Chancellor Rachel Reeves has presented Labour’s first Budget since 2010, following the party’s ascent to power. She declared tax increases amounting to £40bn, which she claimed would restore public services and secure public finances. Below is a summary of the principal measures affecting individuals and small businesses.
Personal taxes
- The rates of income tax and National Insurance (NI) paid by employees, as well as the rate of VAT, will remain unchanged.
- The basic rate of capital gains tax on profits from selling shares is set to increase from 10% to 18%, while the higher rate will rise from 20% to 24%.
- The rates on profits from the sale of additional properties remain unchanged.
- The freeze on the inheritance tax threshold has been extended for an additional two years, up to 2030.
- The legal minimum wage for individuals over 21 will increase from £11.44 to £12.21 per hour starting in April.
- The wage rate for 18 to 20-year-olds will increase from £8.60 to £10, marking a step in the long-term strategy to transition to a “single adult rate.”
- The eligibility for the allowance provided to full-time carers has been expanded by raising the maximum earnings threshold from £151 to £195 per week.
- The stamp duty surcharge on second home purchases in England and Northern Ireland is set to increase from 3% to 5%.
- Basic and new state pension payments will increase by 4.1% next year, exceeding the rise in working-age benefits, due to the “triple lock” policy.
- The rate of interest payable on unpaid tax will increase from 6th April 2025 by 1.5% from 7.5% to 9%.
- From 1st January 2025, education services, vocational training and boarding services provided by private schools in the UK will be subject to the standard rate of VAT of 20%.
- Inherited pension pots will be taken for Inheritance tax calculations from April 2027.
Business taxes
- Starting in April 2025, companies will be required to pay National Insurance at a rate of 15% on salaries exceeding £5,000, an increase from the current 13.8% on salaries above £9,100, which is projected to generate an additional £25 billion annually.
- The employment allowance, designed to help smaller companies reduce their National Insurance liability, will increase from £5,000 to £10,500.
- The tax on profits from successful deals paid by private equity managers is set to increase from a maximum of 28% to a maximum of 32% starting from April 2025.
- Main rate of corporation tax, paid by businesses on taxable profits over £250,000, to stay at 25% until next election.
- The 100% First Year Allowance for qualifying expenditure on zero-emission cars and plant and machinery for electric vehicle charge-points have been confirmed for a further year for corporation tax and income tax purpose.
- Agricultural and Business Property Relief will allow certain agricultural and business assets to be passed on death, free of Inheritance Tax – 100% rate of relief will continue, but only for the first £1 million of combined agricultural and business assets. Thereafter, only 50% relief will apply, reducing the effective rate of Inheritance Tax on affected assets from 40% to 20%.
In Addition..
- The Vehicle Excise Duty for owners of new petrol cars, except for the most efficient ones, will double in the first year to promote the transition to electric vehicles.
- The 5p reduction in fuel duty on petrol and diesel, introduced by the Conservative government and set to expire in April 2025, has been extended for an additional year.
- The £2 cap on single bus fares in England will increase to £3 starting January.
- A new tax of £2.20 for every 10ml of vaping liquid will be introduced starting October 2026.
- Tax on tobacco to increase by 2% above inflation, and 10% above inflation for hand-rolling tobacco
- The tax on non-draught alcoholic beverages will rise by the higher Retail Price Index measure of inflation, while the tax on draught drinks will be reduced by 1.7%.
- The government is set to reassess the sugar tax thresholds for soft drinks and contemplate its expansion to include “milk-based” beverages.
Information are made available to you only as self-help tools for your independent use and are not intended to provide investment or tax advice. We cannot and do not guarantee their applicability or accuracy in regards to your individual circumstances. We encourage you to seek personalized advice from qualified professionals regarding all personal finance issues.