“Winter Has Come”: What Does a ‘Stealth Tax’ on Middle Earners Mean for UK Creativity?

The UK autumn budget lands in an era of squeezed consumer wallets and heightened scrutiny on spend, but as ever creative leaders see opportunity. We approached a range of British creative companies to see what Rachel Reeves’ latest set piece as chancellor means.

With tax thresholds frozen and households under pressure, agencies and other companies in the marketing space anticipate a renewed focus on value-led messaging, effectiveness and operational sophistication. At the same time, a promise of economic stability offers the long-term horizon the industry has been craving. From culturally resonant storytelling to retail media experimentation and AI-driven production, creative leaders say the brands that win will be those who combine commercial clarity with brave, meaningful ideas.

Alongside the tax-freeze “stealth tax”, leaders also pointed to a handful of measures likely to shape brand behaviour in 2025: the removal of the two-child benefit cap from 2026, which restores spending power for larger families; a rise in the minimum wage, contributing to a sense of long-term stability; and pared-back growth forecasts that tighten the focus on commercial rigour. Taken together, these signals create a mixed landscape — one where relief for some households sits alongside broader financial pressure for others, pushing brands to be both more culturally resonant and more ruthlessly effective in how they invest.

Find out in more detail what they said below.

Stephen Woodford – chief executive officer of the Advertising Association

This budget brings changes that will further increase employers’ costs, including for those in advertising, as well as higher taxes for the public, so it is hard to see how these measures are going to encourage more economic growth.

However, there are welcome changes to skills, including fully funded apprenticeships for under-25s in SMEs. It is positive to see skills investment aligned with the modern Industrial Strategy’s growth-driving sectors, which includes the creative industries, and the prioritisation of digital skills programmes such as the £187m ‘Techfirst’ initiative. Allocation of a Creative Places Growth Fund to regional clusters will help unlock innovation in areas where advertising can play a key economic role.

Still, further reform of the Growth and Skills Levy is needed to make it workable for all employers. We will continue to work with the government to ensure the best solutions are found to sustain our industry’s talent pipeline.”

Paul Bainsfair – director general of the IPA

Whilst there didn’t seem to be much in the budget for our world specifically, we did note the planned investment in AI and the digital economy, alongside the commitment to making the UK an attractive place for start-ups and scale-ups. Both measures will help the UK’s creative sector maintain its position as a world leader in creativity and innovation.

We also look forward to hearing more detail on the announcement that training apprentices under the age of 25 will be free for SMEs. As we know, apprenticeships are a vital way for agencies to bring in, train and develop young talent, helping to future-proof our talent pipeline.

Steve Davies – chief executive officer of the APA

I’m having trouble separating out my view of the budget from a view on behalf of APA members but perhaps that is impossible.

The whole approach is timid and feeble. Weak leadership without the mettle to address the country’s problems.

Labour should have said before the election, “We all know that education, the health service, public services generally are failing and we’re going to put income tax up by 2p to pay for it.” They would have got elected anyway – the Conservatives had been in power for 14 years and their corruption and incompetence made them unelectable.

Instead they ran away from that message and boxed themselves in with pledges about no tax rises. It was a fatal error. For business it shows the government is weak and facilitating and can’t provide the certainty business craves. So, bad for all businesses, including APA members too. 

Dom Boyd – managing director solutions & marketing effectiveness practice at Kantar

The new budget creates a value reckoning for brands.

The long wait is over. Today’s budget has finally arrived at the same time as a distinctly wintery spell for consumer and business confidence. And the chill is going to create a stress-test for marketers.

Rises to minimum wage are handsomely offset by the impact of frozen tax thresholds – effectively a stealth tax – which will impact middle income households the most, while businesses are facing higher costs.

And that creates a challenging environment for marketers where consumers will be much more choosy about what they buy, and businesses will be more cautious about what they spend.

