Personal taxation Archives

Chancellor Rachel Reeves’ first budget: New policies to boost UK economy

Posted on 31 October 202428 March 2025 by Sophie Soraf

“Our mission to grow the economy”

Chancellor of the Exchequer, Rachel Reeves, delivered the Labour government’s first Budget on 30 October with a promise to “restore economic stability” and “invest, invest, invest” to promote growth. In her statement, she outlined a number of new tax and spending measures that she said would create “an economy that is growing, creating wealth and opportunity for all.” In total, the Budget will see taxes rise by £40bn.

Economic forecasts

The Chancellor stressed that every Budget she delivers “will be focused on our mission to grow the economy” and outlined seven pillars that will form the government’s growth policy priorities. Key among these is restoring economic stability and increasing investment, while other areas include boosting regional growth, improving skills across the workforce, creating an industrial strategy, driving innovation and transitioning to Net Zero.

Ms Reeves then unveiled the Office for Budget Responsibility’s (OBR’s) latest economic projections, which suggest the economy will expand slightly faster than previously expected both this year and next, before easing off from 2026 onwards. The new forecast predicts the economy will grow by 1.1% in 2024 and 2.0% next year, before falling back to 1.6% by the end of this Parliament. Overall, the OBR noted that, although the policies in the Budget will ‘temporarily boost’ the economy, the overall level of output will be ‘broadly unchanged’ over the five-year forecast period. Inflation is predicted to average 2.5% this year and 2.6% in 2025.

Cost-of-living measures

The Chancellor acknowledged the burden that the cost-of-living crisis has placed on working people, and committed to:

Increasing the National Living Wage (NLW) from £11.44 to £12.21 per hour from April 2025 – a 6.7% increase
Increasing the minimum for 18 to 20-year-olds from £8.60 to £10 per hour (over time, the intention is to create a single adult NLW rate)
Freezing fuel duty for one year and extending the temporary 5p cut to 22 March 2026
Increasing the weekly earnings limit for Carer’s Allowance to equate to 16 hours at the NLW rate
Providing £1bn for local authorities to support those in immediate hardship and crisis.

Personal taxation, savings and pensions

As pledged in the Labour manifesto, there are to be no changes to the basic, higher or additional rates of Income Tax, employee National Insurance contributions (NICs) or VAT.

As previously announced, the government has committed to maintain the State Pension Triple Lock for the duration of this Parliament, meaning that the basic and new State Pensions will increase by 4.1% in 2025-26, in line with earnings growth. This means £230.30 a week for the full, new flat-rate State Pension (for those who reached State Pension age after April 2016) and £176.45 a week for the full, old basic State Pension (for those who reached State Pension age before April 2016).

The lower and higher main rates of Capital Gains Tax (CGT) will increase to 18% and 24% respectively for disposals made on or after 30 October 2024. The rate for Business Asset Disposal Relief and Investors’ Relief will increase to 14% from 6 April 2025 and then to 18% from 6 April 2026. The lifetime limit for Investors’ Relief will be reduced to £1m for all qualifying disposals made on or after 30 October 2024, matching the lifetime limit for Business Asset Disposal Relief.

Inheritance Tax (IHT) nil-rate bands will stay at current levels until 5 April 2030 (previously 2028). The nil-rate band remains at £325,000, residence nil-rate band at £175,000, and the residence nil-rate band taper starts at £2m. Unused pension funds and death benefits payable from a pension will be subject to IHT from 6 April 2027.

The government intends to reform Agricultural Property Relief and Business Property Relief from 6 April 2026. In addition to existing nil-rate bands and exemptions, the current 100% rates of relief will continue for the first £1m of combined agricultural and business property. Thereafter, the rate of relief will be 50%, including for quoted shares which are ‘not listed’ on the markets of recognised stock exchanges, such as AIM. From 6 April 2025, Agricultural Property Relief will be extended to land managed under an environmental agreement with, or on behalf of, the UK government, devolved governments, public bodies, local authorities, or approved responsible bodies.

The concept of domicile status is to be removed from the tax system and replaced with a residence-based regime from 6 April 2025. This includes ending the use of offshore trusts to shelter assets from IHT and scrapping the planned 50% tax reduction for foreign income in the first year of the new regime. Individuals who opt in to the regime will not pay UK tax on foreign income and gains (FIG) for the first four years of tax residence.

