Yesterday, the Chancellor delivered the first budget by a Labour Government since 2009.  We unpick the headlines.

Employers National Insurance

The biggest announcement of the budget was an increase in Employers National Insurance.

The rate is increasing from 13.8% to 15% and the threshold at which it is paid decreases from £9,100 to £5,000.

To small businesses the Employment Allowance has been increased from £5,000 to £10,500.  

The wage bill tipping point will vary from business to business depending on how much part time work their employees do but assuming an average salary of £30k per employee we calculate that businesses will be worse off if they have more than 6 employees.

Larger businesses will also benefit from changes to the Employment Allowance.  Previously businesses with an annual Employers NI bill of more than £100k were prohibited from claiming the allowance.  This restriction is being scrapped though the benefit will be a fraction of the increased tax paid.

Personal Tax

As promised the Chancellor did not increase personal tax rates or decrease thresholds.  In a surprise move she announced that the ‘fiscal drag’ caused thresholds staying frozen while inflation pushes up wages.  She announced thresholds would be increased in line with inflation from 2028.

Making Tax Digital for Self Assessment (the new online new system declaring and paying tax) is confirmed to be rolled out from April 2026 and it was announced that it would be extended to those whose incomes were above £20k by the end of this Parliament in 2029.

High Income Child Benefit Charge

The Chancellor confirmed that the charge will be applied to earners with income agave £60k from 2025-26 tax year.

Corporation Tax

Corporation Tax is also untouched with Standard Rate at 25% and Small Profits Rate of 19%.

Capital Gains Tax

As was widely anticipated Capital Gains Tax rates have risen for property that is non-residential.  

• Basic Rate increases from 10% to 18% 

• Higher Rate increases from 20% to 24%

Capital Gains on the sale of residential properties remain untouched at 18% and 24%.  The Annual Exempt amount remains at £3,000.

There were rumours that Business Entrepreneur’s Relief would be abolished.  This did not happen but the tax rate applying will increase from 10% to 14% from April 2025 an increase further to 18% after April 2026.

Stamp Duty Land Tax

Individuals who purchase additional residential properties such as second homes or buy-to-let properties currently pay an additional 3% SDLT.  This rate is increased to 5% for transactions on or after 31st Oct 2024.

Inheritance Tax

The freeze on the inheritance tax threshold of £325k is extended to 2030.  From 2027 inherited pension pots will be subject to tax.

Minimum Wage

The National Living Wage will increase by 6.67% to £12.21 from April 2025.

VAT on Private School Fees

The planned introduction will go into effect from 1st Jan.

Business Rates

The Chancellor announced permanently lower rates for from 2026-27 and until then 40% relief up to a maximum of £110,000 for the retail, hospitality and leisure sector..

Conclusion

By the Chancellor’s own admission this budget will hit businesses and especially those businesses through the rises in Employers NI and Minimum Wage.

We recommend everyone with a payroll of more than 6 people to start to plan for the effect on their business. A great place to start would be our free budgeting webinar: https://co-accounting.co.uk/events/introduction-to-budgeting-5-november