Chancellor Rachel Reeves delivered the much-anticipated UK Budget yesterday. Revenue-raising measures were somewhat lighter than expected, while the spending priorities brought some welcome support to several key areas, including renewable energy, electric vehicles, and decarbonising home heating—sectors that align with Tribe’s investment focus on impact and sustainability.
One of the most anticipated changes was the adjustment to capital gains tax. Early speculation suggested a possible alignment with income tax rates; however, the actual increase was a 4% increase for higher rate taxpayers, bringing the rate to 24%. Inheritance tax (IHT) bands remained largely untouched, though from April 2027, pension pots will be included in estates for IHT, affecting long-term estate planning.
Funding for the £40bn tax increase will come primarily from a hike in employer National Insurance contributions, which, alongside rising minimum wages, could place substantial pressure on businesses. As anticipated, the Chancellor also announced the end of the non-dom regime, removing tax advantages for certain offshore trust arrangements.
We feel the latest UK Budget brings encouraging developments for sustainability-focused investors, particularly those with exposure to government green initiatives and the UK’s clean energy goals. Here’s a closer look at some key highlights and their potential impacts:
- Green hydrogen investment: Eleven green hydrogen projects are set to receive backing under the Hydrogen Business Model, with funding for hydrogen and carbon capture rising from £1.4bn in 2024-25 to £3.7bn in 2025-26. This significant allocation also includes £134m for port infrastructure to support offshore wind, strengthening renewable supply chains – a positive outlook for investors in HydrogenOne and related sectors.
- Electric Vehicle (EV) incentives: The government extended key EV tax incentives, including 100% first-year allowances for EVs and charge points. Additionally, a further £200m investment is allocated for on-street EV charging infrastructure. These steps support a faster transition to EVs and benefit investments within Tribe’s EV and electrification portfolios.
- Social housing and impact investment initiatives: The budget introduces a five-year social rent settlement and begins developing a social impact investment vehicle to attract socially motivated investors. This creates new opportunities in the affordable housing sector and socially driven investment, aligning with Tribe’s mission to back projects with positive societal impact.
- National wealth fund and industrial strategy: New funding under the National Wealth Fund is set to catalyse investment in clean energy and high-growth industries, promoting both net-zero commitments and economic growth. This public-private capital synergy underpins long-term innovation, creating fertile ground for sustainable investments.
- Carbon border adjustment and plastic packaging taxes: The UK Carbon Border Adjustment Mechanism (CBAM) will take effect in 2027, covering sectors like aluminium, cement, and steel, as a sign of the government’s resolve for a low-carbon economy. Meanwhile, the plastic packaging tax will increase to encourage recycling, a boost for firms in the recycling sector.
- Living wage and social measures: The National Living Wage will rise to £12.21 an hour in April 2025, alongside other wage increases, in a welcome effort to address in-work poverty.
- Departmental budget increases: A 1.7% increase for government departments is expected to particularly benefit the Department for Environment, Food, and Rural Affairs (DEFRA), which faces rising demands to address flooding, climate resilience, and sustainable farming. This is promising for green gilt investors, as it strengthens the government’s capacity to co-invest with private capital to tackle key environmental challenges.
- Energy profits levy adjustment: The windfall tax on North Sea energy producers will rise from 35% to 38% and be in place until 2030, conditional on oil and gas prices. This bolsters the government’s commitment to its net-zero goals, a positive signal for renewable energy investments, including those with exposure to Contract for Difference (CfD) scheme auctions.
Overall, the UK Budget signals sustained commitment to decarbonisation, clean energy, and social impact, aligning closely with the priorities of impact-driven investors like Tribe. The renewed focus on green projects, from hydrogen to EV infrastructure, coupled with new social investment pathways, suggests a positive trajectory for long-term sustainability and resilience investments in the UK.
Further reading: discover the key UK Budget 2024 insights for the charity sector.
