This week saw the first Labour Budget in over a decade, and the first ever delivered by a female Chancellor.
Many of the announcements did not come as a surprise whilst some others did. Not all of the changes will apply directly to businesses, so below we have broken down the main points and their likely impact on your business:
Employer’s national insurance (NI)
- From April 2025, employer’s NI will rise from 13.8% to 15%, and the threshold to start making payment will fall from the current £9,100 to £5,000.
- The NI Employment Allowance – the amount allowed by smaller, qualifying business to be deducted from their employer’s NI bill – will more than double from £5,000 to £10,500, meaning that most of the burden will fall to medium and larger businesses.
- The rate at which employee’s national insurance applies is unchanged.
Corporation Tax (CT)
- The main rate of CT – the tax charged to companies on their taxable profits over £250k – will stay at 25% until at least the next election.
Income tax
- There was no change to any of the tax rates applied to income, but from 2028 onwards the tax bands will increase in line with inflation. This is designed to prevent more people being dragged into the higher brackets as their incomes and wages rise.
Capital Gains Tax (CGT)
- On profit from the disposal of shares, the rate of CGT will increase from 10% to 18%, and from 20% to 24% for those on the higher rate.
- The CGT rates applicable for profits on the disposals of additional properties are not changing.
Inheritance Tax (IT)
- The thresholds for IT have been frozen for a further two years until 2030.
- Unspent pension pots, previously exempt, will be subject to the tax from 2027 onwards.
- Current exemptions that apply to the inheritance of farmland will be made less generous from 2026.
Wages
- From April next year, the minimum wage for over 21s will rise from £11.44 to £12.21 per hour.
- As part of a long term plan for a ‘single adult rate’, the rate for 18 to 20 year olds will rise from £8.60 to £10.
At the time of writing, only three days have passed since the Budget announcements, and there has already been analysis from the OBR saying that growth will not increase as promised, and several legal challenges are being launched against some specific changes, so we shall see how many of the announcements are fully implemented unaltered.