It’s a moment where weak brands are going to get found out, and strong trusted brands will thrive because consumers will trade down unless brands prove their value.

But marketers mustn’t press the panic button by racing to cut investment or prices just when resilience is most needed. Instead this is a golden opportunity for marketers to make their mark by doubling down on brand building fundamentals which drive pricing power, predisposition and presence.

That means protecting and increasing share of voice, by creating distinctive, memorable emotional connections, by innovating new services that create extra value and - perhaps most critically in the new AI-enabled LLM search world – by ensuring they show up in the right way, at the right time, in the right channels to give audiences reasons choose to them when it matters.

Winter has come. But it’s the brands that base their decisions on deep customer insight, think creatively to find new opportunities and demonstrate compelling value in the moments that matter who will thrive come springtime.

Brenda Imeson – director of strategy at Brave Bison

Today's budget has created a tale of two consumer markets. The extended freeze on income tax thresholds until 2031 means fiscal drag will steadily erode middle and high earners' disposable income. The very demographic that drives discretionary spending on cars, holidays, and home improvements. Add property and investment tax increases from 2027, and investment for higher end advertising categories will slow down.

On the flip side, the National Living Wage rising to £12.71, scrapped energy levies, and abolished benefit caps inject real purchasing power into lower-income households. This does offer opportunities in FMCG, retail, and essentials, which will have a wide-ranging impact.

We are facing a polarised consumer market requiring fundamentally different approaches to reach those whose financial realities are increasingly divergent. When people are anxious about their financial future and national economic prospects, even the most creative campaigns face headwinds. For middle- and higher-income consumers left feeling financially constrained, their disposable income isn't the only thing reduced, their receptiveness to advertising messages is equally diminished.

Jack Chape — EMEA head of integrated media at PMG

The 2025 budget signals a clear shift for brands and advertisers. Freezing income tax thresholds until 2031 has been described as a ‘stealth tax’ on middle-income earners, tightening household budgets and increasing price sensitivity. In contrast, removing the two-child benefit cap from 2026 gives lower-income families with two plus kids renewed spending power across retail, grocery, home, leisure and family services.

As a result, the advertising landscape is likely to become more polarised. Value messaging, promotions and performance media will grow as brands compete for more cautious consumers, while premium and luxury brands may need stronger storytelling or international focus to offset softer domestic demand.

Consumers want confidence in their purchasing decisions, so trusted, high-impact channels like TV and OOH will continue to reinforce brand credibility. At the same time, advertisers will prioritise efficient capture of high-intent audiences through digital, with continued growth predicted in retail media where audiences compare value close to the point of purchase.

The brands that adapt fastest and communicate with clarity, value and relevance will be best placed to win in 2026 and beyond. Experimentation and incrementality testing will be key to proving the impact of new channels such as retail media.

Yann Mathias – chief executive officer at Culture3

Rachel Reeves’ 2025 autumn budget won’t radically rewrite the economy, but it does reframe the mood. After years of volatility, this budget signals a return to something our industry desperately needs: permission to think long term. Stable inflation, steady growth and a rising minimum wage create the conditions for people to feel a little more secure and when people feel secure, they look for brands that actually mean something.

For advertisers and brands, the freeze on tax thresholds will tighten disposable income, but it also sharpens the creative brief. Relevance, truth and cultural resonance will matter more than reach. This is not a moment for louder campaigns, it’s a moment for work that moves culture.

If there is an opportunity here, it’s this: in an age of AI acceleration and audience fragmentation, the brands that win will be those who show up with clarity, courage and a commitment to ideas that matter.

Tamara Lover – global head, creative operations solutions at ICP

Now the budget is out, it’s clear many households will face higher tax and financial pressure, even as the Government offers selective cost-of-living relief. On the surface this is not great news for agencies and brands who will be grappling with consumers who have less money to spend and an increasing pressure to manufacture growth.

