The arrival of a new Government and Chancellor has introduced a fresh approach to the UK’s fiscal policies, impacting both businesses and individuals who may need expert legal advice to navigate upcoming changes.
In her first Budget, Rachel Reeves set forth a bold vision, declaring that her measures would lead to “an economy that is growing, creating wealth and opportunity for all.”
However, with economic growth projected to be slow and a suggested £22 billion gap in the public finances, her strategy emphasises the importance of investment and long-term stability over quick fixes.
For business owners and individuals, her decision to raise taxes by £40 billion, along with policy shifts aimed at strengthening economic stability, means adjusting to a more complex financial landscape, which brings its own nuances to existing and future plans.
Going into this we knew it was going to be a substantial Budget, but the measures confirmed will certainly be challenging for many, as her speech focused on:
Employment
Going into the Budget many employers suspected that they would be a target for the Chancellor, following Labour’s pledge not to increase Income Tax, VAT, and National Insurance for individual workers.
Unfortunately, their fears were confirmed with a hike in National Insurance Contributions (NIC), which will rise from 13.8 per cent to 15 per cent.
Compounding this, the per-employee threshold at which employers begin paying NICs will drop significantly, from £9,100 to £5,000 annually, further impacting budgets across businesses of all sizes.
At the same time, the National Living Wage (NLW) will increase by 6.7 per cent to £12.21 per hour and the National Minimum Wage (NMW) for 18-20-year-olds by a record 16.3 per cent to £10.00 per hour.
This shift towards a unified adult wage rate means employers should prepare for incremental increases as the Low Pay Commission aims to close the gap between the NMW and NLW rates in the coming years.
It is important that companies ensure their payroll processes remain compliant to avoid disputes and grievances from their team.
During her speech, Ms Reeves also confirmed the Government’s commitment to the first phase of the Plan to Make Work Pay, which aims to modernise the UK’s employment rights framework to align with today’s evolving work environment.
This legislation makes flexible working the default option, introduces a new right to bereavement leave, and provides paternity and parental leave from day one of employment.
Women’s employment rights are also set to be strengthened with the introduction of enhanced dismissal protections for pregnant women and new mothers, supported by measures in the Employment Rights Bill.
Capital Gains Tax
Starting today, the main Capital Gains Tax (CGT) rates are changing. The CGT changes are now as follows:
- Lower rate: Increases from 10 per cent to 18 per cent.
- Higher rate: Increases from 20 per cent to 24 per cent.
For those planning to sell a business or a substantial shareholding, it’s important to consider the revised rates for Business Asset Disposal Relief (BADR).
From 6 April 2025, BADR and Investors’ Relief CGT rates will rise to 14 per cent, reaching 18 per cent by 6 April 2026.
Additionally, the lifetime limit for Investors’ Relief will be capped at £1 million for all disposals from 30 October 2024 onward, aligning with the current limit for BADR.
This sudden tax deadline will likely prompt a rise in business sales as owners look to exit before these increases take full effect.
We expect to see more opportunities for mergers and acquisitions (M&A) activity, as well as management buyouts, creating a window for proactive buyers and investors.
Inheritance Tax
With significant changes looming, it’s more important than ever to proactively manage estates and regularly review and update wills to safeguard wealth for the next generation.
From April 2027, unspent pension pots will become subject to Inheritance Tax (IHT), impacting plans to pass down unused retirement savings. The Government is also scaling back key reliefs, limiting the full 100 per cent benefit of agricultural and business property relief to the first £1 million of combined assets, with relief dropping to 50 per cent beyond that – a move likely to affect family farms and businesses heavily.
Additionally, business property relief will be reduced to 50 per cent for shares “not listed” on recognised stock exchanges, such as AIM. While Income Tax rates will unfreeze from April 2028, IHT nil-rate bands will remain unchanged until 2030, adding to the urgency of carefully planning estates now.
Considering these changes, a proactive review of wills and estate plans is essential to mitigate tax liabilities and protect family wealth.
Property and Construction
From the perspective of a property and construction lawyer, the recent Budget announcements signify notable changes for the property market, particularly for first-time buyers and main home purchasers.
By increasing the rate of Stamp Duty Land Tax for Additional Dwellings from three per cent to five per cent for second homes, buy-to-let properties, and corporate residential purchases, the Government hopes to free up the market for people looking to buy their primary home.
The Government’s commitment to increasing affordable housing is clear, with an extra £500 million allocated to the Affordable Homes Programme and ambitious plans to build 1.5 million homes over the current Parliament.
Initiatives like the National Planning Policy Framework, the New Homes Accelerator, and the potential introduction of a ‘brownfield passport’ promise to streamline development approvals, particularly on brownfield sites.
Further, the £46 million boost for planning authority recruitment and training aims to address planning system delays, which are currently a significant barrier to housing development.
This injection of skilled personnel should help accelerate approvals on large sites and provide greater capacity to meet wider economic growth goals.
Final Thoughts
Whilst the Budget doesn’t often deliver direct changes to key laws, it often has a significant impact on markets and appetites for certain activities that may require legal advice.
In Ms Reeves’s first Budget she has certainly left a lot of measures that will affect the lives of businesses and individuals alike.
If you would like legal advice in relation to any of the matters covered by our summary, please get in touch.
To read the full Autumn Budget document, please click here.