A round-up of todays’ first Labour Budget from Chancellor Rachel Reeves, from Tax Partner Colin Hamilton...
Today’s Budget sees one of the largest increases in tax and spending in recent history. It represents the Labour governments vision of Big Taxes / Big Spending / Big Borrowing in response to a perceived £22B ‘financial black hole’ and the need to re-position the economy for the future.
Rachel Reeves has delivered a historic budget - Labour's first since 2010, the first ever from a female chancellor, and the biggest tax-raising fiscal event in more than 30 years.
Set against a very challenging economic backdrop, here’s an overview of announcements for businesses:
National Minimum Wage: to increase from April 2025 for over 21’s to £12.21 per hour an increase of 6.67%. 18–20-year-olds minimum £10 per hour (from £8.60). With effect from April 2025
Employers NIC: increase in rate from 13.8% to 15%. Chargeable on earnings from £5,000 (currently £9,100). Increase in Employment Allowance from £5,000 to £10,500 which will alleviate the increase in the NIC bill for smaller employers.
Capital Gains Tax: the rate of CGT within the basic rate band increases from10% to 18%. Higher rate increases from 20% to 24%. Both changes from 30th October 2024. Business Asset Disposal Relief lifetime limit retained at £1m. 10% rate to increase to 14% in 25/26 and to 18% in 26/27. Tax paid by private equity managers on share of profits from successful deals to rise from 28% to 32% from April.
Inheritance Tax: freezing of bands. APR/BPR to be reformed: £1m combined limit at 100% relief, 50% relief thereafter. Gifts of shares after 30/10/24 where donor dies within 7 years but after 6th April 2026 will have the new rates applied to the failed PET. Deaths before 6 April 2026 will have 100% relief available. From 6 April 2027 the value of a person’s unused pension fund will be included in the value of the Estate for IHT purposes.
Stamp Duty Land Tax: the surcharge for second residential properties will increase to 5% (from 3%) with effect from 31st October. This will also affect the acquisition of residential properties by companies – the flat rate of SDLT will go to 17% from 15%.
Income tax bands: no changes will be made until 28/29 when the bands will increase by inflation (expected to be 1.2%).
Corporation Tax: Main rate of Corporation Tax on taxable profits over £250K to stay at 25% until next election.
Business Rates: rates relief extended for the retail, hospitality and leisure industries until 25/26. But the relief will be cut from 75% to 40%, which could see many businesses experiencing a doubling of business rates.
In conclusion during the election, Labour was talking about menial tax rises and spending commitments compared to what was announced today. To put it into context, this budget, in terms of tax and spend, is £74bn in spending by the end of this parliament, £41bn in tax rises. These are huge tax rises that were not in the manifesto, but will not come as a surprise to many.
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A round-up of todays’ first Labour Budget from Chancellor Rachel Reeves, from Tax Partner Colin Hamilton... Today’s Budget sees one of the largest increases in tax and spending in recent history. It represents the Labour governments vision of Big Taxes / Big Spending / Big Borrowing in response to a perceived £22B ‘financial black hole’ and the need to re...
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