However, there is a silver lining for those who are tasked to help deliver that growth. When budgets tighten, the focus shifts sharply to effectiveness and efficiency with a premium placed on relevance. Relevance is only achieved if you can deliver at scale, which is where the real challenge begins.

This puts creative operations, laser-sharp insights, smart production models and AI at the top of many organisations’ to-do lists. Partners that can help brands navigate this space will become mission critical and brands that are willing to abandon models, built for a different era, will unlock real competitive advantage.

This is not the time to rearrange the deck chairs on the Titanic, when times get tough, fortune favours the brave.

Ian Millner – chair and co-founder of Iris

Today’s budget trades spectacle for straight-up realism. The language is about responsibility, but the impact is pressure – on households managing rising costs and on businesses trying to protect margins. Value will dominate decisions on every front: consumers stretching their spend, and brands reassessing how they earn it. But beneath the headline restraint sits a harder truth: where is the growth? This government is creating a long-term set of toxic conditions for entrepreneurs and wealth creators – the very people who drive innovation, jobs and future economic buoyancy.

For marketers, this isn’t a moment to chase bigger budgets. It’s a reminder that creativity has to justify its place by adding something tangible to people’s everyday lives. This is participate or perish in practice. Voters will judge this budget on who shoulders the burden and who’s protected, and brands face the same dynamic: contribution matters more than commentary.

Some sectors will feel the squeeze more than others. Those hit with higher duties, from EVs to online betting, will inevitably rethink spend. The smartest responses will pivot towards usefulness, safety and practical value.

There are still pockets of opportunity. A renewed push on savings and listings could help reopen the City; if the IPO pipeline loosens, brand-building investment is likely to return.

In the end, the takeaway doesn’t change. You can’t spend your way to progress. Brands will have to earn it. With taxes high and tolerance for bland work even lower, only ideas that show real intent, and real results, will stand a chance.

Hannah Hattie Matthews – chief executive officer at Uncharted

“Choices” may have been the theme of the Chancellor’s speech today, but with taxes rising and growth forecasts being trimmed, lower consumer spending is a possibility… and for a sector so tied to confidence and momentum, that often leads to tighter marketing budgets.

Positives included softer business rates for retail and leisure, free apprenticeship training for under-25s in small businesses, and tax measures aimed at encouraging new start-ups. Updates to enterprise incentives, investment schemes and UK listings could also help high-growth businesses expand at home rather than abroad.

Reeves talked about boosting trade, increasing investment and championing innovation. To fully unlock that potential, we will need genuine economic stability. The kind that gives brands confidence to invest.

The central challenge remains growth. If we want to thrive, we’ll need not just steady stewardship but a plan that backs bold ideas as much as it balances the books.

Charlie Barker – director of Capital Markets and Corporate at Brand Potential

The rabbit everyone across the industry wanted to see the Chancellor pull out of her red box today was a set of policies to foster growth and stability. Time will tell whether she has achieved either. The prevailing narrative in the run-up has shown the lack of confidence UK business and general public at large has in her ‘smorgasbord’ Budget.

But, if we do now see a period of policy consistency and the green shoots of economic recovery the picture could change very quickly. That could see both clients and agencies making more creative bets, partnerships and starting to hire more confidently.

In the meantime, while uncertainty creates challenge, it also offers opportunity for those brands and agencies that are most nimble. Heightened scrutiny will dominate for some time to come, with a continued focus on value, creativity and the power of technology in delivering superior analytics and outcomes.

The Chancellor’s words today haven’t moved the dial. But they hopefully bring a long period of speculation to an end where business leaders can now finally focus on what they do best – investing, building and innovating to grow their firms and the British economy.

Andrew Orr – managing director at TRO

As we digest the 2025 autumn budget, there are encouraging signs for the advertising and marketing industry. The measures provide greater clarity for businesses making investment decisions, at a time when marketing budgets are under scrutiny.

