This is the first budget under the new labour government and it is the first budget to be delivered by a female chancellor – so history in itself!
There have been a lot of rumours over the last few weeks about various things that will be going up but not everything has delivered and there are some other curve balls
The things that are not changing:
- Income Tax, VAT, and most National Insurance rates are not changing
- Personal Allowance thresholds for Income Tax is being held in line with the previous government timeframe. But it will be increased in line with inflation from 2028/29 tax year.
- Main rate of corporation tax at 25% on profits over £250,000 will be held until the next election in 5 years
And now the things that have changed…
National Insurance
- There has not been an increase in the employee or self employed rates of National Insurance, but there has been an increase for employers from 13.8% to 15%.
- There has also been a reduction in the secondary NI threshold for when employers NI is needed to be paid from. Currently Employers NI is paid on income over £9,100. This will be reduced to £5,000. This will apply from April 2025.
- However as a counter act to this, the Employers NI Allowance is being increased from £5000 per year to £10,500 per year.
Capital Gains Tax
- Capital Gains Tax rates will be increased. The lower rate will be raised from 10% to 18% and the higher rate will rise from 20% to 24%. This is to get them in line with the Residential property rates which have remained unchanged.
- Business Asset Disposal Relief (BADR) and Investors Relief will rise gradually to 14% from April 2025 and to 18% from April 2026.
Stamp Duty
The stamp duty surcharge which is paid on second home purchases in England and Northern Ireland will go up from 3% to 5%. This increase will also be applied to businesses purchasing a residential property.
Inheritance Tax
There haven’t been any significant movements with inheritance tax – there was speculation that there would be! All of the current Nil Rate Band Thresholds are being held, as is the Residential Nil Rate Band until April 2030. However, from April 2027, inherited pension pots will be subject to inheritance tax. This is to remove the benefit of using a pension as a tax planning tool rather than their original purpose which is to fund retirement. There are also restrictions being put in place for Agricultural Property Relief and Business Property Relief for estates worth more than £1million.
Minimum Wage & Benefits
- Minimum Wage for over 21’s will rise from £11.44 to £12.21 per hour from April 2025.
- The rate for 18-20years to go from £8.60 to £10.00 per hour with a longer term plan to move to a single rate for all adults
- The maximum earnings threshold for full time carers by increased from £151.00 to £195 per week which means a full time carer can now earn £10,000 per year without having an effect on this benefit.
Smoking, Alcohol & Fuel
- New tax of £2.20 per 10ml of vaping liquid will be introduced from October 2026
- Tax on tobacco will be increased by 2% above inflation and 10% above inflation for hand rolling tobacco
- Tax on non-draught alcoholic drinks to increase by higher than RPI, but tax on draught drinks will be cut by 1.7%
- The temporary tax cut of 5p on fuel has been extended to 22nd March 2026.
VAT on private school fees
As was mentioned in the labour manifesto leading up to the election, the new government have delivered their promise that as from January 2025 20% VAT will be charged on education and boarding services provided by private schools.
As always, the spoken budget only runs for an hour, but the printed version usually has additional things that are not initially mentioned. We have to wait for this to be released and we will advise if there is anything further that needs to be communicated.