Rachel Reeves’ first Budget is the largest tax-raising Budget since 1993, with around £40bn being raised for government programmes of ‘national renewal’.
Following months of speculation, we finally know the details of what this Budget has in store. While it will take some time to fully examine and understand the implications of the measures announced, we can already predict the likely impact of many of these changes. 
For example, the announcement that changes will be made to business relief for Inheritance Tax (IHT) will potentially create a significant cashflow challenge for family businesses, having to distribute profits out from the business in the form of dividends subject to up to 39.35% Income Tax, to be able to fund the IHT payable.
When you factor in the 25% Corporation Tax as well, this could be a significant challenge for many businesses.
Pension funds are now also going to be chargeable to IHT, significantly increasing the number of taxpayers’ estates that are going to be liable to IHT.
And while criticising the growing ‘black hole’ in public finances, Labour created one of its own in trying to define a ‘working person’ when promising not to tax them. Those with assets and savings don’t fall into its economic definition, it seems.
In contrast to Jeremy Hunt’s Spring Budget, which saw cuts to National Insurance, this Budget takes us in reverse with NIC increases on employers, which will feed through to employees via an impact on wage rises and recruitment.
As well as increases to employers’ NIC, the National Minimum Wage will rise to accompany greater employer regulation, adding to the costs of any business that employs people.
And with frozen tax allowances, more people are likely to be dragged into paying tax, including pensioners. They remain frozen until 2028, rather than extended beyond that, as was expected.
In the Spring Budget there was a surprise 4% cut in the higher rate of Capital Gains Tax (CGT) on residential property disposals, but now we have another reversal with rates increasing again from April 2025 – although the residential property remains at the reduced 4%.
The continued fuel duty freeze is good news for businesses with high distribution costs, but overall businesses are likely to feel like they’ve been hit particularly hard.
A new corporate tax business roadmap will bring some clarity for businesses, but our immediate advice is that businesses should start reviewing their business model to see how they can accommodate higher wages and employment costs.
This should include reviewing their financial forecasts and budgets to see if they can streamline their operations to reduce costs.
