This afternoon, Chancellor Rachel Reeves set out the first Labour budget since 2010.
Focusing on economic stability, furthering investment in the UK, and ensuring manifesto pledges were honoured for workers, the budget included many tough choices to reduce spending.
Hannah Kasem, senior tax manager at the Nottingham office of UHY, shares what the budget means for owner-managed businesses.
“The much-anticipated budget announced several changes that will have a significant impact on businesses. With times already tough for small and owner-managed businesses, an increase in tax is certain to have a marked effect on many of those businesses.
“Currently, the Business Asset Disposal Relief allows less Capital Gains Tax (CGT) to be paid when you sell all of your business. It is positive that the Chancellor announced no change to the £1m lifetime allowance; however, the 10% tax rate on all qualifying assets will be increased to 14% from April 2025 and 18% from April 2026, which could impact investment in the UK.
“One of the biggest announcements for businesses, which is causing a reaction, is the increase in Employers’ National Insurance Contributions (NIC). From April 2025, these contributions will increase from 13.8% to 15%, and the threshold at which employers become liable to pay NIC will be reduced from £9,100 to £5,000 per employee.
“The reduction of the threshold alone, at the new 15% rate, will cost employers £615 per year for each employee earning £9,100 or more, which may be an increased cost for many owner-managed businesses. However, to help smaller businesses, the Chancellor is increasing the Employment Allowance from £5,000 to £10,500, meaning that many employers won’t pay any National Insurance at all next year. Although welcomed, this may be marginal for some employers.
“Reforms to Inheritance Tax, specifically Business and Agricultural Property Reliefs, were also announced from April 2026. From this date, the first £1m of combined business and agricultural assets will continue to attract no inheritance tax; however, for assets over £1m, only a 50% Inheritance Tax relief will apply, which once again will impact business owners and their families.
“Although the Chancellor kept her promise not to raise taxes on working people, there will be a wider effect felt by employers who will incur additional costs.
“With the rise in minimum wage and an increase in National Insurance Contributions, this may cause an increase in prices being passed on to the customer, which will have a knock-on effect on people and workers. There is no doubt this budget will have an impact on the profit margins of owner-managed businesses, and planning ahead for these changes will be vital for businesses to survive.”
To find out more about UHY, visit www.uhy-uk.com
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