The chancellor has announced her budget – to raise £40 billion in taxes – and it looks as if the majority of that is to come from businesses.

Here are the highlights: –

Employing staff

The national minimum wage is to increase from 1^st April 2025 by 6.7% to £12.21 per hour.

The minimum wage for 18-20 year-olds is going to come in line, with an initial increase to £10 per hour from 1^st April 2025

National Insurance credits will not be earned until wages exceed £6,500 pa from 6^th April 2025, up from £6,396pa.

Employers national insurance is going to be payable on wages over £5,000 pa, rather than £9,100 pa – from 6^th April 2025

Employers national insurance is to increase from 13.8% to 15% also from 6^th April 2025

However, the employment allowance is increasing from £5,000 to £10,500 from 6^th April 2025 – this will cover the employers national insurance on up to 4 full time staff at the minimum wage, or two earning £40,000pa. This is no longer limited to small businesses, but exemptions will still apply e.g. a one director Co, a company working principally for the government, IR35 wages and domestic payrolls can not claim and only one member of a set of associated companies may claim.

Lots of new employee regulations too, such as day one rights to sick pay etc.

Benefits in Kind

Double Cab Pickups purchased, leased, or ordered before April 2025 will continue to be classed as Vans; acquired later and they will be classed as Cars.

The taxable benefit for Hybrid cars is doubling to 18% of list price in 2028.

The cap on taxable car benefit is to increase incrementally from 35% from 2028.

The Official rate of Interest, used for beneficial loans etc, is to be set quarterly, instead of annually.

Employers national insurance on benefits in kind is to increase to 15% from 6^th April 2025

Capital Allowances

Double Cab Pickups with a payload of over one tonne, ordered or acquired before April 2025, paid for, and delivered before 1^st October 2025, will still qualify as Vans for capital allowances, but after that must be treated as Cars.

Electric cars and charge points 100% first year allowance extended to April 2026

Sole Trader Taxes

National Insurance credits will not be earned until profits exceed £6,875 pa from 6^th April 2025, up from £6,725pa.

Class 2 national insurance contributions, payable if income is less than the above, is increased to £182.00pa from 6^th April 2025 up from £179.40pa

MTD for Income Tax  

MTD is making tax digital.  MTD for income tax is the requirement for sole traders and landlords to keep digital records and report quarterly to HMRC.

• If turnover is over £50,000 such reporting starts April 2026
• If turnover is over £30,000 such reporting starts April 2027
• And now if turnover is over £20,000 such reporting starts April 2028

Capital Gains Tax

If you decide to sell your business, then Business Assets Disposal Relief is being eroded.  Currently there is £1m tax free lifetime allowance, then the balance of gains pays 10% tax, this is increasing to 14% from 6^thApril 2025 and then 18% from 6^th April 2026.

Investor’s relief lifetime tax free allowance of £10m, is reduced to £1m from Budget Day, and tax rates applicable on the excess are to align with Business Asset Disposal relief.

Additionally there are more regulations, applicable from budget day, to qualify for Employee Ownership Trust capital gains tax reliefs.

Capital Gains tax on the sale of other assets has increased from 10% for a basic rate tax payer and 20% for a higher rate tax payer, to 18% and 24% in line with the current capital gains tax on residential property – from budget day.

Inheritance Tax

If you decide not to sell but retain your business to hand on in your will then the current 100% inheritance tax relief for agricultural property and business property, is being halved for such assets in excess of £1m i.e. from April 2026 inheritance tax will be 20% on business/agricultural assets over £1m (a joint allowance)

AIM shares, in the unlisted securities market, will also only get 50% relief.

Unused pension fund balances and death benefits from a pension, will become subject to inheritance tax from April 2027, with the fund responsible for reporting and paying over these taxes.

Various Duties

The stamp duty land tax surcharge for a second home purchase is increasing from 3% to 5%.

Fuel Duty is being frozen for a further 12 months.

Duty on draft beer is decreasing by 2% – 1p per pint.

Duty on other alcohol is increasing in line with inflation.

Flight duty is being capped but doubled for private jets.

Winners

An increase in the income exemption for careers allowance

Retail, Hospitality and Leisure 40% business rates relief for 2025/6

The building sector with big spending on affordable housing, hospitals, and schools, both new build and maintenance, also new rail projects, and pot holes.

Freezing

Fiscal drag, the increase in tax by not increasing the allowances is applying to the following: –

• Personal income tax allowances and bands until 2028
• Inheritance tax allowances until 2030
• Corporation tax – for the life of this parliament

No changes

• Pension allowances
• Pensions tax relief.
• R&D reliefs
• VAT on double cab pickups
• High Income Child Benefit Charge
• ISAs & LISAs – British ISA not now to be introduced.

Going ahead As Previously Announced

VAT on private school fees from 1^st January 2025

Abolition of Furnished Holiday Letting regime from April 2025

Abolition of Domicile rules, from April 2025, hence all will be taxed based on residence – for income tax, capital gains tax and inheritance tax.  New revised FIG (Foreign Income and Gains) rules have now been drafted for those arriving in or leaving the UK.

New 39% tax relief credit for visual effects

Tax Avoidance Measures

Interest charged on late paid tax to increase from base plus 2.5% to base plus 4%, from April 2025

New rules to reallocate responsibility for employment taxes to Agencies who use Umbrella Companies so HMRC can chase missing taxes, from April 2026

Covid Tzar to chase covid fraudsters.

5,000 new tax inspectors to chase Benefit Fraudsters

New training for police and retailers on shoplifting prevention

Compulsory HMRC registration for Tax advisers from April 2026

Crypto asset service providers are to be required to report UK taxpayers income and gains, to HMRC from January 2026

Transfer of money from a related company no longer clears a directors loan for tax purposes – from budget day.

Roll out of business licences from Taxi & scrap metal businesses to try to catch the “Hidden Economy” e.g. to Waste, Animal Welfare and transport.

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