As the dust settles, was the budget as bad as expected for business? Possibly not…

By Esther Hancock, Tax Director, DPC Accountants

Rachel Reeves delivered the most speculated budget for some years, given that the Labour Party prior to delivering the speech stated that there would be difficult decisions and tax rises would be necessary to plug the hole in the public finances.

The Chancellor certainly delivered on the tax rises. Was it as bad as the professionals were speculating? Possibly not. However, there are certainly some tax rises in this budget that will impact taxpayers and businesses.

Below is a summary of the key announcements:

National Insurance

• An increase in Employers National Insurance from 13.8% to 15% from 6^th April 2025.
• A reduction in the per employee threshold at which employers start to pay  National Insurance from £9,100 to £5,000 from 6 April 20215.
• Employment Allowance will increase from £5,000 to £10,500.

Capital Gains Tax (CGT)

• Increase the lower rate of CGT from 10% to 18% from 6^th April 2025.
• Business Asset Disposal Relief and Investors Relief (currently at 10% for £1milion of qualifying capital gains) will rise to 14% from 6 April 2025 and from 6 April 2026 will match the main lower rate of CGT and rise to 18%.
• The lifetime limit for Business Asset Disposal Relief will remain at £1million.
• These changes will immediately impact business owners planning to sell their businesses, with an increased tax bill of up to £80,000.

Stamp Duty Land Rate (SDLT)

• The Higher Rates for additional dwellings on the purchase of second homes, buy-to-let residential properties, and companies purchasing residential properties will increase from 3% to 5% from 31^st October 2024.

Inheritance Tax (IHT)

• The IHT Nil Rate Band threshold will be frozen at £325,000 until 2030.
• IHT Agricultural Property Relief and Business Property Relief will be subject to a £1million combined cap of 100% relief, values over this will only benefit from 50% relief, from April 2026.
• From 6 April 2027 most unused pension funds and death benefits will be included within the value of a person’s estate for IHT purposes, the pension administrator will be liable for reporting and paying any IHT due on the pensions to HMRC.
• The IHT changes will affect the succession of larger family farms and businesses.

National Minimum wage

• Increases to National Living wage by 6.7% from £11.44 to £12.21 per hour
• National Minimum wage for 18-20 year olds will rise from £8.60 to £10.00 per hour.

The changes will affect everyone despite the chancellor stating it was not a tax on working people. While the increases don’t directly affect the take-home pay of an average worker, businesses will have to pass on the increased wage costs and National Insurance in their pricing, which will ultimately affect the pocket of the consumer.

As part of the budget the Chancellor promised significant investment in NHS, schools, transport and infrastructure, Energy, local government, housing and the public sector.  The aim being “to restore economic stability and drive growth”.

If you would like any advice on how these changes affect you or your business, then please don’t hesitate to get in touch.