Brands are already planning earlier, more ambitious campaigns for 2026, focusing on initiatives that deliver tangible business impact. From my perspective, experiential marketing continues to prove its ability to drive ROI across the full funnel. From raising awareness to deepening engagement. To building brands and driving sales. This versatility makes it particularly valuable in uncertain times.

If the budget delivers the economic stability and long-term signals it promises, it should give brands the confidence to back the channels and agencies that consistently deliver measurable impact.

Katie Earlam – acting managing director at 72Point Group

Now that Rachel Reeves’ autumn budget has officially landed: tax rises confirmed, thresholds frozen, and growth forecasts pared back, the implications for the advertising industry, and for our clients at 72Point, are becoming clearer. This is a budget that tightens the belt for many households and businesses. With more people being pulled into higher tax brackets and operating costs shifting across sectors, brands will inevitably become more considered in where and how they invest.

But that doesn’t mean a retreat from marketing – quite the opposite. In tougher economic conditions, brands need their spend to work harder. That’s where agencies like ours can make a real difference. Clients will be looking for campaigns that deliver genuine bang for their buck: bold, distinctive creative underpinned by strong insight and measurable outcomes.

The budget’s focus on long-term stability and financial discipline puts the spotlight firmly on effectiveness. Flashy without focus won’t cut it. Instead, brands will value partners who can combine creativity with commercial thinking, generating ideas that travel, spark conversation and deliver clear ROI.

For us and our clients, the opportunity lies in doing more with less: smarter storytelling, sharper earned-media strategies and campaigns that prove their value in real terms.

Ben Moutrie – founder of The Midnight Club

This government specialises in gloom. Could it be any more desperate for the inspiration and energy of a brilliant creative partner? All that resource and expertise, with seemingly one way to boost its funding and prospects. In an era screaming for optimism and invention, they are almost comically short of ideas. Starved of the power of original, progressive thinking. This, for clarity, is NOT a plea to work with the chancellor (or a comment on her individually) – but she and everyone else caught in such political quicksand would gain much from leveraging the best of our creative sector. Creativity perhaps, in its most raw and electrifying form, is the only thing that could save them.

Lucy Bairner – client experience director at Collaborate Global

The Autumn Budget signals a tougher, more value-driven landscape for advertising and brand experience. With tax thresholds frozen and household budgets tightening, brands will inevitably scrutinise spend, not to cut creativity, but to demand clearer, smarter returns.

For agencies, this accelerates a shift we’re already seeing: a move toward “magical modular” thinking. Clients want ideas that are adaptable, repeatable and designed to work harder over time, not just one-off set pieces.

Experiential won’t disappear, far from it. As digital interactions become increasingly ubiquitous and, frankly, interchangeable, real-world experiences still offer something uniquely human. But they’ll need to justify their place more rigorously. Not every activation has to be a spectacle; this moment is an opportunity to champion nimbler, inventive, high-impact ideas that create meaningful connection without requiring extravagant budgets.

Alex Attfield – managing director at Simply Social

Today’s budget lands alongside a downgrade in our national productivity forecast. A reminder of the shocks we’ve absorbed since 2008: a financial crisis, a global pandemic, Brexit…the works. Our industry has weathered every one of them. But when the economy slows, advertising gets asked to prove its value twice over and that’s exactly where we need to level up. Social-first creativity already delivers some of the strongest ROI in the market, but we have to get far sharper at measuring and communicating that impact. The UK punches well above its weight globally, with advertising generating around 4% of GVA in 2024. If the government wants growth, our industry can help drive it, but we also need to back ourselves. We need to guide clients toward longer-term thinking and show the real commercial value that great creative delivers.

Rich McCloskey – managing director at true

The positive news is that we are now in a position of certainty. The long lead-up to this budget and high levels of speculation have fuelled masses of uncertainty and ultimately stalled a lot of businesses at a time when business is already very challenging.

