Chancellor Rachel Reeves has delivered Labour’s first Budget in 14 years.
Billed as a Budget to “fix the foundations and deliver change”, it includes a huge £40 billion pounds of tax rises, one of the biggest tax rising Budgets outside of a recession.
In what the Chancellor described were “difficult decisions on tax”, the announcements will certainly leave many business owners facing difficult decisions themselves with rises in the National Minimum Wage and National Insurance Contributions announced.
The key takeaways from today’s budget are:
– The National Minimum Wage for those aged 21 and over will rise by 6.7% from £11.44 an hour to £12.21 from next April. This is above the 5.8% increase recommended by the Low Pay Commission earlier this year. In addition, the National Minimum Wage will rise for 18-20-years old from £8.60 to £10. Apprentices will see the biggest increase, with hourly pay increasing from £6.40 to £7.55.
– Fuel duty will be frozen next year and the temporary 5p cut will remain for another year.
– Employers’ National Insurance Contributions (NIC) will increase 1.2% from 13.8% to 15% from 6th April 2025 while the threshold at which businesses start paying National Insurance on a workers’ earnings will be reduced from £9,100 to £5,000.
– The Employment Allowance will increase from £5,000 to £10,500 while the £100,000 threshold will be removed, expanding this to all eligible employees. The Chancellor says this means 865,000 employed will pay no NICs next year and over 1 million will pay the same or less as they do now.
– The lower rate of Capital Gains Tax (CGT) will rise from 10% to 18%, and the higher rate from 20% to 24%. CGT rates for Business Asset Disposal Relief and Investors’ Relief will rise gradually to 14% from 6th April 2025 and match the main lower rate of 18% from 6th April 2026, to allow business owners time to adjust to the changes.
– From 2026-27 there will be a permanently lower business rates multiplier for retail, hospitality & leisure (RHL) properties. Plus, the small business multiplier will be frozen and 250,000 RHL properties will receive 40% relief on bills, up to a cash cap of £110,000 per business.
– To help drive the transition to electric vehicles (EVs) the government is strengthening incentives to purchase EVs by widening the differentials in Vehicle Excise Duty First Year Rates between EVs and hybrids or internal combustion engine cars. The government is also maintaining EV incentives in the Company Car Tax regime and extending 100% First Year Allowances for zero emission cars and EV chargepoints for a further year.
– To support businesses to invest, the government is publishing a Corporate Tax Roadmap, which confirms a cap on the rate of Corporation Tax at 25%, the lowest in the G7, for the duration of the Parliament.
– Alcohol duty rates on non-draught products will increase in line with RPI from February next year (equivalent to a 2.7% increase). Duty on draft alcohol will be cut by 1p per pint.
– No extension of the freeze to income tax and National Insurance contribution thresholds beyond the decisions of the previous government. From April 2028, personal these tax thresholds will be uprated in line with inflation.
– The appointment of a Covid corruption commissioner to recoup billions of pounds lost to Covid fraud.
