Which Contract Clauses Decide Who Pays When Tax Rules Change in the Autumn Budget 2026

A supplier signs a two-year fixed-price service deal in October. In November, the Autumn Budget raises employer National Insurance or introduces a new levy on the sector. The supplier's costs jump 3%. The question everyone reaches for the contract to answer is simple: can they pass that increase on, or does it come straight out of their margin? The answer almost never lives in a headline clause. It can depend on how the contract deals with tax, price adjustment and changes in law, and how those provisions interact.

Who pays when tax rules change is decided by four clauses working together: the tax and VAT clause, the price and price-adjustment clause, a change-in-law (or change-in-tax) clause, and the gross-up wording. If your contract is silent on any of them, the default position usually leaves the cost sitting wherever it happens to fall, and that is rarely where you'd have negotiated it.

Why the Autumn Budget 2026 makes this urgent

A Budget can change the economics of a live contract overnight. VAT rate changes, National Insurance adjustments, new sector levies, changes to withholding tax, and shifts to allowances all land on deals that were priced before anyone knew the numbers. A contract signed at a fixed price for 12 or 24 months carries that price through the change unless a clause says otherwise.

The exposure is largest for teams selling complex, project-based work: B2B SaaS on multi-year subscriptions, IT consultancies on fixed-fee engagements, construction and infrastructure firms on long build programmes, and energy developers on power purchase or supply agreements that run for years. In every case the deal was priced against one tax regime and delivered under another.

The four clauses that decide who pays

These clauses interact, so reading one in isolation gives you a false answer. Here is what each one actually controls.

1. The tax and VAT clause

Most well-drafted B2B contracts state that prices are "exclusive of VAT". That single word means if VAT rises, the buyer pays the higher VAT on top and the supplier is unaffected. If the contract says prices are "inclusive of VAT", the supplier absorbs a VAT rise, because the total the customer pays does not move and the supplier hands more of it to HMRC. Check which way yours reads. For consumer-facing pricing the presumption often runs the other way, so the exclusive/inclusive line is the first thing to confirm.

2. The price and price-adjustment clause

A genuinely fixed price, without an applicable adjustment mechanism elsewhere in the contract, puts the risk of changes in the supplier's underlying costs on the supplier. Many longer contracts soften this with an indexation clause that lets the price rise annually in line with a published index (commonly the Consumer Prices Index published by the Office for National Statistics). Indexation covers general inflation, but it does not automatically capture a specific new tax, so a supplier relying on CPI uplift alone can still be caught out by a targeted levy.

3. The change-in-law or change-in-tax clause

This is the clause that most directly answers a Budget change, and it is the one most contracts leave out. A change-in-law clause says that if the law changes after the signing date in a way that materially affects a party's cost of performance, the parties will adjust the price (or the affected party can require an adjustment). A narrower change-in-tax clause does the same for tax specifically. The details matter enormously:

• Which taxes are covered. Some clauses cover only new or increased taxes "directly relating to the services", which can exclude general taxes like corporation tax or employer National Insurance.
• Direction of adjustment. A fair clause works both ways: if a tax falls, the price should fall too. Some are drafted only to let one party pass increases on.
• Materiality threshold. Many require the change to exceed a stated percentage or value before any adjustment is triggered, to avoid renegotiating over trivial amounts.
• Process and timing. The clause should say who notifies whom, within what period, and how the new price is calculated.

4. The gross-up clause

Gross-up wording matters most in cross-border deals and financing arrangements. If a new withholding tax requires the payer to deduct tax before paying, a gross-up clause obliges them to increase the payment so the payee still receives the amount they were promised. Without it, a change to withholding rules can quietly reduce what actually reaches the payee's account, even though the headline price never changed.

A worked example

An IT consultancy signs a 24-month managed services contract at £20,000 per month, described as "fixed for the term, exclusive of VAT". There is no change-in-law clause. Six months in, the Budget increases employer National Insurance, adding roughly £900 a month to the consultancy's staffing cost across the account.

Because the price is fixed and the only tax the contract addresses is VAT (which the customer already pays on top), the consultancy has no contractual route to recover the NIC increase. It absorbs £900 a month for the remaining 18 months, around £16,200, out of margin. Had the same contract included a change-in-tax clause covering "any new or increased tax, levy or statutory charge affecting the cost of providing the services, above a 2% materiality threshold", the consultancy could have served notice and adjusted the fee. One clause, tens of thousands of pounds of difference.

Reviewing your own contracts before the Budget

You do not need to reopen every agreement. Prioritise the ones where a tax change would hurt most and check them methodically.

1. List your longest and largest fixed-price contracts. Anything running past the Budget date at a locked price is where exposure sits.
2. Find the VAT wording. Confirm prices are exclusive of VAT (or understand the consequence if they are inclusive).
3. Find any change-in-law or change-in-tax clause. Read it for scope, direction, materiality threshold and notice process. If there isn't one, note the gap.
4. Check the price-adjustment mechanism. Is the price truly fixed, or is there indexation you can rely on, and does it cover the kind of change you're worried about?
5. Look at cross-border payments for gross-up wording. If you pay or receive across borders, confirm who carries the risk of a new withholding tax.
6. Decide your position for new contracts. As a supplier, push for a change-in-tax clause and exclusive-of-VAT pricing. As a buyer, you may prefer a genuinely fixed price and a mutual (two-way) adjustment clause so falls are passed on too.

Drafting the clause you're missing

If your standard contract has no tax-change protection, the fix is a short, mutual change-in-tax clause with a clear trigger, a materiality threshold, and a defined notice and recalculation process. The hard part is not the concept, it's making sure the wording is consistent with the VAT clause, the price clause and the rest of the agreement, so you don't create a contradiction the other side can exploit.

This is exactly the kind of cross-clause consistency check that is easy to miss when reviewing a contract term by term. A tax provision may look reasonable in isolation while creating a different result when read alongside the price-adjustment and change-in-law provisions. GenieAI can review those provisions against your own positions, surface potential gaps or conflicts, and help draft a change-in-tax provision that is consistent with the rest of the agreement. The point is not simply to find a tax clause; it is to understand how the relevant provisions work together and what they mean for the commercial position.

The provisions that determine who bears the cost are usually already in your contract, or conspicuously absent from it. Finding out which, before the Budget rather than after, can be the difference between passing a cost on and absorbing it.