This has been hard for agencies as we try to navigate our own challenges whilst remaining supportive and present for our clients. We can now move ahead and plan accordingly as to how we best deal with the changes.

What we’ve seen is a wide-ranging budget that seems to have been designed to placate MPs, rather than drive the UK economy or support businesses.

Thinking specifically about our clients in the hospitality sector, the budget has done little to address their current woes. The increase in the minimum wage for younger people signals further convergence of the minimum wage and the living wage. This will cost hospitality businesses more and make it harder for first-time job seekers to find roles. It’s also inevitable that these increased costs will find their way into price increases rather than eroding margin – can this sector really stomach increased costs at this time? The hoped-for reduction in hospitality VAT was absent, and there was no relief for hospitality business on the higher level of business rates.

The inevitable increase in prices in hospitality arrive alongside the changes to salary sacrifice and the freezing of income tax brackets. Overall, there will be less disposable income for consumers to spend across the economy, so it would seem logical that businesses are going to have a harder time vying for the fewer pounds in people’s pockets.

As agencies we’re well placed to help with these challenges, but in a world where we are also facing higher costs of doing business and falling budgets across the board, it feels like we are in for a challenging time ahead.

Warren Johnson – founder of W Communications

For brands, Reeves’ budget is a reminder that the next wave of growth will have to be earned, not gifted. With freezes on income tax thresholds and higher operating costs baked in, consumer spending will stay under pressure. That hits the categories we work closest with – hospitality, retail, FMCG and travel – where even small dips in disposable income translate directly into softer footfall and tougher conversion.

Brands in regulated or ‘behaviour-shaping’ sectors will also feel the chill with recent budget-related announcements. New health-linked levies and signalling on gambling and sugar show that scrutiny won’t ease any time soon. Creative that once sailed through will now need sharper justification and smarter framing to land.

Dan Yardley – chief operations/finance officer at MSQ

It would have been great to see a budget with initiatives to encourage growth and investment in the economy. Our industry tends to perform well when the macroeconomic picture is healthy. While we understand the challenges, this budget doesn’t appear to be one focused on the creation of jobs and growth, rather finding a way to cover existing commitments and stopping anything bad from happening.
It reinforces what we've long understood: brands can't afford to wait for perfect macroeconomic conditions to create momentum. While we'd welcome measures that more actively stimulate growth and investment, the reality is that budgets like this one   — focused on stabilization rather than expansion — underscore why agility and efficiency matter more than ever.

For clients, this environment demands partners who can deliver both strategic ambition and operational discipline. This is precisely where MSQ's model becomes increasingly valuable. Unlike legacy holding companies weighed down by structural overhead, or independents limited by scale, we offer the "Goldilocks" positioning: global reach without the bureaucracy, senior strategic partnership without the corporate drag.

While this budget may not actively accelerate the advertising sector, it does clarify the landscape. Brands now need partners built for resilience and results, not just scale.

At MSQ, we're confident in the future — not despite the budget, but because our model was designed for exactly these conditions.

Rt Hon Jonathan Ashworth -- UK chairman of public affairs at Weber Shandwick

This budget was a high-wire act for Rachel Reeves who primarily has to satisfy three audiences: the markets, who needed confidence she could grip borrowing and tame inflation; voters, who expected action on the cost-of-living pressures they face daily; and Labour MPs, who wanted reassurance of a distinctly Labour agenda.

After several difficult months, No. 11 believes it managed to satisfy all three, whatever the political backlash in the right-wing press. The question is: at what cost?

Faced with missing her fiscal rules and losing confidence of the markets, the Chancellor was faced with two options: cut spending or tax more. She chose tax rises, unveiling £26bn of additional tax rises.

The government knows there will be political pushback but believes the measures taken will help over the next few years relieve cost-of-living pressures and build consumer confidence. With growth subdued and low confidence, Labour MPs and business alike will hope the pain is worth it, leading to brighter prospects ahead. Time will tell.