National Minimum Wage
The national minimum wage will increase to £12.21 an hour in April after the Chancellor confirmed a 6.7% increase. More than 3 million low-paid workers are in line for a pay rise.
The minimum wage for workers aged 18 to 20 will rise from £8.60 to £10 an hour, a rise of more than 16% and the most significant increase on record. This means those in full-time employment will see their pay boosted by £2,500 next year.
Capital Gains Tax
The Chancellor has announced that the main rate of Capital Gains Tax (CGT) will increase.
She says the lower rate of Capital Gains Tax will rise from 10% to 18%, and the higher rate will rise from 20% to 24%.
The rate on residential property will remain at 18% and 24%.
Inheritance Tax
The freeze on the inheritance tax threshold will remain in place for a further two years (2030).
That means the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants and £1m when a tax-free allowance is passed to a surviving spouse or civil partner.
From April 2027, inherited pensions will form part of the inheritance tax.
The Chancellor has also announced that she will reform Agricultural Property Relief and Business Property Relief.
From April 2026, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax at all, but for assets over £1m, inheritance tax will apply with 50% relief at an effective rate of 20%.
State Pension, Income Tax and National Insurance (for employees)
Spending on the state pension is projected to rise 4.1% in 2025-26 – that is a £470 increase for over 12 million pensioners in the UK.
There will be no increase in employees’ National Insurance, VAT, or income tax (and no increase in the government’s definition of “working people”).
Employers National Insurance Contributions
Employers’ National Insurance contributions will rise from 13.8% to 15%. In addition, the threshold at which businesses start paying National Insurance on a worker’s earnings will be lowered from £9,100 to £5,000
The Chancellor also announced she would extend the amount employers can claim back from their National Insurance bill from £5,000 to £10,500.
Business Rates Relief & Employment Allowance
Businesses will receive an increase in employment allowance, which will mean 65,000 employers won’t pay any National Insurance at all next year. The allowance will grow from £5,000 to £10,500, meaning more than a million businesses will pay the same or less than they did previously.
Business rates relief will fall from the current 75% down to 45% for retail, leisure and hospitality businesses (up to a maximum of £110k).
Private School Fees
A much-discussed Labour policy has been formally announced: From 1 January 2025, VAT at the standard rate of 20% will be added to private school fees.
The Government will soon introduce legislation to remove their business rates relief from April 2025.
Corporate Tax Roadmap
The Government has set out a corporate tax roadmap outlining plans for corporate tax over the coming years. The highlights include:
- Capping the headline rate of Corporation Tax at 25 per cent for the duration of parliament, the lowest rate in the G7
- Retaining the small profits rate and marginal relief at current rates and thresholds
- Maintaining our world-leading capital allowances system, including permanent full expensing and the £1 million annual investment allowance
- Maintaining the generosity of R&D reliefs
- Working collaboratively with companies on simplification and improving user experience, including HMRC’s path forward on digitisation
- Developing a new process for increasing the tax certainty available in advance for significant investments
Public Services
The spring will see the implementation of a 10-year plan to address the health system. The NHS will receive new funding under this Budget.
The Chancellor has announced a £22.6bn increase in the day-to-day health budget and a £31bn increase in the capital budget.
On schools, Reeves promises an additional £6.7bn to the Department for Education next year – a 19% real-terms increase on this year. This includes over £1.4bn to rebuild 500 schools.
Other announcements
- The Government will increase the stamp duty land surcharge for second homes by 2% to 5% from tomorrow (England only as Wales has “LTT”).
- Duty will be cut on draught alcohol, and alcohol duty rates on non-draught products will increase in line with RPI from February next year.
