TAX EXPERT REACTS TO CHANCELLOR REEVES' BUDGET

Andrew Wilson, Head of Tax at Dains Accountants gives his reaction to the budget delivered today by Rachel Reeves.

With increases in VAT, income tax and Employees’ National Insurance already ruled out, it was no surprise that the main targets were rises in Employers’ National Insurance, Capital Gains Tax and Inheritance Tax; the key question being how far and fast the Chancellor would push revenue raising in these areas.

Employers’ National Insurance is set provide the biggest contributor to Treasury coffers, even though the 1.2% headline rate increase fell short of most pre-Budget speculation.?This, along with the secondary threshold being cut to ￡5,000 and a 6.7% increase in the National Living Wage to ￡12.21 (together with consequential pressure on wage differentials) will inevitably impact on employment decisions.

Fears of aligning Capital Gains Tax rates with income tax sensibly did not materialise, with the 4% increase to the higher rate being at the lower end of expectation and its immediate introduction, rather than 6 April 2025, preventing a period of market distortion.?Business Asset Disposal Relief survived but with it being phased up to 18% from 6 April 2026, the ￡1m Lifetime Allowance will then only be worth ￡60,000.

Changes to Inheritance Tax from 6 April 2026 will limit the availability of 100% Business Property Relief and Agricultural Property Relief to the first ￡1m, with a 50% allowance thereafter.?Relief will also be limited to?50% on AIM market shares, making longer term inheritance tax planning of increasing importance.

The corporate tax regime hardly featured, with stability of regime being favoured over change.

Outside of the headline measures, the opportunity to make more radical changes to the tax system was not taken, with tweaks to existing rates and allowances the theme, rather than the introduction of any significant new tax incentives or regimes.

If you would like to discuss tax in further details please contact us on 0800 298 3899 or visit www.dains.com .

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