It’s been an exciting time in the world of finance with Rachel Reeves and the Labour Party presenting their very first budget. After weeks of speculation and media buzz, we’re finally able to see what’s official and how it may impact you.
There’s been lots of talk about potential tax rises, and some anticipated big changes, especially around Capital Gains Tax (CGT) and National Insurance. For example, the CGT increase turned out to be a gentler adjustment than rumoured—rising to 24% instead of the 39% many feared. It’s still a change, but for some, it might feel less daunting than expected.
A more significant adjustment was made to Employer National Insurance, which went up by 1%. This might feel frustrating, particularly for small business owners. Labour had promised not to increase National Insurance for employees, so this was a way to bring in more revenue without directly impacting workers. However, it still has a ripple effect across working people.
Additionally, there’s some longer-term good news: income tax thresholds are set to remain frozen until April 2028 but will then be adjusted for inflation. This move might help take the sting out of any tax increases over time.
One other potential change on the horizon is in Inheritance Tax (IHT) and pensions. A consultation is planned, which could lead to changes by 2027 that might bring pensions under IHT. It’s early days, but we’re keeping a close eye on this and will keep you updated on anything that may affect you.
Below, we’ve pulled together a summary of the key points for easy reference. If you have questions on how any of this might impact you personally, we’re here to help!.
We’ll provide more detailed insight over the coming days, but for now, here are the main headlines.
TAXES
CGT will rise from 10% to 18% for the lower rate and 20% to 24% for the higher rate. CGT on residential properties will be unchanged at 18% and 24%.
IHT threshold is frozen to 2030, however the Chancellor also stated she would bring inherited pensions into IHT from April 2027, and reform Agricultural Property Relief and Business Property Relief.
VAT to be applied to private school fees.
Business Asset Disposal Relief lifetime limit will stay at £1m but will increase to 14% in April 2025 and 18% from 2026-27.
Non-domicile tax regime to be abolished. Stamp Duty surcharge for non-UK residents increased from 2% to 3%.
Stamp duty on second homes to be increased from 2-5% with immediate effect.
Air passenger duty increasing by no more than £2 for economy short haul flights, but a 50% increase for private jets.
PENSIONS & SAVINGS
No changes to core investment allowances into ISAs or pensions.
Agricultural property relief and business property relief reforms to be kept but reduced.
Enterprise Investment Schemes and Seed Enterprise Investment Schemes will continue until at least 2035.
Pensions triple lock will be maintained and the state pension will rise by 4.1% from April 2025.
Relief on shareholdings on the Alternative Investment Market cut to 50%.
LIVING COSTS
Fuel duty cut kept for another year.
Carers allowance to rise.
Alcohol duty cut on draught alcohol to help pubs. Rates on non-draught products will increase in line with RPI from February 2025.
A flat rate duty on all vaping liquid will come into force from October 2026.
Soft Drinks Industry Levy will rise with inflation and increase in line with CPI each year going forward.
BUSINESSES
The Employment Allowance will increase from £5,000 to £10,500, which the Chancellor claims will mean 865,000 employers won’t pay any National Insurance at all next year.
Corporation tax capped at 25%.
The minimum wage will increase by 6.7% to £12.21 an hour from April. For 16–18-year-olds it will increase by 16% from £8.60 to £10 an hour. Apprentices will also an increase of 18%, from £6.40 to £7.55 an hour.
There will be a crackdown on umbrella companies and promoters of tax avoidance schemes.
Existing 40% business rates for the retail, hospitality and leisure industries will continue in 2025/6 up to a cap of £110,000 per business.
Windfall tax on the profits of energy firms extended until 2030 and increased to 38%.
ECONOMY
The Office for Budget Responsibility (OBR) expects inflation the budget to push inflation up slightly in 2025 to around 2.6% before falling back in line with the Bank of England’s 2% target. This could have a short-term impact on interest rates, which may drop more gradually as a result.
UK economy predicted to grow by 1.1% in 2024, 2.0% in 2025, 1.8% in 2026, 1.5% in 2027, 1.5% in 2028, and 1.6% in 2029. This is higher it predicted after the April budget for 2024 and 2025 but lower for the following three years. The figures for April were 0.8% in 2024 and 1.9% in 2025. This will be followed by growth of 2% in 2026, 1.8% in 2027 and 1.7% in 2028.
In her first budget, Rachel Reeves has leaned heavily on the Office for Budget Responsibility (OBR) to support her projections. She explained that some recent changes in the forecasts for growth come from what she says was outdated information provided by the previous government. According to the OBR, they didn't have all the details they needed for their last forecast, which could have led to a “materially different” outcome if they had. Unsurprisingly, this claim was quickly challenged by Rishi Sunak, speaking on behalf of a visibly unsettled Jeremy Hunt.
As we learn more about the new budget’s details, we’ll be diving into what these changes could mean for you. If you are subscribed, expect a detailed report from us soon in your inbox—stay tuned!
If any questions pop up in the meantime, please reach out. We're here to help!
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