Today, the Chancellor increased employer National Insurance contributions by 1.2% to 15% and lowered the threshold for when employers begin to pay National Insurance contributions from £9,100 per year to £5,000 per year.
Andrew Brookes, Head of Employment Tax Solutions, comments, “Today’s increase in employer National Insurance contributions to 15%, coupled with a reduction in the contribution threshold from £9,100 to £5,000, delivers a significant blow to businesses’ capacity to invest in their people and long-term growth.
“The Government has made efforts to offset the impact on smaller businesses through an enhanced employment allowance. It means that 65,000 businesses will be exempt from National Insurance contributions altogether next year. However, the new policy still places added financial strain on larger employers. For many, these higher costs could impact hiring decisions, training programs, and broader investments in workforce development. It comes at a time when sustained investment in talent is crucial for economic stability and growth.”
Business Asset Disposal Relief
The rate for Business Asset Disposal Relief, formerly known as Entrepreneurs’ Relief, will increase to 14% from 6 April 2025. It will increase again to match the lower main rate of Capital Gains Tax at 18% from 6 April 2026.
Richard Godmon, Head of Tax services, comments, “For those under Business Asset Disposal Relief, this change will almost double the current rate of Capital Gains Tax for individuals disposing of business assets. This could have profound implications for entrepreneurs and investors.
“For many business owners, the relief has provided a huge incentive to reinvest in their businesses or plan for retirement. This increase could cause a real slowdown in business disposals as owners weigh the higher costs against potential gains. This may impact market liquidity and limit opportunities for new investors looking to acquire established businesses. While the Government aims to boost revenue through these adjustments, it is vital to ensure that the tax regime continues to support business growth and encourages entrepreneurial activity in the long run.”
Abolition of non-dom tax status
The Chancellor confirmed she would fulfil Labour’s manifesto promise to remove the non-domicile tax status. It announced a move towards a residence-based regime.
Craig Hughes, Head of Private Client Tax Services, comments, “While the abolition of non-domicile status in favour of a residence-based tax regime may be well-received in the current economic climate, this shift raises concerns for those who have long contributed to the UK economy through investment and spending. Many non-doms are active investors in UK businesses and property. The rapid implementation of this change will introduce uncertainty, especially for those with complex overseas interests who may now face significantly higher tax liabilities. While this might offer a short-term boost to the Treasury, the long-term effects could be counterproductive, as some may or indeed will, choose to relocate elsewhere.
“This change comes at a time when UK firms, especially in the City, are competing fiercely for global talent. Non-dom tax status has traditionally been a powerful incentive for skilled individuals to work in the UK. It’s imperative that the Government strikes the right balance between fair taxation and policies that support the UK’s appeal to international investors and individuals to prevent potential economic repercussions down the line.”
Increases to Capital Gains Tax
The Budget increases the lower rate of Capital Gains Tax (CGT) from 10% to 18% and the higher rate from 20% to 24%.
Craig Hughes, Head of Private Client Tax Services, comments, “Many will likely feel relieved that the increase for non-residential assets is a modest rise at the top end from 20% to 24%, rather than the more significant hikes that were initially anticipated.
“However, the immediate implementation will have a tangible impact on taxpayers currently engaged in asset transactions. Had these changes been deferred until the new tax year, as is often the case with Budget adjustments, it’s likely we would have seen a surge in asset sales as taxpayers moved to lock in gains at the lower rate. This would have provided a short-term revenue boost for the Treasury and allowed taxpayers time to adjust.
“Conversely, the insistence on an immediate increase may have the unintended consequence of dampening market activity, as taxpayers hold onto their assets rather than incur a higher tax liability. This could limit the Treasury’s opportunity to capitalise on potential sales in the short term.”
Inheritance Tax changes
The current inheritance tax thresholds are due to be frozen until April 2028, and the Government is extending these threshold freezes for a further two years to April 2030. Agricultural property relief and business property relief will also be reformed from April 2026. The rate of relief will be cut to 50% after the first £1 million of combined agricultural and business assets. The government will also reduce the rate of business property relief to 50% in all circumstances for shares designated as “not listed” on the markets of a recognised stock exchange, such as AIM.
The government is also bringing unspent pension pots into the scope of inheritance tax from April 2027.
Craig Hughes, Head of Private Client Tax Services, comments, “Today’s announcement on Inheritance Tax (IHT) introduces additional layers of complexity without providing comprehensive reform. Freezing IHT thresholds until 2030, combined with adjustments to agricultural and business property reliefs, represents a substantial shift that will impact family-run businesses and farms particularly hard.
“These changes are a heavy blow, especially for those with unlisted or agricultural assets, and could deter long-term investment in family businesses. A simplified and modernised IHT framework, rather than incremental adjustments, would be more effective in supporting intergenerational planning and economic growth.”
Investments in HMRC
Today’s Budget announced a significant expansion of HMRC, including the recruitment of 5,000 new officers and 1,800 debt management officers, signalling a tougher approach to tax debt collection. To support these efforts, substantial investment will also be made in IT to enhance HMRC’s ability to identify unreported taxpayers, referred to as “tax ghosts.”
Matt Watkins, Tax Disputes & Disclosures Director, comments, “The announcement of 5,000 new HMRC officers and 1,800 debt management officers, with an investment of £1.4 billion over the next five years, marks a significant step in enhancing the UK’s tax compliance. However, it will be some time before the true impact of these recruits materialises. The training process for compliance officers can span several years, which means that the increased enquiry work may not be fully realised until these officers gain the experience they need.”
Tax Disputes & Disclosures: Autumn Budget Commentary
“In the meantime, the emphasis on IT investment to streamline processes and target high-risk sectors may provide HMRC with more short-term wins. The use of technology to identify ‘tax ghosts’ will complement the increased enquiry activity, enhancing HMRC’s ability to uncover previously unreported liabilities.”
Menzies has produced a report that lays out even more detail around the impact of the budget here.
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This article was first published on the Menzies LLP website
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