In England, higher rates of Stamp Duty Land Tax (SDLT) which apply to purchases of second homes, buy-to-let residential properties and companies purchasing residential property, increase from 3% to 5% above the standard residential rates, effective 31 October 2024. The single rate of SDLT that is charged on the purchase of dwellings costing more than £500,000 by corporate bodies will also be increased by two percentage points, from 15% to 17%.

In addition:

Annual subscription limits will remain at £20,000 for ISAs, £4,000 for Lifetime ISAs and £9,000 for Junior ISAs and Child Trust Funds until 5 April 2030. The government will not proceed with the British ISA due to mixed responses to the consultation launched in March 2024
The Enterprise Investment Scheme and Venture Capital Trust schemes are extended to 2035
The Income Tax Personal Allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028. From April 2028, these personal tax thresholds will be uprated in line with inflation (rates and thresholds may differ for taxpayers in parts of the UK where Income Tax is devolved)
Working age benefits will be uprated in full in 2025-26 by the September 2024 Consumer Prices Index (CPI) inflation rate of 1.7%
The starting rate for savings will be retained at £5,000 for 2025-26.

Business measures

In her speech, Ms Reeves said, “we are asking businesses to contribute more” to raise revenues required to fund public services. She added, “I do not take this decision lightly,” before announcing:

An increase in employers’ National Insurance Contributions (NICs) by 1.2 percentage points to 15% from April 2025
A reduction of the secondary threshold from £9,100 per year to £5,000 per year
An increase to the Employment Allowance from £5,000 to £10,500
The introduction of two permanently lower business rates for retail, leisure and hospitality businesses from 2026-27, funded by a higher multiplier for the most valuable properties
£1.9bn of support to small business and the high street in the form of a freeze on the small business multiplier and 40% rates relief for retail, hospitality and leisure properties (capped at £110,000)
£250m in funding for the British Business Bank’s small business loans programmes
The headline rate of Corporation Tax will be capped at 25%.

Health and education

To round off her inaugural Budget, Ms Reeves turned her attention to “two final areas in which investment is so badly needed to repair the fabric of our nation.”

As indicated in the Party’s election manifesto, the Chancellor confirmed plans to introduce VAT on private school fees (except for children below compulsory school age) from January 2025, and to remove private schools’ business rates relief from April 2025.

Funding for the state school system is set to increase by £11.2bn from 2023-2024 levels – a 3.5% real terms increase. This includes:

Increasing funding for day-to-day school spending by £2.3bn, £1bn of which is earmarked for pupils with special educational needs and disabilities (SEND)
£1.8bn to continue the expansion of government-funded childcare
£30m to fund thousands more breakfast clubs in primary schools
Investing in new teachers for core subjects
£300m for further education.

Ms Reeves also announced a £6.7bn capital funding package for education in England in 2025-26, a real terms increase of 19% from 2024-25, including £1.4bn towards rebuilding over 500 schools in the greatest need.

Lastly, the Chancellor tackled her plans for the National Health Service, announcing:

A 10-year plan for the NHS, to be published in the spring
A £22.6bn increase in the day-to-day health budget to deliver on the government’s 18-week waiting time target
£3.1bn increase in the capital budget over this year and the next.

Other key points

Help to Save scheme – extended until April 2027
Alcohol duty – tax on non-draught alcoholic drinks to increase by the usually higher RPI measure of inflation, tax on draught drinks cut by 1.7%
Vaping products duty – new tax of £2.20 per 10ml of vaping liquid introduced from October 2026
Tobacco duty – to increase by 2% above RPI on all tobacco products and 10% above inflation for hand-rolling tobacco with immediate effect
Bus fares – £2 cap on single fares in England to rise to £3 from January 2025
Clean energy sector – £3.9bn of funding in 2025-26
Air Passenger Duty (APD) – increased for 2026-27, £1 more for domestic economy flights, £2 more for short-haul economy flights and £12 more for long-haul destinations. The higher rate applicable to private jets will rise by 50% in 2026-27
Devolved government funding – to receive an additional £6.6bn through the operation of the Barnett formula in 2025-26 (£3.4bn for the Scottish Government, £1.7bn for the Welsh Government and £1.5bn for the Northern Ireland Executive)
Expanding government-funded childcare support – an additional £1.8bn pledged for working parents in England, bringing total spending on childcare to over £8bn in 2025-26.

Closing comments

Rachel Reeves signed off her Budget saying, “I have made my choices, the responsible choices, to restore stability to our country, to protect working people… Fixing the foundations of our economy. Investing in our future. Delivering change. Rebuilding Britain.”

