Last year Chancellor Rachel Reeves delivered the first Budget of the new Labour Government. Expected to be a significant fiscal event, it had been the subject of much speculation. We take a closer look at the impact for insurance brokers.
Employers’ national insurance contributions (NICs)
Perhaps the most significant changes were those made to employers’ NICs. From 6 April 2026, the rate will increase from 13.8% to 15%. Not only that, the threshold at which employers start to pay will reduce from £9,100 to £5,000 pa.
The rate increase, coupled with the reduction in the threshold, means brokers will see an increase in the costs of employing staff.
It’s worth noting the allowance employers can use to offset their NIC liabilities will go up from £5,000 to £10,500 pa, and this will now be available to all employers. But in many cases, this is a small contribution to the increased costs for brokers.
Capital GainsTax (CGT)
A possible hike in the CGT rate drew the most attention in the run up to the Budget. It will no doubt be a relief to business owners that the increases were not as high as some were speculating.
From 30 October (Budget Day), the lower rate of CGT increased from 10% to 18% and the higher rate from 20% to 24%.
Many brokers are owned by those who work in the business, whether founders or employees. These individuals will continue to benefit from a lower rate of CGT on the sale of their business when compared to income tax rates, albeit at the higher rates of 18% and 24%.
Business Asset Disposal Relief (BADR) will also still be available. BADR means those who own qualifying business assets can benefit from a lower rate of CGT. This is commonly available where a person owns all or part of the business in which they work, often with a minimum holding percentage and time period.
The current BADR rate is 10% and the lifetime limit is £1m. This lifetime limit will remain unchanged, but the rate applicable to qualifying gains will go up to 14% from the 6 April 2025 and 18% from 6 April 2026.
There was an increase in activity in the run up to Budget Day, with brokers looking to sell their business before any changes to CGT were announced.
There has been some additional interest from business owners looking to complete transactions before 5 April 2025 to ensure BADR at the lower rate of 10%. However, we have not yet seen the level of increased activity which we experienced before budget day. This is perhaps because the increase to BADR does not affect all business owners and the relief is only available on the first £1m of qualifying gains.
Employee share schemes
Changes to CGT also impact the tax employees pay on equity incentives. This is particularly true for tax-advantaged schemes.
Small and mid-sized brokers will often offer key employees share options under an Enterprise Management Incentives (EMI) scheme. This means they can benefit from lower CGT rates on any increase in value of the shares.
With the rate for CGT staying below income tax, this will remain a tax efficient way of rewarding employees. And all the more attractive since the increase in employers’ NICs to 15%.
Inheritance Tax (IHT) and Business Property Relief (BPR)
There are also changes for IHT from 6 April 2026, with a cap on BPR of £1m being introduced (a joint cap with agricultural property relief).
Currently, BPR applies to qualifying business assets and provides 100% relief from IHT. The change will mean that where the value of qualifying assets exceeds this cap, relief will only be available at 50%, creating an effective rate of 20% on this excess.
From this date, a family-owned broker with a value over £1m may now be chargeable to IHT if left to children on death. Before this change, families would expect to pay no IHT with the business qualifying for BPR at 100%.
We may see people passing on businesses before the cap comes in from 6 April 2026, or they may choose to do so earlier in their life. Gifts made in life usually fall outside IHT after seven years.
So, it’s worth businesses planning ahead for what these changes may mean, so that they are as well prepared as possible.
For more information on how the new Budget may affect your insurance intermediary, please contact Tom Golding.
