In her debut Budget, Chancellor Rachel Reeves has introduced £40bn of tax increases, largely aimed at increasing employers’ National Insurance Contributions (NICs) and implementing a temporary repatriation facility for non-domiciled people.
According to Nimesh Shah, CEO of Blick Rothenberg, while pre-Budget rumors had hinted at major tax changes, the actual announcements were more targeted, although still having a significant impact.
The main tax increase is a £25 billion increase due to NIC changes. From April 2025, employer NICs will rise by 1.2 percentage points to 15%, with a lower NIC threshold of £5,000. For businesses this means an additional cost of £615 per employee, which means significant costs for SMEs. A business with five employees each earning £50,000 will see their NIC bill rise by more than £5,500.
Capital Gains Tax (CGT) also saw adjustments, with rates rising to 18% for basic rate taxpayers and to 24% for higher rate taxpayers. Although the CGT changes were less severe than expected, business owners will feel the impact as the tax savings potential of the Business Asset Disposal Relief drops to £60,000 by 2026. The carried interest regime for private equity is also facing an increase, effectively increasing the CGT on carried interest. up to 32% from April 2025, and further within the scope of income tax and NIC from 2026.
The budget introduced a temporary repatriation facility for non-domiciled individuals, allowing them to transfer money abroad at a reduced tax rate of 12% for two years. This initiative is expected to generate £12.7 billion in revenue. However, this move has caused many non-doms to consider their options, especially with the looming inheritance tax implications of previously announced reforms.
Family businesses face new challenges with a £1 million cap on business property relief and a 50% cut thereafter. Although these changes will come into effect in 2026, Shah advises early planning, noting that anti-forestalling measures on lifetime transfers could complicate efforts.
Shah’s overall view on the budget is mixed; While this avoided the more serious changes many feared, there remains room for more tax increases in the upcoming spring budget. Businesses and investors will need to monitor developments closely as they navigate the changing fiscal landscape.