On 30 October 2024, Chancellor of the Exchequer Rachel Reeves delivered the first full budget under a Labour Government since 2010. She announced taxes will be raised by £40bn, we have summarised the key changes that may affect you and your business below:
National Living/Minimum Wage
From April 2025 the National Living Wage (NLW) will rise by 6.7% from £11.44 to £12.21 per hour. The National Minimum Wage (NMW) for 18-20 year olds will also increase by 16.3% from £8.60 to £10.00 per hour. The NMW for apprentices up to the age of 19 in their first year of the apprenticeship will also increase from £6.40 to £7.55 per hour.
Employers National Insurance
Currently businesses pay a rate of 13.8% National Insurance on each of their employee’s earnings above £9,100 per annum. This will increase by 1.2% to 15% from April 2025 with the threshold being lowered to £5,000.
Following on from this, The Chancellor also announced an increase in the Employment Allowance from £5,000 to £10,500 per year. Previously, the Employment Allowance was only available for businesses with Employer National Insurance Contributions of £100,000 or less in the previous tax year. The £100,000 threshold will be removed from 6 April 2025.
Class 2 National Insurance
For those paying voluntary Class 2 National Insurance Contributions, the government will increase the rate from 6 April 2025 to £3.50 per week.
State Pension
The basic and new State Pension will increase by 4.1% in 2025/26. Which could see pensioners gain an additional £470 per year.
Capital Gains Tax
The budget saw an immediate increase in Capital Gains Tax (CGT) with the main rates rising from 10% and 20% to 18% and 24%. The residential rates of 18% and 24% remain unchanged. It was also announced CGT rates for Business Asset Disposal Relief (BADR) will rise to 14% from 6 April 2025 and then will match the main lower rate of 18% from 6 April 2026. In addition, the lifetime limit for Investors’ Relief will reduce from £10m to £1m with immediate effect.
Inheritance Tax
The Inheritance Tax (IHT) thresholds were previously frozen until 2028. It was confirmed in the budget that these threshold freezes will now remain until 2030.
The Government will reform Agricultural Property Relief (APR) and Business Property Relief (BPR) from April 2026. Currently APR and BPR give IHT relief on certain assets at either 50% or 100%. From 6 April 2026, the 100% relief will only be available on the first £1m of combined qualifying agricultural and business assets. With the remaining value of assets receiving 50% relief.
She has also announced that from April 2027 inherited pensions will be included within the value of the death estate and subject to Inheritance Tax.
Stamp Duty Land Tax
From 31 October 2024, the Higher Rates for Additional Dwellings surcharge on Stamp Duty Land Tax will increase from 3% to 5%. This will affect those purchasing second homes, buy-to-let residential properties and companies purchasing residential properties.
Double cab pick-ups
Double cab pick-ups (DCPUs) are currently classed as commercial vehicles and attract 100% tax relief. From 1 April 2025 for Corporation Tax and 6 April 2025 for Income Tax, DCPUs with a payload of over one tonne will be treated as cars for tax purposes. The existing capital allowances treatment will apply to those who purchase a qualifying DCPU before April 2025.
Business Rates
The government has proposed support to small businesses and the high street in England by freezing the small business multiplier and providing 40% relief on bills for retail, hospitality, and leisure (RHL) properties up to a cap of £110,000 in 2025/26.
In addition, from 2026/27 for RHL properties The Government will introduce lower business rates multipliers.
Fuel Duty
The Government will freeze Fuel Duty rates for 2025/26, saving the average car driver £59 in the year. The temporary 5p cut in fuel duty rates will be extended by 12 months, expiring on 22 March 2026.
The Government also confirmed that the current rates of Corporation Tax, VAT and Income tax will remain unchanged.
If you have any queries or would like to discuss how any of the above changes affect you, please get in touch.