Wednesday's budget saw Chancellor Rachel Reeves vow to exclude 'working people' from tax hikes, but business owners, pension holders and investors will see big changes, we've analysed how our clients could be affected by these changes.
Business owners:
National Insurance and minimum wage hikes
For business owners, the Chancellor announced a slashing of the threshold at which employers begin making NICs from £9,100 to £5,000 from April 2025. She also used the Budget to hike the rate at which employers pay NICs by 1.2 per cent to 15 per cent.
If you're an employee your likely to be unaffected in the short term, however these tax changes are likely to have a knock-on impact in the longer term.
Alongside these changes to NICs, employers will need to consider the impact of increased wages from April next year after Ms Reeves' announced increases to both the National Living Wage and National Minimum Wage.
Investors and entrepreneurs:
Capital Gains tax hiked
The lower rate of capital gains tax will rise from 10 to 18 per cent and the higher rate of 20 per cent to 24 per cent.
CGT is charged on profit from selling an asset that has increased in value, such as stocks that are not held in an ISA, or a second home. The tax applies to individuals, but also to company owners, partners in a business, and self-employed people, among others.
Ms Reeves said the relief for people selling their businesses will be held at 10 per cent this year, rising to 14 per cent in 2025 and 18 per cent in 2026.
The lifetime limit for business asset disposal relief will stay at £1 million.
The Chancellor said that, despite the rises, the UK will still have the lowest CGT rate of any European G7 economy.
Ms Reeves said: 'We need to drive growth, promote entrepreneurship, and support wealth creation ... while raising the revenue required to fund our public services ... and restore our public finances.'
Parents with children at private schools:
VAT Exemption axed
Starting in the new year, fee-paying schools will no longer be exempt from VAT as the government looks to fund 6,500 extra teachers for state schools. This will cost £3,300 to parents paying the annual average of £16,656.
Currently, independent schools do not have to charge 20 per cent VAT on their fees because there is an exemption for the supply of education. French and German ambassadors to the UK have already called for international students to be excluded from this increase.
Pensioners
Pensions become liable for inheritance tax for the first time
From 2027, the value of pensions will be included in your Estate when you die. The Chancellor has also closed several IHT tax loopholes that investors, family business owners and farmers enjoy, making it more difficult to pass money down to the next generation. This includes reform to agricultural property relief and business property relief.
From April 2026, the first £1million of combined business and agricultural assets will continue to attract no inheritance tax at all.
But for assets over £1million, the Chancellor said inheritance tax will apply with a 50 per cent relief at an effective rate of 20 per cent. Families can still pass on up to £325,000 after death free of inheritance tax – known as the nil-rate band.
Millionaires:
Non-Dom axe confirmed
Ms Reeves confirmed that the Government will abolish the non-dom tax regime from April 2025.
She said: 'In our manifesto we made a number of commitments to raise funding for our public services.
'First, I have always said that if you make Britain your home, you should pay your tax here.
'So today, I can confirm, we will abolish the non-dom tax regime and remove the outdated concept of domicile from the tax system from April 2025.'
Second home owners:
Stamp Duty rise for second homes
The Chancellor announced, from as soon as this week, those purchasing additional properties will have to pay a 5 per cent stamp duty surcharge. This is a two percentage point increase from the current level, with Ms Reeves qualifying that the extra cash earned by the Treasury would benefit other homeowners. Restrictions will also be announced on the Right To Buy scheme, which allows council house tenants to buy their properties.
