can expect opportunities from increased infrastructure spending, particularly those aligned with green objectives and transport. Firms in digital healthcare, AI, and clean energy technologies may also see a benefit from targeted support and public procurement opportunities.

Technology businesses are likely to see some growth stimulus through investment in digital public services and AI infrastructure. Similarly, the life sciences and carbon capture sectors are expected to benefit from targeted research and development initiatives.

However, the business community remains cautious. The Spending Review comes at a time when government debt is at historically high levels, and market confidence is sensitive to fiscal overreach. Some forecasters have warned of a potential shortfall of up to £20 billion in the government’s medium-term plans, which could necessitate either tax increases or tighter departmental controls later this year.

There is also concern over the government’s reliance on efficiency savings to meet its commitments. While welcomed in principle, businesses and economists alike remain sceptical about how quickly those savings can be delivered in practice.

In summary, the Spending Review presents a growth-focused and investment-driven agenda. For business, it brings opportunities, particularly in sectors aligned with the government’s infrastructure, green and digital priorities. However, there are risks associated with delivering on these promises if forecasts fall short or efficiency measures do not materialise as planned.

BT has announced that it may exceed its previously stated target of cutting 40,000 jobs by 2030, as artificial intelligence (AI) becomes more central to its operations. The move comes as the company accelerates its cost-cutting programme and seeks to reorient itself in a changing telecoms landscape.

The CEO, Allison Kirkby, who took over in early 2024, has emphasised efficiency, automation, and simplification. Since then, BT has exited international operations, focused more tightly on its UK telecoms core, and made plans to separate out divisions like Openreach to unlock shareholder value.

The company is now embedding AI across key departments, including customer service, fault detection, and network operations. Automation of routine tasks is enabling BT to reduce headcount while aiming to improve efficiency and service delivery. AI-driven tools are being integrated into call centres and technical support functions, with a view to replacing human input for common troubleshooting and account management requests.

The financial rationale is clear. BT is in the midst of a £3 billion cost-reduction programme and has said that increases in employer national insurance contributions alone could cost it £100 million annually. Leveraging AI is seen as one of the few scalable methods of preserving margins while continuing to invest in infrastructure.

This restructuring has important implications across the telecoms sector. Job losses will be concentrated in customer-facing roles and back-office operations. At the same time, there is likely to be increased demand for skilled AI engineers, data analysts, and cybersecurity specialists.

Smaller providers and BT’s supply chain will need to adapt quickly. Companies offering AI systems, automation tools, and support services may find new commercial opportunities, particularly if BT’s adoption drives wider change in the sector.

The risk is that over-automation could impact customer service and employee morale. BT will need to strike a careful balance to maintain brand reputation and service levels, especially as it faces competition from a possible Vodafone–Three merger and new market entrants.

BT’s direction under Kirkby points to a leaner, more tech-led organisation. For investors, this may offer stability and long-term growth. For employees, it signals ongoing transformation and the need for reskilling. For the wider economy, it highlights how AI is moving beyond hype and directly reshaping corporate strategy and workforce planning.