The UK’s 2025 Autumn Budget will force a fundamental reset in how agencies and service-sector firms are valued, according to new investor research from Unusual Group. The firm says the Budget marks the most significant shift in the sector’s fiscal environment in more than a decade, with implications for M&A appetite, cross-border capital flows and long-term value creation.
For years, agencies, consultancies and technology-enabled service businesses have operated in conditions that favoured dividend extraction, rewarded capital gains at exit and supported relatively linear workforce expansion.
The latest Budget, delivered by Chancellor Rachel Reeves on 26 November, ends that regime. Although corporation tax and VAT rates remain unchanged, the Government has tightened almost every other mechanism founders and investors rely on to manage returns.
Key 2025 Autumn Budget Measures
The 2025 UK Budget introduces a series of policy changes that materially reshape how UK service businesses create, protect and transfer value. These include:
- Freezing income tax and National Insurance thresholds until 2030–31
- A 2% point rise in dividend and savings income tax rates from 2026/27
- Higher tax on property, dividend and savings income as a combined class
- Narrowed capital gains reliefs, including reduced benefits for some business disposals and Employee Ownership Trust (EOT) transactions
- A £2,000 annual cap on NIC-free pension salary sacrifice from 2029
- Mandatory e-invoicing for all VAT invoices from April 2029, requiring full digitalisation of finance operations
Unusual Group’s analysis indicates that these measures will fall disproportionately on founder-led, people-heavy businesses. A typical agency founder relying on a blend of salary and dividends could face £1,500–£2,200 in additional annual personal tax, while changes to capital-gains treatment may reduce net proceeds from certain exits by 6–10%.
Investor and Market Behaviour
Luke Tobin, CEO of Unusual Group, said the changes mark a turning point for UK service firms:
This Budget does not simply raise taxes; it resets the economics of value creation. Dividend-led and extraction-focused models are less viable. International buyers will price in the additional fiscal drag, and UK firms will need stronger operational discipline to remain competitive globally.
Tobin, who oversees investments across the UK, Europe, North America and Canada, said investor sentiment is already shifting,
Investors are favouring firms with reliable reporting, automation and predictable cashflow. The valuation gap between resilient and fragile service businesses will widen in 2026.
According to Unusual Group, well-structured agencies with automated delivery, diversified revenue and robust financial controls are attracting 20–30% more buyer interest than peers lacking those characteristics. Industry modelling suggests targeted automation and AI adoption could offset 40–60% of the Budget’s additional tax and wage burden over 12 to 18 months for scalable firms.
Cross-border M&A and Rising Diligence
The research highlights a marked increase in cross-border enquiries from UK founders since the Budget announcement, as firms explore multi-jurisdictional structures and overseas revenue diversification.
Ali Newton-Temperley, Unusual Group’s Chief Operating Officer, said,
The Budget has accelerated cross-border planning. Agencies with global capability and AI-enabled operations will be better positioned in M&A processes, while domestic labour-heavy models will struggle to defend margins.
International acquirers, particularly from the US, Canada, Europe and the Middle East, are expected to remain active in the UK market, but will apply heightened scrutiny to:
- Margin resilience and wage-to-revenue ratios
- Levels of automation and technology adoption
- Forecasting quality and reporting cadence
- Governance, compliance and finance hygiene
- Key-person dependency and leadership succession
“Financial clarity is no longer administrative housekeeping; it is central to enterprise value,” Ali Newton-Temperley, COO of Unusual Group said. “Businesses reliant on spreadsheets and manual reconciliations will fall behind quickly.”
2026: A Pivotal Year for UK Agency Valuations
Unusual Group’s research identifies 2026–2028 as a pivotal period for UK agency and services M&A, with four trends expected to shape the market:
- Earlier founder exits
Higher tax burdens and reduced reliefs are likely to bring forward decisions on succession, trade sales, private equity investment or EOT alternatives. - Sharpening valuation divergence
Only the top 20–30% of agencies, those with automation, diversified income, strong reporting and cross-border capability, are expected to maintain or grow earnings multiples. - Acceleration in cross-border consolidation
International buyers will target UK assets with operational leverage and governance maturity, rather than purely revenue growth. - Financial discipline as a core valuation metric
Clean debtor books, reconciled monthly accounts, clear contractor/IR35 documentation and consistent forecasting will materially influence deal execution.
What UK Founders Should Prioritise Now
Across its 2024–2025 deal flow, Unusual Group has observed a clear pattern, premium valuations are concentrating among firms that exhibit:
- Automated or tech-enabled delivery
- Diversified client and geographic exposure
- Documented governance and compliance
- Recurring or productised revenue lines
The firm recommends founders focus on:
- Restructuring dividend-dependent remuneration models and strengthening financial transparency and reporting cadence
- Accelerating automation and AI efficiency programmes
- Updating governance, documentation and forecasting for M&A readiness
- Exploring cross-border diversification or multi-market revenue strategies
“The Budget accelerates the split between resilient and fragile firms,” Newton-Temperley said. “Businesses relying on legacy structures will feel pressure quickly.”
2026 UK Market Outlook
Unusual Group stresses that the 2025 Budget has not made UK agencies uninvestable; rather, it has raised the threshold for what constitutes a “quality asset”.
“Operational clarity, automation and cross-border capability are now prerequisites for premium valuation,” Tobin said. “The firms best positioned for the next cycle will be those built for resilience, not extraction.”
The firm expects fiscal drag, compliance demands and increased cross-border scrutiny to create a more selective but more active M&A landscape through 2026–2028.
