In the first Budget to be delivered by the Labour Party in 15 years, Chancellor Rachel Reeves cited a £40 billion ‘black hole’ in the nation’s finances as a reason for immediate change which included:
- A means-tested Winter Fuel Allowance.
- Increased capital borrowing flexibility for investments aimed at promoting economic growth.
- Introduction of VAT on private schooling, effective January 2025.
- A 6.7% increase in the national minimum wage, raising it to £12.21 for those over 21 and £10 for those aged 18-21.
- A £500 million investment in new social housing, £1.4 billion for schools, £10 billion for the NHS, and £1.8 billion for childcare.
- These measures represent a significant effort to address the UK’s economic challenges.
The Highlights
The Chancellor’s speech was longer than usual, accompanied by extensive supporting documentation. Here are some key highlights:
- Legislation will be introduced to tackle non-compliance in the umbrella company market, this will likely result in the recruitment agency being made ultimately responsible for ensuring the correct amount of PAYE and NICs is received by HMRC. Discussions over draft legislation will take place before possible implementation in April 2026.Employer NICs will rise to 15% in April 2025, with the threshold for contributions increasing from £9,100 to £5,000. To offset this, the Chancellor announced an increase in the Employment Allowance from £5,000 to £10,500, which could benefit some small employers.
- Fuel duty will remain frozen for another year.
- The main rates of Capital Gains Tax that applies to assets other than residential property is to rise, the lower rate will increase 8% to 18% and the higher rate will increase 4% to 24% for disposals made after Budget Day. These new rates will match the residential property rates, which are not changing.
- The limit for Business Asset Disposal Relief will remain at £1 million, while the Capital Gains Tax rate will rise by 4% starting in April 2025.
- A proposal to freeze Inheritance Tax at £325,000 (or £500,000 for direct descendants).
- Stamp Duty on secondary property purchases will increase by 2% to 5%, effective immediately.
- A Corporate Tax Roadmap was released alongside the Budget, outlining commitments to maintain the Corporation Tax rate at 25% for the entire parliamentary term, as well as to keep the small profits rate and marginal relief at their current levels and thresholds.
- For individual taxpayers, Ms. Reeves pledged to unfreeze the Income Tax thresholds starting in 2028, allowing them to increase in line with inflation once again.
With numerous measures to analyse and many changes set to take effect in the new financial year starting in April, the industry will need to dedicate time to understanding the impact of these reforms on contractors and agencies once the dust has settled on the budget.
Related article: Our predictions for the first Labour Budget
Labour introduced its key Employment Rights Bill to the Commons (on the 10th October), aimed at benefiting both the economy and employees by reducing unfair practices in the workplace and granting employees access to rights earlier in their career.
Deputy Prime Minister Angela Rayner stated, “This government is delivering the biggest upgrade to rights at work for a generation, boosting pay and productivity with employment laws fit for a modern economy.”
Labour Party Employment Rights Bill Revealed >