Boxed in by Labour’s manifesto pledges not to increase Income Tax, employee’s National Insurance and VAT, Chancellor Rachel Reeves instead had to raid other taxes, like Capital Gains Tax (CGT), Inheritance Tax (IHT), employer’s National Insurance and to extend the tax threshold freeze to find the £40bn needed to balance the books.

While the tax rises came thick and fast, the Chancellor announced there would no longer be biannual fiscal events. The Budget will be held in the autumn, while the Spring Statement will have no tax changes.

Reeves said “This Government was given a mandate to restore stability to our economy and to begin a decade of national renewal, to fix the foundations and deliver change through responsible leadership in the national interest. That is our task, and I know that we can achieve it.”

KEY BUSINESS CHANGES

Employer national insurance contributions

The most dramatic change for businesses in the Autumn Budget was the increase in employer NICs from 13.8% to 15% from April 2025.

Additionally, the point at which businesses pay NI for each employee’s salary has reduced from £9,100 to £5,000.

For smaller businesses, the Employment Allowance increased from £5,000 to £10,500 – so they’ll be protected from some of the NI increase.

According to Government predictions, these changes mean:

• 865,000 employers will pay no NICs at all next year.
• More than 1 million employers will see no change or save money overall.
• Larger employers will bear the brunt of NICs hikes, with projected revenues of £25bn a year.

 

Investing in growth-driving sectors

The Autumn Budget confirmed the Spring Budget’s long-term support for growth-driving sectors:

• £975m over five years for the aerospace sector.
• Over £2bn over five years for the automotive sector, focusing on zero-emission vehicle manufacturing.
• Up to £520m for a new Life Sciences Innovative Manufacturing Fund.
• Tax reliefs providing £15bn of support over the next five years for the creative industries.

 

Encouraging business investment

The previous Government’s £1m annual investment allowance has been maintained, providing certainty for businesses looking to invest in their future growth.

The Government is also extending the 100% first-year allowances for zero-emission cars and electric vehicle charge points for another year, supporting the transition to cleaner transportation.

 

Supporting Small Businesses

The Autumn Budget confirmed several measures from the previous Spring Budget aimed at supporting small businesses, including:

• Over £1bn across 2024/25 and 2025/26 for the British Business Bank to enhance access to finance for small businesses, including over £250m each year for small business loans programmes, such as Start Up Loans and the Growth Guarantee Scheme.
• Over £200m for wider small business support, including continued funding for Growth Hubs and the Help to Grow Management scheme.
• The Made Smarter Adoption programme, which helps small manufacturing businesses adopt advanced digital technologies, will see its funding double to £16m in 2025/26.

 

Research and Development Investment

The Autumn Budget emphasised the importance of research and development (R&D) in driving innovation and economic growth:

• £20.4bn allocated for R&D investment in 2025/26, including at least £6.1bn for core research.
• £25m in 2025/26 for a new multi-year R&D Missions Programme.
• Real-terms increase in funding for the National Institute for Health and Care Research.
• At least £40m over five years to support the commercialisation of university research through spin-out proof-of-concept funding.

 

Corporation Tax and Business Asset Disposal RelieF

The Corporation Tax rate’s remaining the same at 19% for profits made under £50,000 and 25% for profits made over £250,000. This consistency is to foster long-term planning for businesses.

The lifetime limit for Business Asset Disposal Relief (BADR), which offers a reduced rate for qualifying business disposals, was maintained at £1m to encourage entrepreneurship and business investment.

However, the tax rate will increase from the current 10% to the following:

• 14% from 6 April 2025.
• 18% from 6 April 2026.

 

Investment in green and digital infrastructure

The Energy Profits Levy on oil and gas companies was increased by three percentage points to 38% and extended until 31 March 2030, with the 29% investment allowance also removed.

The money raised will be diverted toward environmental projects. In line with sustainability goals, the Budget introduced green grants and subsidies for energy-intensive sectors, such as logistics and manufacturing, to help businesses reduce carbon emissions.

The Chancellor also announced a heavy investment in HMRC modernisation to improve tax compliance and close the tax gap. This includes recruiting for 5,000 additional compliance and debt staff, along with updates to the tax processing systems.

 

Sector-specific support and incentives for growth

• The Chancellor unveiled a £20.4bn R&D allocation for 2025/26 to assist with industry-specific recovery and to encourage innovation, especially within the high-tech, pharmaceutical, and manufacturing sectors.
• The original fuel duty, which saw petrol and diesel to be cut by 5p, was due to end in April 2025. This has now been extended for another year.
• In an unexpected move, draught alcohol duty will be cut by 1.7% from February 2025, equivalent to a penny off each pint – a relief aimed at supporting the hospitality sector. Alcohol duty on non-draught products will increase in line with Retail Price Index (RPI) inflation from the same date too.

 

KEY PERSONAL CHANGES

The key measures which will affect individuals are:

• National living wage will rise by 6.7% to £12.21 per hour.
• State pension rising by 4.1% under Triple Lock.
• CGT rates increasing to 18% and 24%.
• IHT thresholds frozen until 2030.
• Fuel duty freeze and 5p cut extended for 12 months.
• Carer’s allowance earnings limit increased significantly.
• Universal Credit debt repayments capped at 15%.