It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding of the Budget, taxation and HMRC rules and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

All details are believed to be correct at the time of writing (30 October 2024)

This material is intended to be for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. Tees is a trading name of Tees Financial Limited which is regulated and authorised by the Financial Conduct Authority. Registered number 211314.

Tees Financial Limited is registered in England and Wales. Registered number 4342506.

October 2024 budget: What does it mean for individuals and businesses?

Posted on 2 October 202429 March 2025 by Sarah O'Sullivan

As Rachel Reeves prepares to deliver her first budget as Chancellor of the Exchequer on 30 October, businesses and individuals are bracing for significant economic shifts. With an apparent £22 billion deficit, Reeves is expected to announce a range of measures aimed at driving growth while maintaining monetary responsibility.

Reeves is favouring real-term growth in public spending through a combination of tax increases and selective borrowing. These policy adjustments will have broad implications for taxpayers, businesses, and many more.

As a leading firm in legal and financial advisory services, Tees offer expert advice and solutions for individuals and companies looking to understand the impact of the proposed measures.

Potential budget highlights

Income tax adjustments

Reeves is likely to adjust income tax thresholds, potentially pushing more earners into higher tax brackets. With the Institute for Fiscal Studies (IFS) estimating that lowering the personal allowance or basic-rate limit by 10% could yield billions, those in higher brackets need to prepare for greater tax liabilities.

Pension tax relief reforms

Significant reforms to pension tax relief could be on the table, with the potential to raise up to £15 billion annually. These changes are expected to affect those benefitting from higher-rate tax relief, potentially making pension contributions more costly for both individuals and employers.

Capital gains tax (CGT) increases

Reeves may also increase CGT rates or broaden the taxable base, potentially aligning it more closely with income tax. While this could generate revenue, it risks impacting investment portfolios.

Inheritance tax (IHT) adjustments

Changes to IHT, particularly around pensions, business assets, and agricultural land, are expected to raise additional revenue. Caps on exemptions and potential reforms to relief on Alternative Investment Market (AIM) shares could have a significant impact on estate planning.

Fuel duty increases and environmental taxation

Ending the freeze on fuel duty could raise £6 billion annually, a move aligned with environmental goals. This may impact businesses with high fuel consumption, particularly in logistics and transport sectors.

Windfall taxes on banks and private equity

The October budget may introduce windfall taxes on banks and higher taxes on private equity profits, targeting the substantial gains these sectors have seen amid rising interest rates.

Windfall Taxes on Banks – As banks benefit from widened net interest margins, a proposed one-off windfall tax could significantly impact their profitability and lending capacity. While this measure aims to generate revenue for the Treasury, it may lead to reduced lending, particularly affecting small and medium-sized enterprises (SMEs) that rely on bank financing.
Increased Taxes on Private Equity Profits – Reeves is also expected to align the taxation of carried interest in private equity with income tax rates, currently at 28%. This could discourage investment in higher-risk ventures and shift private equity firms toward lower-return strategies, potentially slowing innovation and start-up funding in the UK.

Revised fiscal rules

Reeves may introduce or revise fiscal rules, creating space for increased investment without destabilising public finances. Businesses looking to benefit from potential growth areas, including green infrastructure and housing, will need strategic advice to take full advantage of these opportunities.

As the UK prepares for Reeves’ budget, Tees is ready to assist clients in understanding and responding to the challenges and opportunities presented by these potential measures. Our team of legal and financial experts are equipped to provide tailored advice, helping businesses and individuals alike plan in a changing economic environment.

About Tees

Tees is a leading UK-based legal and financial advisory firm with over 110 years of experience. It offers expert services in a wide range of areas, including tax planning, wealth management, corporate law, and estate planning.

Our team of specialists can help individuals and businesses navigate complex legal and financial matters, ensuring they are well-positioned for the future.

We provide bespoke financial planning, pension advice, wealth management, estate planning, and corporate law services, helping clients adapt to changing regulations, maximise their financial potential, and achieve their long-term goals. Additionally, we can assist businesses in transitioning to greener alternatives, managing the financial impact of increased fuel duties, and capitalising on new government investments.

This material is intended for information purposes only and is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice or investment recommendations. Past performance is not a reliable indicator of future returns, and all investments involve risks. Some information quoted was obtained from external sources we consider to be reliable.

Tees is a trading name of Stanley Tee LLP, regulated by the Solicitors Regulatory Authority. Registered in England and Wales, number OC327874

Tees is a trading name of Tees Financial Limited which is authorised and regulated by the Financial Conduct Authority. Registered number 211314. Tees Financial Limited is registered in England and Wales. Registered number 4342506.

