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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
• Capital Gains Tax
• Inheritance Tax
• Property and Construction
• Final Thoughts

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.

A mix of measures have been suggested in the Employment Rights Bill which was recently published by the new Labour Government.

The majority of these measures, however, will not come into force for some time. The Bill is essentially an overview and much of the detail is not yet known. The majority of the provisions are either subject to consultation or require regulations to provide the detail.

As such there is only a limited amount of preparation for the new provisions coming into force that can be undertaken at present.

As expected, these provisions include the suggestion that unfair dismissal would become a day-one claim (a claim that you can bring without any specific qualifying period of service).

Currently, an employee must have 2 years’ continuous service to bring a claim for unfair dismissal, although this is reduced in some instances. The new day-one right will be subject to a probationary period. At present, there is no real detail of how this would work.

The Bill provides for details to be given by way of regulations (which have yet to be published). The Government has indicated that it is proposing a 9-month probationary period. It seems during this period a ‘lighter-touch process’ would apply. Although it appears that this will not apply in respect of redundancy dismissals and will be limited to capability or conduct-related dismissals.

In the Government’s publication Next Steps to Make Work Pay, it suggested that the process should include a meeting with the employee to discuss concerns about their performance. Although no further details have been given to date.

The Bill includes provisions to limit potential compensation for successful unfair dismissal claims during the probationary period. The government has committed to consulting on whether lower compensation should be awarded to claims brought in respect of unfair dismissal during the probationary period.

At present, it seems that these reforms are unlikely to take effect prior to Autumn 2026. As such, although employers need to be aware of the upcoming changes and will need to ensure their policies and systems are ready prior to the implementation, it will be a case of waiting for the regulations in order to be able to fully prepare for the change.

The Bill will introduce a right to guaranteed hours for zero-hours or low-hours workers reflecting the hours workers have worked during a reference period.  It is thought that this period may be 12 weeks.

A right to reasonable notice of shifts and to payment for shifts cancelled or curtailed at short notice has also been included in the Bill.

A consultation seeking views on how to apply these measures to agency workers commenced on 21 October 2024. There is likely to be a further consultation on the more general implementation of these measures.

Employers should begin considering how these measures will impact their business if they utilise zero-hours or low-hours workers.

It may be that some of those workers, on review, should be classified as part-time workers rather than zero-hours workers. It seems likely that it will be some time before these measures come into force.

The Bill amends the thresholds for when the need to collectively consult arises. The Government has said that it remains ‘committed to consult on lifting the cap of the protective award if an employer is found to not have properly followed the collective redundancy process’.

The Bill includes provisions which make dismissals unfair where the principal reason for dismissal is that an individual did not agree to an employer’s requested variation of their contract of employment.

There is a limited exception where the employer is in financial difficulty which is affecting or likely in the immediate future to affect the employer’s ability to carry on the business.

As a result of this a further consultation commenced on 21 October 2024: ‘Making Work Pay: Consultation on strengthening remedies against abuse of rules on collective redundancy and fire and rehire’. Employers should review the terms of their contracts of employment currently as if there is the need to consider amendments to the contracts of employment, it may be wise to consider these before the new provisions come into force.

The Bill removes the current waiting period of 3 days in respect of statutory sick pay. It also removes the current qualifying periods of employment for paternity leave and parental leave.

It includes provisions which will make flexible working requests harder for employers to refuse as employers will only be permitted to refuse on specified grounds (which is the current position) but also only if it is reasonable to refuse on those grounds.

The employer will need to explain why it believes that reason applies and why it considers it reasonable to refuse the request.

There are also numerous provisions in respect of trade unions which strengthen their position.

The provisions regarding unfair dismissal are likely to have a significant impact on many employers, particularly those with employees who have shorter periods of service.

Currently, it is not clear what the process will be to dismiss someone during that period but it appears that there will be some form of process.

Presently, so long as the employee does not have the benefit of a claim for automatic unfair dismissal, a discrimination claim or a claim that does not require the standard period of continuous service for an unfair dismissal claim, an employer can dismiss an employee at any point before they reach the continuous service requirement, without reason and without following any form of process as long as the employee is given or paid in lieu of their notice period.

Employers may wish to look to strengthen their recruitment processes to ensure as far as possible the correct employee is employed initially.

They may also need to keep more detailed records of any concerns regarding employees during the probationary period and go through a more formal process in respect of any performance concerns, although it will be necessary to review the regulations regarding this when they are published to ascertain exactly what is required.

At present, employers cannot do much more to prepare than review their processes as the requirements for the ‘light-touch’ process to be used during the probationary period are not yet known.

The change to unfair dismissal and those changes impacting zero-hours workers are likely to be the ones that impact the largest number of employers.

The Government estimates that approximately 9 million additional employees will be entitled to bring claims for unfair dismissal under the new rules. At present, however, it is a case of ‘watch this space’!