Now that Chancellor Rachel Reeves has delivered the first budget of this Labour parliament, we take a brief look at the main announcements below.
INCOME & EMPLOYMENT
National Minimum Wage
Announced the day before the budget, the following new rates will come into force next April:
Age 21 and over £12.21
Age 18 – 20 years £10.00
Apprentices £ 7.55
Employer’s National Insurance
Whilst there were promises not to increase income tax and national insurance for working people, employers are going to see employer’s national insurance contributions on worker’s salaries increase from 13.8% to 15% from April next year. Additionally, the threshold on which contributions will become payable will be lowered from £9,100 to £5,000.
Employment Allowance
In a bid to help smaller businesses deal with the additional liabilities above, the Employment Allowance will be increased next year from £5,000 to £10,500. We are assuming that the eligibility criteria remains unchanged (employer’s national insurance liabilities in the previous year were less than £100,000 and some restrictions on work in the public sector) these monies can be claimed through payroll software with effect from April 2025 and continue each payroll until the £10,500 has been deducted from contributions has been reached.
Income Tax
Income tax thresholds which have been frozen since 2022 and set to remain this way until 2027-28 will once again be uprated in line with inflation from 2028-29.
ESTATES & PROPERTY
Inheritance Tax (IHT)
The inheritance tax threshold freeze has been extended for a further two years to 2030. This enables the first £325,000 of any estate to be inherited tax free (rising to £500,000 if the estate includes a residence passed to direct descendants and £1million when the tax-free allowance is passed to a surviving spouse or civil partner). However, from 2027 inherited pensions will be brought into IHT calculations.
Property Relief
From April 2026, reforms will come in for both Agricultural Property Relief and Business Property Relief. Combined business and agricultural assets exceeding £1million will attract inheritance tax with 50% relief – an effective rate of 20%.
Stamp Duty Land Tax (SDLT)
The stamp duty surcharge on second homes will increase from 3% to 5% with effect from 31st October 2024.
Capital Gains Tax
The rates of tax payable on the disposal of chargeable assets such as shares that are not in a PEP or ISA, business assets, etc., are rising immediately from 10 to 18% for lower rate tax payers and from 20% to 24% for those on higher rate tax. These are the same rates that were applied to disposals of residential property in April this year. The lifetime limit for Business Asset Disposal Relief will remain at £1million but with rates increasing from the current 10% to 14% from April 2025 and 18% from April 2026.
MOTORING
Fuel Duty
The Chancellor announced a continuation of the freeze on fuel duty for 2025-26 and 2026-27.
Vehicle Excise Duty
Vehicle Excise Duty (aka Road Fund Tax) rates will be adjusted in April 2025 to increase the differential between fully electric and other fuel type vehicles.
BUSINESS
Corporation Tax
The Chancellor announced the introduction of a Corporation Tax Roadmap with a number of commitments including capping the headline rate of Corporation Tax at 25% for the duration of parliament.
Business Rates
Measures were announced to support the Retail, Leisure & Hospitality sectors by introducing two new lower business rates for these industries from 2026-27.
In the meantime, along with freezing the small business tax multiplier next year, the current 75% relief which was due to expire in 2025 will be replaced by a 40% relief up to a maximum discount of £110,000.
Value Added Tax (VAT)
Whilst no changes were announced to the thresholds or rates for VAT, it was confirmed that VAT will now be chargeable on private school fees with effect from January 2025.
We’ll provide further updates as details emerge, but in the meantime, we are here to work
alongside you and help you prosper so please do get in touch at any time.
Penn, Janet, Elaine, Lucy, Rebecca, Steph, James, Josh, Dawn, Becky, Nat & Leanne
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