Rachel Reeves delivered her first budget on Wednesday and upheld the promise not to increase taxes on working people, with no changes to income tax, employee’s National Insurance, or Class 4 National Insurance.
There are balanced changes to employer’s National Insurance with the rate going up but the employer allowance more than doubling to £10,500. Director’s who are the sole employee of their company will lose out as will the largest employers.
There were no changes to relief on pension contributions so higher-rate tax relief remains in place for these.
The major changes, as many expected, were to capital gains tax and inheritance taxes where the impact will be felt by far fewer taxpayers.
Individuals
- Minimum wage to increase to £12.21 per hour from April 2025 for those aged 21 and over
- Minimum wage to increase to £10 per hour from April 2025 for those aged 18 to 20 with a view to equalising these rates in the future
- Pensions ‘triple-lock’ maintained with an increase of 4.1% from April 2025
- Personal allowance remains frozen at £12,570 until April 2028 but freeze extension ruled out
- Higher rate threshold remains frozen at £50,270 until April 2028 but freeze extension ruled out
- Non-dom tax status to be abolished from April 2026
- No changes to savings starting rate allowance (£5,000) or personal savings allowance (£500 or £1,000 for lower and higher rate taxpayers).
Businesses & self-employed
- No change to Class 4 NIC which remains at 6%
- Employer’s NIC to increase from 13.8% to 15% from April 2025, with earnings threshold to drop from £9,100 to £5,000
- Employment allowance increases from £5,000 to £10,500 from April 2025
- The VAT registration threshold remains at £90,000
- Quarterly reporting to be extended to include businesses and landlords with turnover of £20,000 or more ‘by the end of this parliament’
Capital Gains tax
- Capital gains tax annual allowance to remain at £3,000 from April 2025
- Capital gains tax main rates to increase from 10% and 20% to 18% and 24%
- Capital gains tax residential property rates to remain at 18% and 24%
- Rates on disposals qualifying for Business Asset Disposal relief to increase from 10% to 14% from April 2025 and then to 18% from April 2026
Inheritance tax
- No changes to main Inheritance Tax thresholds or rates until 2030
- First £1m of Business and Agricultural property to receive 100% Inheritance tax relief from April 2026, with property in excess of £1m to receive 50% Inheritance tax relief
- Inheritance tax relief on Alternative Investment Market (AIM) shares to be reduced to 50% from April 2026.
- Inherited pension pots to be subject to Inheritance tax from April 2027
Companies & shareholders
- Dividend tax rates remain the same – 8.75%, 33.75% and 39.35%
- The tax-free dividend threshold remains at £500 from April 2024
- No changes to Corporation tax rates and thresholds: rates remain at 19% and 25%
Property
- Higher-rate Stamp duty Higher Rates of Stamp Duty Land Tax for purchases of additional dwellings and for companies purchasing residential property from 3% to 5% from 31 October 2024
- Draft legislation published for the abolition of advantageous tax reliefs for furnished holiday lets
- Capital gains tax rates for residential property unchanged
Other announcements
- Minimum wage to increase to £12.21 per hour from April 2025 for those aged 21 and over
- Minimum wage to increase to £10 per hour from April 2024 for those aged 18 to 20 with a view to equalising these rates in the future
- VAT to be applied to school fees from April 2025
- Plans to increase compliance staff at HMRC by 5,000 and debt management staff by 1,800
- Fuel duty to remain frozen
- 100% first year allowances for zero-emission cars extended to April 2026
- Duty on tobacco products to increase by 2% over RPI; duty on hand-rolling tobacco to increase by 12% over RPI
- Vaping products duty to be introduced from October 2026.
If you want to know more about how these changes may effect you or your business, get in touch with Greenwood Tax and Accounting today.
