The Chancellor has just delivered her first Budget as part of this Labour Government with the aim to raise 40 billion pounds of taxes with the main pinch being for businesses and higher rate taxpayers as the government aim to provide relief to UK households through wage increases and improved access to healthcare.
Please see below a summary from Neil Kellaway, Practice Manager at ForeTwo Accounting, on the key highlights.
Employers National Insurance (NI) Thresholds increase by 1.2% to 15%. In addition, there is a reduction in the secondary threshold from £9,100 to £5,000 per year, with effect from April 2025.
Therefore, meaning for a sole Director with a salary of £12,570, the Employers NI would increase by £615.
Employment Allowance on a positive note, which reduces the employers NI liability, will increase from £5,000 to £10,500, helping businesses with multiple employees manage their NI costs.
There will be no change to employee NI or income tax rates. Also confirmed was that there will be no extension on the freeze on these thresholds, meaning that from 2028/29 these thresholds will be updated in line with inflation.
National Minimum Wage will rise in April 2025, with rates for over-21s increasing from £11.44 to £12.21 per hour. Those aged between 18-20 will see a rise from £8.60 to £10 per hour.
Those aged 16 & 17, but also eligible apprentices under 19 or those over 19 in the first year of an apprenticeship will see a rise to £7.55 per hour.
Capital Gains Tax: Tax on share sale profits will increase from 10% to 18% for basic rate taxpayers and 20% to 24% for higher rate taxpayers.
On the sale of second residential properties, CGT rates will remain the same at 18% (basic rate taxpayer) & 24% (higher rate taxpayer).
Corporation Tax: The higher rate remains at 25% for profits of over £250,000 until the next election with profits less than £50,000 still paying 19%.
Business Asset Disposal Relief (BADR): previously known as entrepreneurs’ relief has Increased from 10% up to 14% from April 2025, then up to 18% from April 2026.
Inheritance Tax: Frozen thresholds extended to 2030, meaning no changes for longer and maintaining at £325,000 tax free.
At present, any money saved in a pension does not count towards this but, from April 2027, inherited pensions will be included. This is likely to bring more estates into the inheritance tax net, owing to pension savings that have not been spent before somebody dies.
The government says this could affect 8% of estates. Until now, various exemptions have allowed certain types of property, such as farms and family business assets, to be disregarded in terms of inheritance.
However, from April 2026, the rules will ensure some tax will be paid on assets of more than £1m.
‘Non-dom’ Status: ‘Non-dom’ status to be abolished from the tax system from April 2025.
Business Rates: 75% discount rates due to expire in April 2025 and will be replaced with a discount of 40% up to a maximum of £110,000.
Stamp Duty: Stamp duty on the purchases of second homes, buy-to-let residential properties, and companies purchasing residential property in England and Northern Ireland, will rise from 3% to 5% on Thursday.
Analysts say this could affect landlords’ willingness to buy more properties. If the supply of rental properties is squeezed, that could mean rents rise for tenants in the remaining homes.
Company Vehicles: This Budget will maintain existing incentives for EVs in company car tax from 2028. It will also increase the differential between fully electric and other vehicles in the first rates of Vehicle Excise Duty beginning in April 2025.
Again, after the U-turn, double cab pickups will lose their commercial vehicle status, meaning higher tax bills as these will fall as a benefit in kind (BIK). This is as part of the aim to encourage low emission choices.
Other Talking Points:
Carers Allowance: Earnings limit expanded from £151 to £195 per week to support more full-time carers.
Private School Fees: A much-discussed Labour policy has been formally announced, which means that VAT at the standard rate of 20% will be added to private school fees from 1 January 2025.
How much extra that means parents of privately-educated children will have to pay depends on the decision of individual schools. It is also highly unlikely they will now be able to avoid the extra fees by paying in advance.
Fuel Duty: This will be frozen next year, maintaining the existing 5p cut for another year.
Alcohol Duty: A cut to duty on draught alcohol by 1.7%, meaning ‘a penny off a pint in the pub’. Alcohol duty on non-draught products will increase in line with RPI from February 2025.
Bus Fares: The single bus fare cap applied to many routes in England will be raised to £3 in 2025, up from £2. Single bus fares in London with Transport for London will remain at £1.75 and those in Greater Manchester at £2, owing to a different funding system in those cities.
Smoking & Vaping: Tax on tobacco will increase by 2% above inflation, and 10% above inflation for hand-rolling tobacco.
A flat rate of duty will be applied on all vaping liquid from October 2026, at £2.20 per 10ml vaping liquid.
Summary:
Yesterday’s Autumn Budget is aimed at addressing the state of the country’s finances and the needs of the people.
With measures aimed at supporting people on low-incomes and investing to improve Public Services infrastructure, Government have set out to deliver short and longer-term plans to reduce the deficit and be a catalyst for a steady growth in the economy.
