Businesses are set to face higher costs after Chancellor Rachel Reeves unveiled increased employer national insurance contributions in the Labour government’s Autumn Budget on Wednesday. The Chancellor framed her decisions around the need to catalyse investment to deliver improved living standards, public services and a growing economy.

To help protect ‘working people’, the Chancellor announced increased borrowing and tax rises that were primarily focused on businesses and asset taxes rather than taxes that would affect a worker’s payslip.

Rises to capital gains tax were less than many speculated but will likely impact individuals with savings outside of an ISA or pension.

Irene Wolstenholme, Wealth Planning Specialist at Coutts, the bank behind our customers’ investments, including Royal Bank Invest, said: “With there being so much speculation in the build up to the Budget, we now have the details to start understanding the impact these changes will have on personal finances.

“The rise to employer national insurance contribution is expected to raise over £20 billion a year which should account for the majority of what the government wanted to raise. This has meant many of the other speculated changes did not come to fruition.”

Employer national insurance rise

Employer national insurance contributions (NIC) are set to rise by 1.2% to 15% from April 2025. The secondary threshold, the amount at which an employer starts paying NICs on an employee’s earnings, will fall from £9,100 to £5,000. 

Support for businesses  

To help smaller businesses reduce outgoings, the Employment Allowance – the amount a business can save on National Insurance – will increase from £5,000 to £10,500. The annual investment allowance and full expensing were also retained. 

Corporation tax capped at 25%

As mentioned as part of Labour’s manifesto prior to the UK election, corporation tax is being capped at 25% for the remainder of this Parliament.

In addition, the Government published a “Corporate Tax Roadmap” which is designed to give companies more certainty about the future for Corporation Tax.

Inheritance tax for business owners

From April 2026, individuals inheriting unquoted trading businesses worth over £1 million will effectively be subject to 20% inheritance tax on the amount that exceeds £1 million. Business property relief (BPR) and agricultural property relief (APR) will apply to businesses and farms worth under £1 million which will continue to receive 100% relief. 

Capital gains tax raised

Reeves is raising the lower rate of capital gains tax (CGT) to 18% up from 10%, and the higher rate has been increased to 24% from 20% with immediate effect. This means any investment sales from today will attract the new higher rates.  

Inheritance tax ‘nil-band rate’ unchanged

The ‘nil-band rate’ for inheritance tax (IHT) will remain at £325,000 for a further two years until 2030. This is the amount that can be gifted or inherited during a lifetime or death without paying tax. With this allowance being kept at the same level, rather than rising with inflation, more wealth is likely to breach this threshold and therefore trigger IHT payments. 

There is also an effective 20% rate for shares in AIM-listed companies that were previously subject to full relief from IHT.

Pensions to be incorporated into IHT

Inherited pensions will be brought into inheritance tax from April 2027. 

Rise in CGT for carried interest

Capital gains tax on carried interest – a share of profits generally paid to the partner of a private equity company – will be raised from 28% to 32% in 2025, and then raised again in 2026. 

VAT on private school fees

Reeves is introducing VAT on private school fees from January 2025. The government also plans to introduce legislation to remove their business rates relief from April 2025. 

Increased Stamp Duty surcharge 

From 31 October 2024, second homes purchased in England and Wales will incur an increased Stamp Duty Land Tax (SDLT) surcharge of 5%, upped from 3%. This will result in the maximum SDLT rate being upped from 15% to 17% for properties bought for over £1.5 million. 

Non-doms tax regime ending

Currently, those not domiciled in the UK have a special tax regime if they have lived in the UK for fewer than 15 years.

From April 2025, the term ‘domicile’ will be removed from the tax system. Instead, if you have been a non-resident in the UK for at least 10 complete tax years, a new regime will apply to you for the first four years you are a UK resident. If you elect for this regime, any foreign income and gains you may receive during the time will not be taxable in the UK. 

After you have lived in the UK for four years, you will be taxed on your world-wide income and gains. 

If you were previously not domiciled in the UK, you might have funds outside of the UK which would be taxed if you remitted them to the UK. There will be a Temporary Repatriation Facility (TRF) which allows you to declare this overseas income and gains, bringing them to the UK at a much lower rate. 

From April 2025, people who have been UK residents for no more than 10 years out of the previous 20 will be subject to IHT only on UK assets. 

Markets broadly responded positively to the Budget, said Lilian Chovin, Head of Asset Allocation at Coutts, with much of the announcements being ‘highly anticipated’. 

Lilian explained: “In the build up to Wednesday, investors were focusing on how the government would balance announcing infrastructure investments, requiring increased borrowing without compromising fiscal stability.”

The positive market response suggests investors are more optimistic about the potential growth of the UK. The FTSE 100, which is comprised of globally focused companies, dipped -0.5% by the middle of the afternoon’s trading. However, the more domestically focused FTSE 250 climbed by more than 1.5% at one point – lead by economically sensitive companies like homebuilders, affirming some improving prospects in the future of the UK’s economy.

What does this mean for the UK economy?

The Office for Budget Responsibility (OBR) said that this Budget delivers a large, sustained increase in spending, borrowing and taxation. 

UK economic growth forecasts by the OBR are more optimistic than those from the Bank of England and sees GDP to grow by 2% next year and 1.8% in 2026. 

The OBR expects inflation to rise to 2.6% in 2025 and gradually come down to the central bank's 2% target by 2029. 

How are our funds and portfolios positioned?

At Coutts, our stock holdings are positioned globally, enabling us to access opportunities worldwide. We continue to favour equities over bonds in light of solid US economic growth and company earnings.

Past performance should not be taken as a guide to future performance. The value of investments, and the income from them, can fall as well as rise and you may not get back what you put in. You should continue to hold cash for your short-term needs.

We're here to help, but please be aware that we cannot offer any tax advice. We recommend you contact an independent tax advisor to discuss your personal tax situation.

Tax reliefs referred to are those applying under current legislation which may change. The availability and value of any tax reliefs will depend on your individual circumstances.