“…And the only way to drive economic growth… is to invest, invest, invest.” So said Rachel Reeves, early on in her first Budget on 30 October. Those who kept listening learned, however, that invest, invest, invest would only follow borrow, borrow, borrow and tax, tax, tax. On the borrowing front, the Office for Budget Responsibility now projects that the government will still be borrowing over £70 billion a year in five years’ time and will be paying more than £100 billion of debt interest every year from 2024/25 through to 2029/30. The tax figures are equally daunting, with the additional tax raised by the Budget totalling nearly £180 billion by 2029/30. There were three major tax highlights. Employer’s national insurance contributions (NICs) There were two major increases and one minor mitigation. From 2025/26: ■ The main rate will rise from 13.8% to 15.0%. ■ The secondary earnings threshold, below which no employer’s NICs are levied, will fall from £9,100 to £5,000 and be frozen until April 2028. ■ The employment allowance, effectively an annual NIC rebate, will rise from £5,000 to £10,500. However, this remains unavailable for companies with a single director employee or if the employee is providing domestic services (e.g. a nanny). Combined with a 6.7% increase in the National Living Wage from April 2025, the higher NICs will mean a significant additional cost for employers, particularly those operating in low wage sectors, such as retail and hospitality. One notable upshot is that salary sacrifice schemes involving low emission cars or pension contributions will be more attractive from 2025/26 because of the employer NIC savings they offer. Capital gains tax (CGT) Changes to CGT were thoroughly trailed in the run up to the Budget, but proved to be less dramatic than some rumours had suggested: ■ The main rates rose from 10% to 18% for basic- and nil-rate taxpayers and from 20% to 24% for higher- and additional-rate taxpayers, effective from Budget day. The move brings the rates into line with those already applying to residential property. ■ The rate for business assets disposal relief (BADR) will increase from 10% to 14% for 2025/26 and 18% thereafter, while the BADR lifetime limit stays at £1 million. Some consequences of these increased tax rates are considered elsewhere in the newsletter. Inheritance tax (IHT) Like CGT, changes to IHT were widely expected, and they lived up to, if not exceeded, the rumours: ■ The nil-rate band (£325,000 since 6 April 2009), residence nil-rate band (£175,000 4 The first Budget from a Labour government in over 14 years reflects the financial strain we have been briefed to expect. An uphill climb? Tackling the Autumn Budget outcomes TAX
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