The time has finally come. A historic moment with Chancellor Rachel Reeves delivering her first Budget as the UK’s first female Chancellor.
It is nearly four months since Labour won the election of 4 July, and for much of that time, the domestic political headlines have been filled with frenzied speculation regarding significant tax raises in the Budget, a narrative that the Chancellor has not sought to change.
The item most likely to grab headlines is the increase in National Insurance contributions, and the pre-Budget discussion as to whether this breaches the Manifesto commitments to not increase National Insurance, where the Chancellor confirmed that this commitment only extended to Employee costs. However, many studies support that ultimately, it is employees who bear the burden of charges on the employer, through resultant lower wage settlements. Expect this argument to run and run.
Similarly, the headline grabbing changes to Inheritance Tax will give concerns to many. A cap of £1m has been brought into APR and BPR, and inherited pensions are also in scope from 2027. For as long as only 6% of estates fall within the charge to Inheritance Tax, the coverage of the restrictions may be disproportionate to the number impacted.
There is perhaps some relief that CGT changes have not gone as far as they could have done with an increase to 18% for the lower rate, and 24% for the higher rate from 30 October 2024. In addition, BADR has not been abolished, but there will be an increased rate of 14% applying from April 2025 and 18% from April 2026.
Finally, there is some further welcome news that the freeze on Income Tax and National Insurance thresholds will not be extended beyond 2028, perhaps giving some compensation especially to those pensioners missing out on the winter fuel allowance.
With the first Budget of a new government traditionally being the “noisiest”, perhaps we can now look forward to a calmer 12 months.
