Following Rachel Reeves' Budget statement yesterday, a range of Bloomsbury Professional authors and friends give their initial thoughts.
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Author of Agricultural, Business and Heritage Property Relief, and co-author of the Bloomsbury Capital Gains Tax, Inheritance Tax, and Trust and Estates annuals.
Initial reaction:
Bit of a scattergun approach. It could have been a lot worse and was definitely not as bad as expected or indeed predicted.
Biggest surprise?
Capped APR/BPR relief at £1m. This will have a huge impact on the farming community which is already struggling and it will be ill received.
Not included but should have been?
Dividend rate left untouched.
Author of Rayney's Tax Planning for Family and Owner-Managed Companies.
Initial reaction:
Nowhere near as bad as feared. Thought it was quite sensible and very polished. Once again, pensions largely unscathed. Sensible CGT changes in the end - thankfully someone has heard of the laffer curve.
Biggest surprise?
Cap on 100% BPR. This will come as a shock to many owner managers of sizeable businesses. Likely to accelerate succession plans for most (using the PET regime!).
Not included but should have been?
An increase in the lower limits for small profits 19% Corp Tax to help smaller businesses.
Co-author of Ray and McLaughlin’s Practical Inheritance Tax Planning, and the Bloomsbury Inheritance Tax annual
Initial reaction:
Rachel Reeves hasn’t wrecked the economy – yet. Could have been a lot worse, and after all the scaremongering, the general feeling is one of relief. Having said that, the devil will probably be in the detail – 103 pages of legislation on the non-dom changes, plus a tightening of the loans to participators anti-avoidance rules – info to follow.
Biggest surprise?
Not the increase in employer’s NICs, but reducing the secondary threshold to £5,000. That is bound to affect wage increases. I only hope it doesn’t lead to redundancies, or stunt growth (yes, the employment allowance has more than doubled, but that isn’t going to stretch very far.
Not included but should have been?
Greater incentives to save, especially towards retirement (given that I’m now 60!).
Author of Bloomsbury’s National Insurance Contributions Annual and contributor to our Payroll Management manual.
Initial reaction:
Pleasantly surprised…nowhere near as bad as I had feared!
Biggest surprise?
They didn’t increase the rates of capital gains tax on residential property but chose instead to bring other rates into line. With increase in second property SDLT supplement, assume this is to encourage landlords/second home owners to sell, but not reinvest in property. While increase supply of houses to buy will reduce supply of rental property.
Also surprised they left taxation of dividends alone after furore as to who was a ‘working person’.
On National Insurance, no surprises on increase in employer contributions and reduction in secondary threshold, as widely predicted. Pleased they increased employment allowance, and by more than I expected. Surprise was removal of qualifying condition for EA that secondary liability in previous year less than £100,000 so most employers benefit.
Not included but should have been?
Would have liked to see a more detailed review of capital gains tax addressing the issue of inflationary gains, with either rebasing or maybe a lifetime limit. Should a gain that has arisen over up to 42 years be treated as if all arose in year of disposal?
Co-author of Tax Advisers’ Guide to Trusts and the Bloomsbury Corporation Tax and Capital Gains Tax annuals.
Initial reaction:
Flawed - the manifesto commitment was to not increase income tax/NI/VAT on working people, and yet there has been a huge increase in Employer’s NI. I think the Chancellor is deluded if she does not recognise that the additional costs being placed on employers will not impact employees and ultimately growth.
Biggest surprise?
Biggest surprise for me was that CGT rates were not increased more, especially on residential property which has been a popular target in recent years, and (if I can have two!) the potential changes to transfer pricing rules to bring SMEs into scope, which will have a huge impact if introduced.
Not included but should have been?
I'm struggling to think of something missing from the Budget - mostly I'm relieved some of the things that were being talked about aren't actually there (restriction on pension contributions, CGT exit taxes to name a few).
Co-author of the Buy-To-Let Property Tax Handbook, and our popular ‘One Month in a Minute’ news summary.
Initial reaction:
Worse to Come*. I suspect the new Chancellor trod reasonably carefully, constrained as she was by being new to the role, and her commitments both to manifesto pledges (after a fashion) and “the working mans”. It’s a gamble, depending very much on whether growth (also) pushes up tax receipts. In many cases, the more serious the investment, the longer it will take to yield growth – education, rail infrastructure, etc. I wonder if the public still has the patience for such things to bear fruit.
Biggest surprise?
For me was first and foremost in terms of CGT – I had expected a significant hike but for it to be delayed, so that HM Treasury could surreptitiously cash in on a rush to sell beforehand. CGT is a thorny issue: we have seen roughly a decade of significant inflation, which seriously taints pretty much all so-called “gains”. Meanwhile, HM Treasury has quietly been saving billions after freezing Indexation Allowance – just for companies – since 2017: and if the Exchequer is raking it in, then the implications for taxpayers – and fairness – are obvious. Secondly, the fact that NICs were hiked, while dividends went unscathed, bucks a dark trend over the last few years.
Not included but should have been?
Something to finally address the truly egregious iniquity of Mileage Allowance rates that are essentially unchanged since their introduction over 2 decades ago, despite official statistics recognising that motoring expenses have broadly doubled in real terms since. Could even be why the Chancellor skirted around fuel duty for another year. I am old enough to remember the real reason why this “simplification” became millions of employees’ only option. Which does NOT make it any better.
*Why “Worse to Come”? Take your pick –
Co-author of Ray and McLaughlin’s Practical Inheritance Tax Planning.
Initial reaction:
The IHT changes are huge for farms and businesses. The big reform from April 2026 will allow a total £1m relief at 100% for APR & BPR combined, but over that the rate reduces from 100% to 50%. There is some real scope for succession planning in the next year and five months, though the CGT changes will interact with this. The detail will need careful attention. There are special rules for trusts set up before today, which will have a £1m allowance from April 2026, but restrictions on what can be done from today. This simply needs a big review by clients!”
