UK Budget: At A Glance

Well there we have it folks. A powerful speech from Reeves, but will it be seen as 'invest, invest invest'? Or will it be as #RishiSunak rebutted: 'up, up. up.'

Spending is going up. Taxes are going up. Borrowing is going up.

It was certainly a budget to remember. Here's some of the key takeaways:

National Insurance Contribution (NIC)

Changes From April 2025, employer NICs will increase by 1.2 percentage points to 15%. Additionally, the Secondary Threshold—at which employers begin contributing—drops to ￡5,000 per employee per year. Small businesses can offset this through an increased Employment Allowance of ￡10,500, now available across all businesses without the previous ￡100,000 cap, potentially impacting payroll costs significantly.

The previous government froze income tax and National Insurance thresholds in 2021 and then they did so again, after the mini budget, extending their threshold freeze for a further two years …

Having considered this issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people would take more money out of their pay slips. I am keeping every single promise on tax that I made in our manifesto. There will be no extension of the freeze in income tax and national insurance thresholds beyond the decisions by the previous government.

From 2028-29, personal tax thresholds will be uprated in line with inflation once again.

Capital Gains Tax (CGT) Rates

Capital Gains Tax rates are rising from 10% and 20% to 18% and 24%, respectively, starting October 30, 2024. Business Asset Disposal Relief and Investors’ Relief rates will increase incrementally to align with the main lower rate of 18% by 2026. These changes affect wealth management strategies and may impact advisory services for clients on asset sales.

Inheritance Tax Adjustments

Inheritance tax reforms will bring unused pension funds and death benefits into an estate's taxable value by April 2027. Additionally, agricultural and business property reliefs are restructured: 100% relief remains for the first ￡1 million of assets, dropping to 50% thereafter. This affects estate planning, especially for clients with significant agricultural or business assets.

First, the previous government froze inheritance tax thresholds until 2028. I will extend that freeze for a further two years until 2030 that means the first ￡325,000 of any estate can be inherited tax free, rising to ￡500,000 pounds if the estate includes a residence passed to direct descendants and ￡1m when a tax free allowance is passed to a surviving spouse or civil partner.

Second, we will close the loophole created by the previous government made even bigger when the lifetime allowance was abolished by bringing inherited pensions into inheritance tax from April 2027.

Finally, we will reform agricultural property relief and business property relief from April 2026. The first ￡1m of combined business and agricultural assets will continue to attract no inheritance tax at all. But for assets, but for assets over ￡1m inheritance tax will apply with a 50% relief at an effective rate of 20%,

This will ensure that we continue to protect small family farms with three-quarters of claims unaffected by these changes.

I can also announce that we will apply a 50% relief in all circumstances on inheritance tax for shares on the Alternative Investment Market (AIM) , and other similar markets, setting the effective rate of tax at 20%.

Stamp Duty Increase for Additional Properties

The Higher Rates for Additional Dwellings (HRAD) surcharge on Stamp Duty Land Tax will rise from 3% to 5% on October 31, 2024. This could deter additional property investments, impacting landlords and property businesses, and may increase demand for tax planning around property acquisitions.

Business Rates Relief

Eligible retail, hospitality, and leisure properties in England will receive a 40% discount on their business rates in 2025-26, capped at ￡110,000. For larger properties, sector-specific business rate multipliers will be introduced in 2026-27. This provides a tax planning opportunity for clients within these sectors to maximize relief benefits.