Spring Budget 2023

Posted on 16 March 202329 March 2025 by Sarah O'Sullivan

Chancellor of the Exchequer, Jeremy Hunt, delivered his first spring budget on the 15th of March declaring it was “A budget for growth.” The fiscal update included a range of new measures, some of which had been widely trailed prior to budget day, in order to achieve growth “by removing obstacles that stop businesses investing; by tackling labour shortages that stop them recruiting; by breaking down barriers that stop people working; and by harnessing British ingenuity to make us a science and technology superpower.”

OBR forecasts

The Chancellor began his statement by unveiling the latest economic projections produced by the office for budget responsibility (OBR) which he said showed the UK would meet the Prime Minister’s priorities to “halve inflation, reduce debt and get the economy growing.” In relation to the first priority, Mr Hunt said the latest OBR figures suggest inflation will fall from an average rate of 10.7% in the final quarter of last year to 2.9% by the end of 2023. This sharp decline is partly due to some of the chancellor’s budget measures, including the three-month extension to the household energy price guarantee (EPG), which the government had confirmed earlier in the day.

Mr Hunt also said the OBR forecast suggests the UK economy will now avoid a technical recession this year (defined as two consecutive quarters of economic decline) and then expand in each of the remaining years of the five-year forecast period. According to the updated figures, the economy is expected to shrink by 0.2% this year, a significant upgrade from last autumn’s forecast of a 1.4% contraction, with growth then predicted to hit 1.8% in 2024 and 2.5% in 2025, before easing back towards its medium-term potential growth rate of 1.75% by 2028.

The Chancellor’s growth strategy focuses on the four pillars ‘everywhere, enterprise, employment and education,’ as previously outlined in his Bloomberg speech in January.

Everywhere

Mr Hunt spoke about the government’s plans for ‘levelling up,’ including the launch of 12 new investment zones. Across these “12 potential Canary Wharfs,” £80m of support per zone will be available for skills, infrastructure and tax reliefs. Mr Hunt also mentioned specific projects selected for local investment, including:

£200m for local regeneration projects and £400m for new levelling up partnerships across England
£8.8bn over the next five-year funding period for the city region sustainable transport settlements
Up to £8.6m for the Edinburgh festivals, as well as £1.5m for the repair of Cloddach bridge, near Elgin, and £20m for the restoration of the Holyhead breakwater in Anglesey
Up to £3m to extend the tackling paramilitarism programme in Northern Ireland.

Enterprise

To provide the right conditions for businesses to succeed: A ‘full expensing’ policy will apply from the 1st of April 2023 until the 31st of March 2026 to allow investment in IT, plant or machinery to be deducted in full and immediately from taxable profits
an increased rate of relief for loss-making research and development (R&D)-intensive small and medium size enterprises (SMEs) – eligible companies will receive a £27 credit from HMRC for every £100 of R&D investment
an extension of higher reliefs for theatres, orchestras, museums and galleries for two further years
the medicines and healthcare products regulatory agency (MHRA) will receive £10m extra funding over two years
all of the recommendations from Sir Patrick Vallance’s review of pro-innovation regulation of digital technologies are accepted
£900m of funding for AI research resources and an exascale computer as well as a commitment to £2.5bn ten-year quantum research and innovation programme through the government’s new quantum strategy
innovation accelerators programme – £100m funding for 26 transformative R&D projects
AI challenge prize – £1 million prize every year for the next ten years to researchers that drive progress in critical areas of AI.

Employment

The Chancellor turned next to employment, with a suite of new measures to “remove the barriers that stop people who want to from working.” To achieve this, he announced:

Mature workers

The expansion of the DWP’s ‘midlife’ MOT scheme, aiming to reach up to 40,000 individuals per year (up from the current 8,000)
new ‘returnerships’ scheme to make existing skills programmes more accessible to older workers and help them upskill and retrain
a pension tax relief overhaul; see details in the personal taxation and pensions section.
people with long-term illnesses and disabilities
a white paper on disability benefits reform
the abolition of the work capability assessment for disability benefits claimants
a new voluntary employment scheme for people with disabilities
£406m to increase support for working adults with mental health, musculoskeletal and cardiovascular problems.

Welfare recipients

An increase to the Administrative Earnings Threshold
a stronger sanctions regime for universal credit claimants.

Care leavers

A 50% increase in funding for the staying close programme
an increase in the qualifying care relief threshold to £18,140 per year plus £375 to £450 per person cared for per week for 2023/24 and these thresholds will then be index-linked, representing a tax cut worth approximately £450 per year on average.

