Significant changes were also made to longstanding IHT reliefs: Agricultural Property and Business Reliefs are now capped at £1 million and halved above that amount. As predicted, inherited pensions will also face IHT from April 2027. Capital Gains Tax (CGT) rates are aligned with higher residential property rates, and the Business Asset Disposal Relief (BADR) rate will phase up gradually, bringing it closer to the main CGT rate. Employers, too, will face an increase in National Insurance, marking a shift from Labour’s earlier stance against such hikes.
Please find below a round up of the key highlights of budget:
National Living Wage
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- Minimum wages will increase from April 2025, with the rate for those over 21 rising from £11.44 to £12.21 an hour.
- Rates for 18 to 20-year-olds will go from £8.60 to £10, and apprenticeship wages will increase from £6.40 to £7.55.
- The government aims to work towards a unified adult minimum wage over time.
Employers’ National Insurance Contributions
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- Employers’ National Insurance contributions will rise from 13.8% to 15% starting April 2025.
- The threshold for paying NI will be reduced from £9,100 to £5,000, while the employment allowance for smaller businesses will increase from £5,000 to £10,500.
- Employee NI, VAT, and income tax rates remain unchanged, with personal tax thresholds set to align with inflation from 2028-29.
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Business Asset Disposal Relief (BADR)
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- BADR will stay at 10% for the rest of this year, increasing to 14% in 2025/26 and 18% from 2026/27.
- The lifetime limit for BADR remains at £1 million.
Capital Gains Tax (CGT)
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- CGT rates have risen, with the lower rate increasing from 10% to 18% and the higher rate from 20% to 24%, applicable immediately.
- Rates on the sale of second residential properties will remain consistent at 18% and 24%.
Inheritance Tax (IHT)
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- IHT threshold freezes will continue for another two years, until 2030.
- Inherited pensions will enter the IHT net starting April 2027.
Electric Vehicles (EVs)
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- Existing company car tax incentives for EVs will remain in place until 2028.
- The differential for EVs in Vehicle Excise Duty rates will increase from April 2025.
Non-Dom Tax Regime
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- The non-dom tax status will be abolished, effective from April 2025, with domicile-based tax replaced by a residence-based system, aimed at internationally competitive arrangements for temporary UK residents.
- This measure is expected to generate £12.7 billion in revenue over five years.
Stamp Duty on Second Homes
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- Stamp Duty for second homes will increase from 3% to 5%.
Private Schools
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- Private school fees will incur VAT from January 2025, and business rates relief will be removed from April 2025.
State Pensions
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- The state pension will see a 4.1% increase in 2025-26, following the government’s commitment to the triple lock policy.
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