National living wage and minimum wage

The National Living Wage will be increased from £11.44 to £12.21 an hour from April 2025. This represents an increase of over £1,400 to the annual earnings of a full-time worker, benefiting over three million low-paid workers across the UK.

The national minimum wage for 18 to 20-year-olds will rise by 16.3% to £10.00 per hour from April 2025, as part of the long term plan to move towards a “single adult rate”.

The minimum wage for under-18s and apprentices will also rise to £7.55 per hour.

Some 200,000 young people across the UK are forecast to see their wages increase by £2,500 annually.

 

State pension

The Government has committed to maintaining the State Pension Triple Lock for the duration of this Parliament. This means the basic and new state pension will continue to be uprated annually by the highest of earnings growth, price inflation, or 2.5%.

In line with recent earnings growth figures, the basic and new state pension will increase by 4.1% from April 2025. As a result, over 12 million pensioners will receive up to an extra £470 per year in their state pension payments.

 

Capital Gains Tax

Effective from 30 October 2024, CGT rates will be increased as follows:

• The lower rate will rise from 10% to 18%.
• The higher rate will increase from 20% to 24%.

This means that CGT rates are now aligned with CGT rates on property.

Reeves was quick to remind everyone that CGT rates remain lower than those in comparable EU countries.

 

Inheritance Tax

IHT thresholds will remain frozen at their current rate band until April 2030.

This means, the nil-rate band will remain at £325,000, and the residence nil-rate band will stay at £175,000 for an additional two years.

 

Unused pension funds

From April 2027, unused pension funds will be subject to IHT. This aims to prevent individuals from using pensions to accumulate wealth and pass it on to their beneficiaries without incurring IHT. This change is especially tricky, in that it is significantly harder to switch wealth into or out of a pension fund than many other types of asset, and so those who have funded their pensions over many decades are now faced with a moving of the goalposts with limited options open to them.

 

Agricultural and business property relief

Both agricultural property relief and business property relief will be reformed from April 2026. While the existing nil-rate bands and exemptions will continue to apply, the current maximum 100% relief rate will only be available for the first £1m of combined agricultural and business assets.

Any value above this threshold will be subject to a reduced relief rate of 50%, resulting in an effective tax rate of 20%. Whilst presented as protecting family farms and businesses, this news will be most unwelcome to older farmers and business owners who will be worried that their exposure to IHT just increased significantly.

The Government estimates these measures will affect a small proportion of estates each year, with the pension fund change impacting around 8% of estates and the agricultural and business property relief reform affecting approximately 0.3% of estates. That will be little consolation to the affected 0.3%.

 

Stamp duty

The rate of SDLT surcharge on second homes has increased from 3% to 5% from Thursday 31 October. For example, the SDLT on acquiring a second home for £300,000 will increase by £6,000.

For first time buyers, which currently enables a home to be bought for up to £425,000 without a SDLT charge, is due to expire on 31 March 2025. This hasn’t been extended.

The increase in the surcharge rate may restrict the acquisition of second homes, which may improve the property market opportunities for potential homeowners. But the impact on first time buyers will make it more difficult for them to enter the market, and so hinder the property market.

 

Non-domicile tax status reform

In keeping with this Labour Government’s intention to close tax loopholes, major overhaul to the tax treatment of non-domiciled individuals (non-doms) in the UK was announced.

From 6 April 2025, the Government will abolish the non-domicile tax regime and replace it with a new, modernised tax system based on residence.

The new residence-based regime will remove the concept of domicile from the tax system, aiming to ensure that all individuals who make their home in the UK pay their taxes here.

 

Air Passenger Duty (APD) changes

For 2026/27, the Government will adjust all APD rates to ensure they keep pace with inflation:

• £1 more for those taking domestic flights in economy class, £2 more for those flying to short-haul destinations in economy class.
• Long-haul economy class passengers will see a £12 increase in APD.
• APD for those travelling in premium economy and business class will rise relatively more.

Moreover, the higher rate of APD, which currently applies to larger private jets, will increase by an additional 50% in 2026/27.

 

VAT on private school fees

As expected, it was confirmed that VAT on private school fees will apply from 1 January 2025.

Business Rates Relief for private schools has also been removed from April 2025.

The new rules are expected to raise an additional £1.8bn per year by 2029/30.

 

consumer duties

Fuel duty has been frozen, and the 5p cut extended for another year, providing a £3bn tax cut that will save the average car driver £59 in 2025/26.

Alcohol duties will see, with effect from 1 February 2025:

• Non-draught products increasing with RPI inflation.
• Draught products duty cut by 1.7%, reducing average pint price by 1p.
• New duty regime supporting British pubs and smaller brewers.

 

Bus fare cap extended

The Budget also extended the single bus fare cap for another year, capping fares at £3 per journey from January 2025 (up from £2 currently).

While England sees the extended cap, other parts of the UK have varying fare policies: Northern Ireland recently increased fares, while Scotland provides free bus travel to residents aged 60 and over, under 22, and those with disabilities. Wales, meanwhile, sets fares locally.