This was a Budget of big numbers …..not least of which was a £40 billion increase in taxes. On the other side, there was an announcement of a £22.6 billion increase in the “day-to-day health budget” aimed at bringing down NHS waiting lists and increasing capacity.
So what were the main changes that will affect the Healthcare sector?
Employer’s National Insurance
Of the £40 billion announced increase in tax revenue, £25 billion is expected to come from the changes to Employers’ National Insurance.
From April 2025, employer National Insurance contributions will increase by 1.2 % to 15%. The employee salary level at which employers start paying the contributions will come down, from the current £9,100 to £5,000. These measures combined are likely to significantly increase the wage bill for many employers. The Employment Allowance will increase from £5,000 to £10,500 to reduce some of the impact for some smaller employers, although this is not available for businesses with more than 50% NHS income
Increased National Living Wage
Employers may also be affected by the increase in the National Living wage from April 2025, when it will increase by 6.7% to £12.21 per hour.
For workers aged 18-20, the National Minimum Wage will increase 16.3% to £10 per hour.
Income Tax
The freeze on income tax thresholds will end in April 2028, after which the thresholds will once again start to increase in line with inflation.
Capital Gains Tax
From Budget day, 30th October, the main rates of CGT that apply to assets other than residential property increase from 10% to 18% for basic rate taxpayers and from 20% to 24% for higher rate taxpayers. This aligns the main rates of CGT with those already payable on residential property, to which there was no change.
Whilst Business Asset Disposal Relief was retained with the current £1m lifetime limit, the 10% tax rate will only apply for the remainder of this tax year. The rate will then increase to 14% for disposals made on or after 6 April 2025, and to 18% for disposals made on or after 6 April 2026.
Inheritance Tax
Whilst there was no change to the 40% rate or any reduction to the Nil Rate Bands as had been feared, the freezing of the bands at their current levels for a further two years, so now taking it through to 2030, will bring an increasing number of estates into paying IHT.
Probably of more immediate impact, though, is that, from April 2027, unspent pension funds and death benefits will be included in an individual’s estate for IHT purposes, unless left wholly to a spouse. Currently, pension assets are outside of IHT, so this could significantly impact the expected IHT liability.
Also, with the potential to significantly increase the expected IHT liability is the restriction that was announced to the twin reliefs of Business Property Relief (BPR) and Agricultural Property Relief (APR), taking effect from 6 April 2026. Whilst there had been some speculation that these valuable reliefs would be lost entirely, they have been retained, but from 2026, the 100% rate of relief will only apply for the first £1 million of combined agricultural and business property. For qualifying assets in excess of this, the relief will be restricted to 50%, giving an effective IHT rate of 20% on these assets.
The rate of BPR, which applies to shares and securities not listed on a recognised stock exchange, such as those listed on AIM, will reduce from 100% to 50% from April 2026.
Domicile
The “non-dom” status will be abolished from 6 April 2025, transitioning to a residence-based tax regime. This new system will require UK residents to pay taxes on worldwide income, removing the previous remittance basis of taxation.
It will also mean that an individual’s obligation to pay IHT will be based on their tax residence as opposed to their domicile status (which is broadly determined by where they were born).
There is expected to be some relaxation written into the rules for those who are only temporarily resident in the UK.
SDLT
From 31 October, the day after Budget day, the additional SDLT payable when purchasing additional dwellings will increase from 3% to 5%, which will impact second homes, buy-to-let properties, and company residential property purchases.
Spending on the NHS
There was a Budget announcement that the Department of Health and Social Care will receive £22.6 billion more in 2025-26 compared to 2023-24 as well as a £3.1 billion increase in NHS capital spending, aimed at modernizing facilities. This includes £1.5 billion for new surgical hubs and diagnostic facilities.
The Budget is likely to have a wide-ranging impact for those working in the Healthcare sector. If you would like to discuss further how the announcements may affect your personal finances, please get in touch with your usual BHP contact.
