Unravelling the Budget with Penguin

In a display worthy of a West End performance — it was good TV to be fair to her with the jibes and the banter – Rachel Reeves and the Labour team have finally revealed their plans. After weeks of endless speculation—particularly around tax hikes and whispered reforms — it’s all finally out there. But there was a large tinge of déjà vu again – we will fix the NHS…(haven’t we heard that many many times before?). Some things don’t change! Here’s what matters and what might impact you.

CGT Rumours – We all expected something seismic, with rumours flying about Capital Gains Tax shooting up to 39%. Instead, it landed with more of a gentle nudge at 24%. A rise, yes, but not quite the Financial hurricane some were bracing for. So, a bit of a sigh of relief there.

Employer National Insurance – Employers, brace yourselves for an increase. It’s Labour’s workaround for raising funds without directly raising National Insurance for employees, but small business owners may still feel the pinch.

Income Tax Freeze – Labour has decided to leave the income tax thresholds alone (frozen until April 2028), which means fewer surprise tax jumps for the foreseeable future. From then, so they say, it’s back to inflation adjustments — so consider it a light at the end of the tax tunnel, but the wonder of Fiscal Drag will help them until then…

Inheritance Tax (IHT) and Pensions Watch – Keep an eye on IHT and Pensions. A consultation is on the cards for 2027, and there’s a hint that Pensions could come under IHT in the future. It’s early days yet, but it’s definitely one to keep on the radar.

For now, those are the big headlines. If any of this has you scratching your head about what it means for you then join us on our Budget Briefing! We’re here to help you make sense of the news and keep your plans on track.

We’re holding a Budget Briefing on Tuesday 5th November at 10AM via Teams. You can join us by registering your attendance here, or email one of the team on [email protected] or call us on 02920 450 143 for more information.

TAXES

• CGT will rise from 10% to 18% for the lower rate and 20% to 24% for the higher rate. CGT on residential properties will be unchanged at 18% and 24%.
• IHT threshold is frozen to 2030, however the Chancellor also stated she would bring inherited pensions into IHT from April 2027, and reform Agricultural Property Relief and Business Property Relief.
• VAT to be applied to private school fees.
• Business Asset Disposal Relief lifetime limit will stay at £1m but will increase to 14% in April 2025 and 18% from 2026-27.
• Non-domicile tax regime to be abolished. Stamp Duty surcharge for non-UK residents increased from 2% to 3%.
• Stamp duty on second homes to be increased from 2-5% with immediate effect – but we haven’t heard what Wales will do yet with Land Transaction Tax as ours is already different(at the time of writing)
• Air passenger duty increasing by no more than £2 for economy short haul flights, but a 50% increase for private jets.

PENSIONS & SAVINGS

• No changes to core Investment allowances into ISAs or Pensions.
• Agricultural property relief and business property relief reforms to be kept but reduced.
• Enterprise Investment Schemes and Seed Enterprise Investment Schemes will continue until at least 2035.
• Pensions triple lock will be maintained and the state pension will rise by 4.1% from April 2025.
• Relief on shareholdings on the Alternative Investment Market(AIM) cut to 50%.

LIVING COSTS

• Fuel duty cut kept for another year.
• Carers allowance to rise.
• Alcohol duty cut on draught alcohol to help pubs. Rates on non-draught products will increase in line with RPI from February 2025.
• A flat rate duty on all vaping liquid will come into force from October 2026.
• Soft Drinks Industry Levy will rise with inflation and increase in line with CPI each year going forward.

BUSINESSES

• The Employment Allowance will increase from £5,000 to £10,500, which the Chancellor claims will mean 865,000 employers won’t pay any National Insurance at all next year.
• Corporation tax capped at 25%.
• The minimum wage will increase by 6.7% to £12.21 an hour from April. For 16–18-year-olds it will increase by 16% from £8.60 to £10 an hour. Apprentices will also an increase of 18%, from £6.40 to £7.55 an hour.
• There will be a crackdown on umbrella companies and promoters of tax avoidance schemes.
• Existing 40% business rates for the retail, hospitality and leisure industries will continue in 2025/6 up to a cap of £110,000 per business.
• Windfall tax on the profits of energy firms extended until 2030 and increased to 38%.