It seems a long time since the Budget was announced and after weeks of speculation and crystal ball gazing, Rachel Reeves has delivered, what she says is a Budget aimed at rebuilding the credibility of the economy and protecting working people. Disappointingly, business owners don’t appear to fall within the definition of working people with many of the changes increasing business tax costs.
Other changes will affect those making capital gains and non-doms living in the UK.
We’ve summarised the changes below and we’ll shortly be issuing more detailed papers…
Tax changes
- From April 2025, the National Living Wage will rise by 6.7% to £12.21 per hour, worth around £1,400 per year for a full-time worker.
- The National Minimum Wage for 18-20 years olds will increase by 16.3% to £10 per hour.
- Capital Gains Tax (CGT) will see the lower rate increasing from 10% to 18%, and the higher rate increasing from 20% to 24%. However, CGT on residential property remains unchanged at 18% and 24%.
- Business Asset Disposal Relief (BADR) maintained at £1m, however the 10% rate for 24/25 rises to 14% in 25/26 and 18% in 26/27.
- Employers will see an increase in NIC by 1.2 percentage points, to 15% from April 2025, with the threshold decreasing (at which NIC becomes payable) from £9,100 to £5,000.
- There will be an increase in Employment Allowance from £5,000 to £10,500.
- The Inheritance tax threshold will be frozen until 2030, with inherited pensions to be included from April 2027
- APR/BPR to be restricted to £1m from 2026, above £1m to receive 50% relief
- There is to be 50% IHT relief for AIM and similar shares.
- The Non-Domiciled tax regime is to be abolished from April 2025, with a new residence scheme to be introduced.
- As pre-announced VAT at 20% will be levied on private school fees from 1 January 2025, with business rates to be removed
- Stamp Duty Land Tax (SDLT) will see the surcharge rise from 3% to 5% on second homes from 31 October 2024.
- The main rate of Corporation Tax to be maintained at 25% through to the end of this Parliament. Full Expensing and Annual Investment Allowance maintained at current rates. A corporation tax roadmap to be published today.
- Business rates – existing 40% on business rates for the retail, hospitality and leisure industries will continue in 2025/6 up to a cap of £110,000 per business.
- Electric cars incentives to remain in place until 2028.
- Fuel duty is frozen until 25/26 representing a saving of around £59 for an average driver.
- Enterprise Investment Scheme (EIS) to remain until 2035.
- The energy profits levy is to increase from 35% to 38%
- The carried interest rate, which is payable on compensation received by general partners of private equity and hedge funds etc. is to increase to 32% from April 2025
- Duty on tobacco is to rise with RPI
- A cut of 1.7% in alcohol duty on draught products below 8.5%, meaning an average ABV strength pint will pay 1p less in duty
- Air Duty will be increased by no more than £2 per person per flight, for an economy class short haul flight, compared to an increase of 50% on private jets (equivalent to £450 per passenger)
Spending
- There is to be funding for those affected by the infected blood scandal and the post office Horizon scandal
- Skills England will be consulted upon with a wide range of partners to ensure that it is meeting the needs of employers, providers and learners, to secure good value for money
- The National Wealth Fund will see an investment of £70bn.
- The HMRC will be modernised with new technology and staff to crack down on tax avoidance scheme promoters and tax evasion.
- There will be ‘Get Britain Working’ white paper released to table those who are economically inactive
To discuss how these wider changes may have an impact on your business please contact one of the team at BHP LLP.
