Wednesday 30 October: Today, the Chancellor of the Exchequer Rachel Reeves presented her much-anticipated Autumn Budget, the first from a Labour government in over 14 years. She described it as the “most consequential” in two decades, marking a significant shift in economic policy toward increased public spending and capital investment.

Funded by £40 billion in new taxes and increased borrowing, this Budget is the largest tax-raising initiative in a generation. Reeves aims to balance the budget by 2029-30 through her “stability rule,” eliminating the need for borrowing for day-to-day expenses thereafter.

Key announcements include a 6.7% increase in the minimum wage and a 1.2 percentage point rise in employer National Insurance contributions, raising the rate to 15% from April 2025. The payment threshold will drop from £9,100 to £5,000 annually, expected to generate £25 billion, impacting small businesses significantly.

The current 75% business rates discount will be reduced to 40%, capped at £110,000, continuing for retail, hospitality, and leisure sectors through 2025/26. While the Budget promises future improvements, immediate cost increases may hinder hiring and growth, challenging businesses in the near term.

Key takeaways from the Budget:

Business Taxes and Non-Dom Tax Status

• The current 75% discount to business rates – due to expire in April 2025 – will be replaced by a discount of 40% for businesses in the retail, hospitality and leisure industry – up to a maximum discount of £110,000. It still means that many businesses will see their business rates increase.
• Small business tax multiplier to be frozen next year to protect against inflationary pressures.
• Capping headline Corporation Tax at 25%
• The non-dom tax status will be abolished from April 2025, and a residence-based scheme will be implemented that provides incentives for investors and wealthy foreigners to come to the UK temporarily. Temporary Repatriation Relief will be extended by three years, and its scope will be broadened to attract inwards investment to the UK.

National Insurance

• A 1.2% rise in employer national insurance to 15% from April 2025. The level at which employers start paying NI for each employee has dropped from £9,100 to £5,000. This will be the chancellor’s biggest revenue raiser worth £25bn. Employment Allowance to claim money back from the National Insurance Bill will be raised from £5,000 to £10,500. This will reduce the NI bill of every small business by up to £5,100 per annum.
• Income tax and employee National Insurance Contribution thresholds will be uprated in line with inflation after the current freeze ends in 2028.

Minimum Wage

• The minimum wage will be increasing by 6.7% to £12.21 from April 2025, while those aged 18-20 will get a 16.3% bump to £10 an hour.

Capital Gains Tax

• The lower rate of capital gains tax will rise from 10 per cent to 18 per cent, and the higher rate from 20 per cent to 24 per cent.
• Business asset disposal relief will rise from 10% to 14% in April 2025, before rising further to 18% from 2026. A lifetime limit for business asset disposal relief will remain at £1 million.
• Carried interest tax rate will be raised to 32% from 28%.

Alcohol

• Alcohol duty will increase in line with the Retail Price Index (inflation) from February next year, equivalent to a 2.7% increase.
• Draught duty cut by 1.7%, taking a penny off pints in pubs.

Tax Free Shopping

• No commitment to re-introduce tax-free shopping.

Inheritance Tax

• The freeze on inheritance tax thresholds will be extended by two years to 2030, however pensions will now be subject to the tax. Agricultural and business property relief will be scrapped on assets over £1m.

Transport

• Fuel duty will be frozen next year and the 5p cut will be retained for a further year.
• Air passenger duty for private jets will increase by 50%.

Crime and Rough Sleeping

• Effective immunity for low-value shoplifting will be scrapped and there will be additional funding for tackling organised gangs that target retailers.
• The Chancellor of the Exchequer has announced £230m to tackle homelessness and rough sleeping

Local Government

• Local authorities will receive £1.3bn of additional grant funding “to deliver essential services”
• The government has doubled down on its effort to “get Britain building”, by making a commitment to hire more planning officers and investing an extra £500 million in its affordable homes programme.

If you have any questions regarding how the Budget announcement will affect your business, contact Interim Head of Public Affairs, Antonia Stratford antonia@holba.london.