Breaking Down the Latest UK Budget: Key Takeaways and Impact on Individuals and Businesses

The latest UK Budget has introduced several significant changes aimed at balancing economic growth with fiscal responsibility. Here's a streamlined summary of the most impactful changes and what they mean for individuals and businesses alike in the government’s own words.

National Minimum Wage

To help tackle the rising cost of living, the national minimum wage will increase to £12.21. This change represents a substantial boost for lower-income earners, designed to provide more financial stability. This increase is likely to benefit millions, particularly in sectors with high numbers of minimum-wage workers, like retail, hospitality, and care.

No Tax Increase for “Working People”

In a bid to provide stability for working individuals, the Budget confirmed that there will be no increases in key personal taxes:

• VAT (Value Added Tax) remains the same.
• Employee National Insurance rates stay fixed.
• Income Tax brackets remain unchanged.

This decision reflects the government’s focus on preserving the disposable income of working households amid challenging economic times. With inflation affecting purchasing power, the decision not to raise these taxes offers some relief to the general workforce.

Employer National Insurance Contributions

Employers will see an increase in National Insurance contributions (NICs), rising to 15% from April 2025. Additionally, the threshold at which employers start paying NI will be lowered from £9,100 to £5,000, a significant change intended to increase revenue.

• Revenue Target: This measure aims to raise £25 billion, which will help fund essential services and reduce the national debt.
• Impact on Businesses: While this will undoubtedly increase costs for employers, the government has introduced measures to mitigate its impact on small businesses, notably by raising the Employment Allowance to £10,500. This allowance increase will help smaller companies offset some of the added employer NI burden, particularly in sectors that are already financially stretched.

Capital Gains Tax (CGT) Rate Increases

The Budget has raised both the lower and higher rates of Capital Gains Tax:

• Lower rate: Increased to 18%
• Higher rate: Increased to 24%

These changes reflect the government’s intent to generate additional revenue from investments and asset sales. For property investors, landlords, and those selling high-value assets, these adjustments could mean a considerable increase in the tax payable on gains, especially with rising property values over recent years.

Reforms for Non-UK Domiciled Individuals

A major shift in the taxation landscape is the abolition of the remittance basis of taxation for non-UK domiciled individuals. Starting from 6 April 2025, a new residence-based regime will take effect, aimed at simplifying tax rules for international residents.

• Key Feature: Under this regime, individuals opting in will not pay UK tax on their foreign income and gains for the first four years of their tax residency.
• Impact: This approach is intended to make the UK a more attractive destination for international talent by removing the complexity of remittance-based taxation, potentially encouraging longer-term stays and investments from foreign residents.

Stamp Duty Changes for Additional Properties

In a bid to address housing affordability and cut down multiple property ownership, the government has raised the higher rates for additional dwellings in Stamp Duty Land Tax. This rate, applicable to second homes, buy-to-let properties, and properties bought by companies, will rise from 3% to 5%, effective immediately.

• Objective: The increase seeks to reduce the number of second homes and investment properties, potentially freeing up more properties for first-time buyers and primary residents.
• Implications: While this may make it costlier for investors and those looking to buy additional properties, it’s a positive move for prospective homeowners struggling with high prices in the housing market.

Welfare Reforms and New Cap

Looking toward the future, the Budget introduced a new welfare spending cap set for 2029-30.  By implementing stricter control measures, the government expects to save £4.3 billion per year. The welfare cap will primarily target reductions in fraud and error, reflecting a commitment to make the welfare system more sustainable without affecting those in genuine need.

Business Rates Relief for Key Sectors

The retail, hospitality, and leisure sectors, which have been particularly affected by recent economic challenges, will benefit from changes to business rates: The small business multiplier will remain frozen and from 2026-27, businesses in these sectors will receive a 40% relief on their rates bills.

This support aims to help these sectors recover and remain viable, especially as they continue to feel the effects of inflation and changing consumer spending habits.

Conclusion

The latest UK Budget introduces targeted measures designed to generate additional revenue, support lower-income workers, and provide relief to small businesses. By balancing increased taxes on certain types of income and assets while protecting the working population from direct tax hikes, the government aims to address pressing economic needs without overburdening households.