The airtime, online and print column inches already devoted to Rachel Reeves’ nascent budget have created an overwhelming mountain of analysis, conflicting information, confusing forecasts and warnings. When life itself is busy and complicated enough, ‘budget burnout’ is a natural response. But neither kneejerk reactions nor burying one’s head are helpful, or necessary. It is still early days; full reactions and market impacts are yet to settle down, let alone see the first tangible impacts. So, take a breath, have a brew, and let’s have a calm first look at some of the major work and business-affecting details of the first Labour budget in 14 years.
Am I a ‘worker’?
The attention-grabbing manifesto pledge “not to raise taxes for working people” returned to haunt the Chancellor, and indeed the Prime Minister, in the flurry of speculation and authorised leaks leading up to the budget, so let’s address that first. For the majority of people, yes, you are worker, and yes, you will undoubtedly be affected by financial changes announced in the budget.
The 21st-century world of work and wealth creation has changed so radically that phrases like ‘people who go out to work’ seem simplistically 19th-century. Work is perhaps best defined as processes that create value (for the individual, society and the economy); this encompasses people who do not go out to work, but who stay at home and engage in activities that create value, like running a household, raising children, and of course the legion of unpaid carers who play a critical role in underpinning the economy, but are still often not regarded as ‘workers’. Consider it this way, and it’s clear everyone will be impacted one way or another.
Headline pullout- facts, not suppositions
Some of the changes Reeves announced this week have already come into effect, while others are unlikely to impact you for several years to come.
Immediate- in effect now:
- Stamp duty and second-home land surcharges will increase from 3% to 5%
- Lower rate of capital gains tax increased from 10% to 18%, upper increased from 20% to 24% percent- affecting people selling shares and residential property and other assets
From April 2025:
- National Minimum Wage increase 6.7%, to £12.21 per hour for workers over 21
- Employers’ National Insurance contributions increase by 1.2% to 15%
- Threshold at which employers start paying NI to fall from £9,100 a year to £5,000 a year
- Business rate relief to hospitality, retail and leisure companies to drop from 75% to 40% (up to a £110,000 cap)
- Small business Employment Allowance to increase from £5,000 to £10,500 before NI payable
- Capital gains tax on carried interest to be increased from 28% to 32%
- Universal credit and state pension to increase in line with inflation, carer’s allowance will also increase
- ‘Non dom’ status to be abolished
Further ahead:
- Permanently lower business rates for retail, hospitality and leisure businesses from 2026-27
- Freeze on tax bands to end April 2028, from when the point at which people pay higher taxes will be increased
- Corporate Tax Roadmap, including capping headline CT at 25% for the duration of parliament retaining the small profits rate and marginal relief at current rates and thresholds
- Freeze on inheritance tax to continue until 2030
Real-world impacts on real-world workers
In juggling to get around their self-imposed ban on tax raises for ‘workers’, it’s hard to see how these impacts on businesses, causing many to revaluate their balance sheets and already tight margins, will not filter through to impacting employees. Similarly, one would not argue against a healthy, decent-wage economy: at this stage forecasts as to the success of Rachel Reeves’ calculations remain largely supposition.
There are undoubtedly serious considerations for business owners, contractors, the self-employed and workers alike, which are better taken in the full light of all impacts. For example, while the loss of the 75% relief on business rates can’t be welcomed, this was introduced as an unprecedented emergency measure to counteract effects of the pandemic; the stability of permanent lower business rates for retail, hospitality and leisure businesses from 2026-27 will come as welcome news for these sectors going forwards. As we have seen, many changes do not come in until April 2025 or later, allowing time (but not infinite) to plan.
It’s easy to overlook ‘non-changes’, but the freeze on fuel duty will come as a big relief to a wide range of sectors, as well as all motorists. On the other hand, the fastest reduction in large farm subsidies will hit the rural sector, often overlooked by City-centred analysts. And speaking of the public, outside our working lives, we and our families can all be impacted by actions like raising the cap on bus travel, stamp duty changes, and abolishing winter fuel allowance.
In what can be unsettling times of significant fiscal change, one thing is for certain: you don’t need to go it alone. Whatever the size of your business or workforce, from sole trader to Limited Company, ICS Accounting are on your side, here to cut through the guesswork, remove the worries, and assist with all your tax, pay and accounting queries, leaving you free to concentrate on what you do best. Uncertain of your next steps, or just want to talk through your options? Simply call our friendly team on 0800 195 3750 or email info@icsuk.com.
