Chancellor Rachel Reeves’s Autumn Budget: Key Takeaways for Young Professionals and Business Owners
Chancellor Rachel Reeves recently unveiled her first budget, packed with a series of measures aimed at raising over £40 billion to bolster public services and support investment. While the spotlight is on business-related tax increases, these measures will indirectly impact young professionals, limited companies, and SMEs. Here’s a breakdown of the key points and how they might affect you.
Inheritance Tax Changes
The inheritance tax threshold remains unchanged, meaning estates can still pass on £325,000 tax-free per parent, or £500,000 each if it includes a family home. The lack of adjustment to this threshold since 2009 has led to more estates being subject to tax each year, as asset values rise. By 2030, it’s expected that around 10% of estates will be subject to this tax, a notable increase.
In addition, inherited pension pots will now be taxable, closing the current loophole where these assets were passed tax-free if the owner passed away before age 75. For business owners, a significant change is the end of the agricultural and business property relief for inheritance tax. Instead, a £1 million cap will be applied from April 2026, with any assets above this level taxed at 20%.
Stamp Duty and Housing Market Adjustments
Stamp duty will see an increase, specifically targeting second-home purchases. While this is aimed at curbing demand for investment properties and giving first-time buyers a slight advantage, there is a risk that these costs could be passed onto renters. Additionally, the previous mini-budget’s higher thresholds for first-time buyers will revert in April 2025, meaning that buyers will again have to pay stamp duty on homes over £300,000.
National Insurance Hike
One of the most significant changes affecting businesses is the planned increase in employer national insurance contributions (NICs), which will rise to 15% from 13.8% in April 2025. While this won’t directly affect employees’ NICs, it will place additional costs on employers. The Office for Budget Responsibility suggests that about 60% of this cost could indirectly affect wages, with some of it potentially leading to higher prices for customers.
For SMEs and limited companies, this change could strain finances, especially for those in low-margin sectors. With additional NICs, businesses may struggle to fund wage increases or expand hiring, which could shift some businesses to explore self-employment options for workers as an alternative.
Minimum Wage Increase
The budget includes an increase in the national minimum wage, set to rise by 6.7% to £12.21 per hour for those over 21. Younger workers aged 18-20 will see an even larger increase to £10 per hour. This move is likely to benefit young professionals but could place additional strain on small businesses as they adjust to higher wage costs, potentially affecting hiring decisions.
What This Means for SMEs and Limited Companies
For SMEs and limited companies, these tax and contribution changes present a mixed bag. On one hand, there’s a clear push to drive more funding into public services, but on the other, there’s a real concern about the cost burden. The rise in employer NICs and the changes to inheritance tax relief on business assets could challenge growth and profitability, especially for smaller businesses. It’s important for businesses to review their payroll and long-term financial plans, considering ways to absorb or offset these added expenses.
How Exchange Accountants Can Help
Navigating these changes and their potential impacts can be daunting. At Exchange Accountants, we’re here to help you understand what the Autumn Budget means for your business or personal finances. Our team can work with you to assess how these tax changes might impact your operations and advise on strategies to optimize your tax position. Whether it’s adapting to new NIC requirements or planning for future inheritance tax liabilities, our goal is to provide you with proactive, practical guidance.