Education

Mr Hunt then turned to Education, stating that he wants to reform the childcare system, currently “one of the most expensive systems in the world.”

His new proposal will offer 30 free hours of childcare each week to pre-school-age children aged nine months or above in English households where both parents work. It will be phased in on the following timeline:

April 2024 – eligible two-year-olds will receive 15 hours of free childcare per week
September 2024 – qualifying children aged nine months to two years will receive 15 hours
September 2025 – eligible children aged nine months to three years will receive 30 hours.

Also, schools and local authorities will be funded to increase the availability of wraparound care, to enable parents of school-age children to drop them off between 8 am and 6 pm.

To tackle the problem of unaffordable upfront costs, Mr Hunt also announced support for the 700,000 families on universal credit. Another major change involves each staff member in England being able to look after five two-year-olds instead of four, as is already the case in Scotland.

Personal Taxation and Pensions

To encourage over-50s to extend their working lives, the government is increasing tax relief limits on pension contributions and pots – the annual allowance will be raised from £40,000 to £60,000 from April 2023; the lifetime allowance (LTA) charge will be removed from April 2023, and the LTA will be abolished from April 2024. The maximum amount that can be accessed tax free (pension commencement lump sum) will be frozen at its current level of £268,275 (25% of current LTA). From April, the minimum tapered annual allowance (TAA) and the money purchase annual allowance (MPAA) will increase from £4,000 to £10,000 and the adjusted income threshold for the TAA will also rise, from £240,000 to £260,000.

As a reminder, the following changes were previously announced in the Autumn statement 2022:

The income tax additional rate threshold (ART) at which 45p becomes payable is lowered from £150,000 to £125,140 from April 2023. The ART for non-savings and non-dividend income will apply to taxpayers in England, Wales and Northern Ireland
the dividend allowance reduces from £2,000 to £1,000 from April 2023 and to £500 from April 2024
the annual capital gains tax exemption reduces from £12,300 to £6,000 from April 2023 and to £3,000 from April 2024
The stamp duty land tax nil-rate threshold for England and Northern Ireland is £250,000 for all purchasers and £425,000 for first-time buyers, remaining in place until 31 March 2025.

In addition:

The income tax personal allowance and higher rate threshold remain at £12,570 and £50,270 respectively until April 2028 (rates and thresholds may differ for taxpayers in parts of the UK where income tax is devolved)
the basic state pension will increase in April 2023 from £141.85 per week to £156.20 per week, while the full new state pension will rise from £185.15 to £203.85 per week. The standard minimum income guarantee in pension credit will also increase in line with inflation from April 2023 (rather than in line with average earnings growth)
inheritance tax (IHT) nil-rate bands remain at £325,000 nil-rate band, £175,000 residence nil-rate band, with taper starting at £2m – fixed at these levels until April 2028
national insurance contributions (NICs) upper earnings limit (UEL) and upper profits limit (UPL) are frozen until April 2028
The ISA (individual savings account) allowance remains at £20,000 and the JISA (junior individual savings account) allowance and child trust fund annual subscription limits remain at £9,000.

Other key points

Potholes fund – an extra £200m for local road maintenance in England in 2023/24
alcohol duty – rates frozen until August 2023 then uprated by RPI, draught relief increased to 9.2% for beer and cider and 23% for wine from 1 August 2023
fuel duty rates – maintaining the rates of fuel duty at the current levels for an additional 12 months
defence spending – an extra £4.95bn for defence over 2023/24 and 2024/25
support for veterans – an additional £33m over the next three years
swimming pool support fund – over £60m for public swimming pools across England
support for charities and community organisations – £100m (England)
plastic packaging tax rate – uprated in line with CPI from 1 April 2023
launching ‘great British nuclear’ – supporting new nuclear builds, £20bn available for carbon capture, utilisation and storage (CCUS), and extending the climate change agreement scheme for a further two years
devolved administrations – receiving an additional £630m through the Barnett formula over 2023/24 and 2024/25 (Scottish government £320m, Welsh government £180m and Northern Ireland executive £130m).

Closing comments

Jeremy Hunt signed off his announcement saying, “today we build for the future with inflation down, debt falling and growth up. The declinists are wrong and the optimists are right. We stick to the plan because the plan is working.”

If you have any queries or need more information on any of the areas covered, or any other financial matter, please do not hesitate to contact us.

Information within this document is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on individual circumstances.

All details are believed to be correct at the time of writing (15 March 2023)