“This Budget will permanently increase the supply capacity of the economy, boosting long-term growth” – Rachel Reeves, Chancellor of the Exchequer
Boxed in by Labour’s manifesto pledges not to increase Income Tax, employee’s National Insurance and VAT, Chancellor Rachel Reeves instead had to raid other taxes, like Capital Gains Tax (CGT), Inheritance Tax (IHT), employer’s National Insurance and to extend the tax threshold freeze to find the £40bn needed to balance the books.
While the tax rises came thick and fast, the Chancellor announced there would no longer be biannual fiscal events. The Budget will now only be in the autumn, while the Spring Statement will have no tax changes.
Reeves said the tax-and-spend Budget was necessary to reverse the dire state of the public finances the government inherited and to “fix the foundations to deliver change”.
“This government was given a mandate to restore stability to our economy and to begin a decade of national renewal, to fix the foundations and deliver change through responsible leadership in the national interest. That is our task. And I know that we can achieve it,” said Reeves at the start of her Budget statement.
We’ve outlined the main announcements from the statement below and have put together a report with all the details, which you can download here >
Personal announcements
In changes affecting individuals, the Chancellor increased the higher rate Capital Gains Tax from 20% to 24% and the lower rate from 10% to 18%, and closed the IHT loopholes, bringing inherited pensions into IHT from April 2027, along with a pledge to reform agricultural property relief.
She will also scrap the non-dom regime from 2025, replacing it instead with a new residence-based scheme “with internationally competitive arrangements for those coming to the UK on a temporary basis”.
Unfrozen personal tax thresholds
Going against pre-Budget predictions, Reeves decided against extending the freeze on personal tax thresholds for a further two years, instead announcing that, from 2028 to 2029, personal tax thresholds will be updated in line with inflation.
CGT, IHT and non-doms
Likely to be of great interest are the proposed changes to Capital Gains Tax and Inheritance Tax.
The Chancellor confirmed pre-Budget speculation by announcing an increase to Capital Gains Tax as part of her fiscal plans.
This means the lower rate of CGT will increase from 10% to 18% and the higher rate from 20% to 24%, while the rates for residential property will be maintained at 18% and 24%.
She also announced that Business Asset Disposal Relief would remain at the current level this year. And, as set out in Labour’s manifesto, Reeves explained that there “needs to be a fairer approach to the way that carried interest is taxed”, introducing an increase to Capital Gains rates on carried interest to 32% from April 2025. Then from April 2026, Labour plans to deliver further reforms “to ensure that the specific rules for carried interest are simpler, fairer and better targeted”.
Chancellor Reeves then turned her attention to Inheritance Tax. She confirmed that she will continue the Inheritance Tax freeze until 2030. “I will extend that freeze for a further two years until 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.”
She announced that the government will close the loophole created by the previous government, made even bigger when the lifetime allowance was abolished, by bringing inherited pensions into Inheritance Tax from April 2025.
Reeves also announced the scrappage of the “outdated concept” of domicile from the tax system from April 2025.
The Chancellor further announced that both agricultural property relief and business property relief will be reformed from April 2026. While the existing nil-rate bands and exemptions will continue to apply, the current 100% relief rate will only be available for the first £1m of combined agricultural and business assets. Any value above this threshold will be subject to a reduced relief rate of 50%, resulting in an effective rate of 20%.
See details of all personal announcements in our Autumn Budget Report:
Business announcements
Chancellor Reeves attempted to delicately tip-toe around the government’s manifesto pledges not to increase taxes on “working people” with the much-expected rise in employer’s National Insurance contributions, taking the employer rate to 15%.
The increase was combined with a lowering of the threshold for employer’s National Insurance from £9,100 to £5,000, but to soften the blow, the Employment Allowance was increased from £5000 to £10,500. This tax increase is expected to raise £20bn, the largest amount of any of the changes announced.
Further investment in HMRC
Elsewhere, the Chancellor continued to build on the government’s pledge to close the tax gap. With Exchequer Secretary to the Treasury, James Murray, at the helm as chair of HMRC, Reeves announced further investment in HMRC services. This builds on the already announced funding for 5,000 additional compliance officers at HMRC.
Introducing further HMRC modernisation, Reeves said: “Before a government could consider any change to a tax rate or threshold, it must ensure that people pay what they already owe.”
The Chancellor then went on to announce that the government will invest to “modernise HMRC systems using the very best technology, and recruit additional HMRC compliance and debt staff”.
She also highlighted a clamp down on umbrella companies and increased interest rates on unpaid tax debts “to ensure that people pay on time and go after the promoters of tax avoidance schemes”. She said these measures will reduce the tax gap and raise £6.5bn by the end of the forecast.
Increase to employer’s National Insurance
The increase to employer’s National Insurance was expected after weeks of speculation. The rise had already ruffled feathers before the Budget, with opposition parties arguing that the increase goes against the spirit of Labour’s manifesto pledge not to increase National Insurance.
Reeves committed to the manifesto promise not to increase Income Tax, National Insurance and VAT on ‘working people’. Although she pinned the blame on needing to increase employer’s National Insurance on the previous government:
“The last government paid cuts of £20 billion to employee and self-employed National insurance in their final two budgets, these tax cuts were not honest, because we now know that they were based on a forecast, which the OBR say, would have been materially different.”
What is here for businesses?
The government spent a huge amount of time before the Budget talking about working people. This ended up tying the government in knots over what taxes it could actually raise without breaking a manifesto pledge but also revealed ahead of time that the burden was likely to fall on businesses.
There was not much in terms of new announcements or incentives for businesses, aside from a previous commitment from the Chancellor to maintain full expensing and the £1m annual investment allowance.
There was a little more for high street businesses; with business rates from 2026-27 being a major source of concern, Reeves said the government was introducing two permanently lower tax rates for retail, hospitality and leisure properties.
“I will today provide 40% relief on business rates for the retail, hospitality and leisure industry in 2025/26 up to a cap of £110,000 per business. Alongside this, the small business tax multiplier will be frozen next year,” she said.
For full details of all business announcements made, read our full Autumn Budget Report:
Other announcements
Chancellor Reeves also made the following announcements:
- Fuel duty to be frozen at 5p for another year.
- An increase to the National Living Wage from £11.44 to £12.21 an hour from April 2025.
- An increase of the Energy Profits Levy on oil and gas companies to 38%.
- An increase in alcohol duty rates on non-draft products in line with RPI from February.
- An increase in the rate of Air Passenger Duty by a further 50%.
For full details of all other announcements made, read our full Autumn Budget Report:
We can help
If you have any questions about how the announcements in the Autumn Budget may affect you, your family or your business, please get in touch