Author of our Making Tax Digital Tracker.
Biggest surprise?
Biggest surprise from my point of view is that MTD for income tax will be rolled out to those on income over £20,000 by the end of the Parliament. The previously announced minimum income threshold was £30,000. Many people were actually expecting (hoping?) for a further delay or restriction in scope, whilst this is the direct opposite.
I think it’s a clear sign of this Government’s commitment to the MTD programme. However, there are a number of unanswered questions and issues we need to resolve before we expand the programme further. I think the Government should wait until at least April 2027 to make a decision on bringing in the £20k - £30k population, as only then will we know how the first year of reporting has gone.
Co-author of Capital Gains Tax Reliefs for SMEs and Entrepreneurs, the Buy-to-Let Property Tax Handbook, and our Corporation Tax Annual.
Initial reaction:
Standard CGT rates have risen from 10%/20% to 18%/24% -, which is in line with the current/previous rates for residential property.
Biggest surprise?
The biggest surprise (to me) is that they are not upping the residential property rates. These rates have previously been higher than standard rates as Government policy to discourage buy to let landlords. That said, the 3% SDLT surcharge on second homes is increasing to 5%. So possibly the Government thought that this was sufficient disincentive for BTL landlords - discourage them on entry, so no need to do anything on exit.
Co-author of Taxation of Company Reorganisations.
Initial reaction:
Overall, I think this is quite a sensible budget, although the increase in national insurance contributions is not going to encourage increased employment!
Biggest surprise?
Perhaps most surprising is that, instead of abolishing business asset disposal relief, the Chancellor has actually given an immediate boost to the relief. Since capital gains tax increases to 24% with immediate effect, but the BAD relief rate remains at 10% until next April, the potential saving per person is now 14%, i.e. up to £140,000 per person. The effective rate of saving will then reduce to £100,000 per person from April 2025 to April 2026, after which the saving will only be 6%, i.e. a maximum of £60,000 per person. This will probably give a boost to business sales over the next six months. One wonders whether this might be a deliberate ploy to boost capital gains tax receipts in January 2026?
The increase in CGT rates is not surprising and, indeed, I thought they might go as high as 30%, so I am pleasantly surprised.
Not included but should have been?
A new stamp duty replacement regime. There was extensive consultation in 2022-23, but nothing since last Autumn.
Co-author of Incorporating and Disincorporating a Business, and a contributor to our Tax Planning commentary.
Initial reaction:
A very risky mix of sensible and flawed! It’s a huge economic and political gamble – and the public will expect the Government to do more than just ‘keep the lights on’ with public services if they want to be elected for a second term.
Biggest surprise?
Not changing the rate of CGT on selling additional properties – this looked like an easy target to tax ‘secondary wealth’ and ‘unearned gains’, and is hard to understand in the wider context of a Labour Government policy in which the winter fuel allowance is abolished.
Not included but should have been?
Reversal of the winter fuel allowance abolition!
Author of Partnership Taxation.
Initial reaction:
A ‘budget for growth’ whose main tax-raising element adds £25Bn to the cost of employing people is a curious contradiction. And if the OBR is to be believed, the vast borrowings don’t seem likely to deliver much of the growth necessary to repay them. Yet again, it looks as if tomorrow’s taxpayers will be burdened with today’s expenditure, just as they were with PFIs.
Biggest surprise?
Probably, the modesty of rises in CGT. I’m not saying they should have been higher: I’m just (pleasantly) surprised that they weren’t.
Author of Bloomsbury’s Tax Rates and Tables.
Initial reaction:
Overall, Labour’s first Budget in over a decade did little to shock and awe, but it will leave businesses with much to consider, including whether they should absorb the upcoming national insurance increases, or pass those costs onto their customers.
Capital gains tax – as widely predicted – was targeted, with the main rates to rise from 10% and 20% to 18% and 24% respectively from 30 October 2024, while the rate of business asset disposal relief will increase to 14% from 6 April 2025 and 18% from 6 April 2026.
However, the most significant tax announcements related to employer’s national insurance contributions. From April 2025, the main rate of employer NIC will increase from 13.8% to 15%, while the secondary threshold will reduce from £9,100 to £5,000. Even with an increase in the employment allowance from £5,000 to £10,500, these changes are forecast to account for some £20 billion.
Biggest surprise?
The Budget contained a surprise measure concerning Making Tax Digital for income tax. Currently, sole traders and landlords with income over £50,000 will be mandated into MTD from April 2026, while those with income over £30,000 will enter from April 2027. Per Budget documents, this threshold will lower to £20,000 by the end of this Parliament, leaving more taxpayers to grapple with the regime.
Tax Director, PKF Francis Clark. Steve specialises in aspects of employment tax and the Construction Industry Scheme.
Initial reaction:
I am a little surprised. It is a bad Budget for employers, but I was worried it could be worse.
The changes to NI were as expected. The increase is not as much as I thought, but the lowering off the threshold to £5k is more than I expected. Some offsetting by the Chancellor with changing the Employment Allowance, not only from £5k to £10.5k, but also extending it to all employers and not just those paying employers NI of less than £100k.
I think those employers with a large number of lower paid employees are the ones most affected; especially those in the care sector, hospitality and the like; especially when you factor in NMW/NLW increases.
They have sneaked in the change to Double Cab Pickups, back to what the previous Government tried to do and those over 1 tonne payload will no longer be classed as vans, but a car. A big hit on the construction and agriculture industries.
We also have the compliance activity investment in HMRC and the focus on tackling Umbrella companies.
