The first Budget from a Labour government in over 14 years reflects the financial strain we have been briefed to expect.

“…And the only way to drive economic growth… is to invest, invest, invest.” So said Rachel Reeves, early on in her first Budget on 30 October. Those who kept listening learned, however, that invest, invest, invest would only follow borrow, borrow, borrow and tax, tax, tax. There were three major tax highlights with a range of potential consequences.

Employer’s national insurance contributions (NICs)

There were two main increases and one small mitigation. From 2025/26:

• The main rate will rise from 13.8% to 15.0%.
• The secondary earnings threshold, below which no employer’s NICs are levied, will fall from £9,100 to £5,000 and be frozen until April 2028.
• The employment allowance, effectively an annual NIC rebate, will rise from £5,000 to £10,500. However, this remains unavailable for companies with a single director employee or if the employee is providing domestic services (e.g. a nanny).

Combined with a 6.7% increase in the National Living Wage from April 2025, the higher NICs will mean a significant additional cost for employers, particularly those operating in low wage sectors, such as retail and hospitality.

One notable upshot is that salary sacrifice schemes involving low emission cars or pension contributions will be more attractive from 2025/26 because of the employer NIC savings they offer.

Capital gains tax (CGT)

Changes to CGT proved to be less dramatic than some had predicted:

• The main rates rose from 10% to 18% for basic- and nil-rate taxpayers and from 20% to 24% for higher- and additional-rate taxpayers, effective from Budget day. The move brings the rates into line with those already applying to residential property.
• The rate for business assets disposal relief (BADR) will increase from 10% to 14% for 2025/26 and 18% thereafter, while the BADR lifetime limit stays at £1 million.

Inheritance tax (IHT)

Like CGT, changes to IHT were widely predicted, and they lived up to, if not exceeded, expectations:

• The nil-rate band (£325,000 since 6 April 2009), residence nil-rate band (£175,000 since 6 April 2020) and its taper threshold (£2 million since 6 April 2017) will all be frozen for a further two years, until 6 April 2030.
• From 6 April 2026, 100% agricultural relief and 100% business relief will be capped at a non-transferable £1 million. Above that level, relief will be at 50%. From the same 2026 date, relief on certain shares listed on the AIM will be halved to 50% in all instances.
• From April 2027, death benefits from pension arrangements (including death in service benefits) will be included in the estate for IHT purposes, meaning that in some instances, they will be liable to both income tax and inheritance tax.

These changes will make little difference for some people, but will upend estate planning for others, something examined further in ‘Time to review your estate planning?’.