The first budget delivered by a Labour Chancellor in 14 years, and the first ever by a woman, took place this week.

Some analysts suggested that Rachel Reeves had deliberately boxed herself in with manifesto pledges not to increase individual rates for income tax, national insurance and VAT. 

So what changes have been made and what does it mean for you and your business going ahead into 2025 and beyond?

National Insurance Contributions (NICs)

Employer’s national insurance contributions have been raised to 15% as had been expected but the increase was combined with a lowering of the threshold for employer’s national insurance from £9,100 to £5,000. 

In addition, the employment allowance was more than doubled from £5,000 to £10,500. According to government calculations this will mean an estimated 865,000 employers will pay no NICs next year while one million more will be paying the same or less than previously.

This is expected to raise £20 billion, the largest amount of any of the announced changes.

Capital Gains Tax (CGT)

The higher rate of Capital Gains Tax has been raised to 24% from 20% with the lower rate increasing to 18% from 10%. 

This has been combined with closing NHT loopholes, bringing inherited pensions into IHT from April 1st 2027 along with a pledge to reform agricultural property relief. 

The “non-dom” tax regime will be replaced in 2025 with a new residence-based scheme “with intentionally competitive arrangements for those coming to the UK on a temporary basis.”

Business Asset Disposal Relief (BADR)

Despite some speculation that this could even be discontinued entirely, BADR remains at 10% for the time being but will rise to 14% from April 1st 2025 and then again to 18% from the financial year 2026/27. 

Unfrozen personal tax thresholds

Defying pre-Budget predictions, the Chancellor decided against extending the freeze on personal tax thresholds for a further two years, instead announcing that from 2028 to 2029, personal tax thresholds will be updated in line with inflation. 

Almost as an aside, she confirmed that the Autumn Budget would now be the only one that would contain any tax changes, giving businesses and their accountants an element of stability. 

Business rates

With business rates from 2026/27 being a major source of concern for owners and directors, the Chancellor announced two permanently lower tax rates for retail, hospitality and leisure properties. 

She announced a new 40% relief on business rates for the retail, hospitality and leisure industry in 2025/26 up to a cap of £110,000 per business. This replaces the Retail, Hospitality and Leisure business rates relief scheme which offered a 75% relief which will end on March 31 2025. 

The rateable value of a business property is calculated by using the multiplier. A property worth £51,000 or lower would use the small business multiplier which has been frozen for another 12 months.

Corporation Tax

No changes to Corporation Tax were announced. 

If a business has profits of £50,000 or less they’re liable to pay a small profits rate (SPR) of 19%. Any profits between £50,000 and £250,000 will be charged at a higher rate of 25%.

Marginal relief is offered to make this an incremental increase to soften the impact.

Full capital expensing for businesses will stay in place – meaning that every £1 a business invests in IT, plant or machinery can be deducted in full from taxable profits.

Wages

The National Living Wage will rise by 6.7% from April 2025 when the following will apply:-

  • £12.21 per hour for employees aged 21 and over (up from £11.44)
  • £10.00 per hour for employees aged 18 to 20 (up from £8.60)
  • £7.55 per hour for employees aged 18 and under and/or apprentices (up from £6.40)

Additional tax measures

  • Fuel duty frozen at 5p for another year
  • Further investment and modernisation of HMRC announced
  • Increase on energy profits levy on oil and gas companies to 38%
  • Alcohol duty rates on non-draft products increases in line with RPI from February 2025. Duty rates on draught products will be cut by 1.7% – the equivalent of a penny off a pint
  • Air passenger duty increased by a further 50%
  • Increasing capital gains rates on carried interest to 32%
  • Increasing the stamp duty land tax surcharge on second homes to 5%

The Chancellor said she intended to “fix the foundations to deliver change” based on the state of public finances she has inherited. 

She continued: “This government was given a mandate to restore stability to our economy and to begin a decade of national renewal, to fix the foundations and deliver change through responsible leadership in the national interest.”

While staff might be celebrating a pay rise, the picture is more mixed and complicated for business owners and directors. 

There will be advantages and disadvantages depending on your sector and circumstances but the one constant everybody is going to have to contend with is an aggressive and now better funded HMRC with a fresh remit from the Chancellor to continue to pursue outstanding arrears.

If you’re worried about Budget changes making life harder for your firm or how you can stretch yourself even further, get in touch with us today. 

We offer a free initial consultation to discuss your specific circumstances with one of our expert advisors. They’ll then be able to talk you through the options available to you based on your situation and where you want to be in 2025. 

The earlier you reach out, the more choices and flexibility you’ll generally have so don’t wait for these changes to come in – act now before your options begin to narrow.