What should UK businesses be expecting from the budget?

The budget on October 30th, has been a long time coming and will make history.  Not necessarily for its content but because it is also the first ever budget delivered by a female chancellor – 40 years after our first female Prime Minister.

Emboldened by their majority the Labour party is determined to enforce “change” and is happy to be unpopular in the process.  There has been so much media discussion about what the budget will deliver and the furore around what it will mean for so many.  Labour have sparked panic by suggestions of “a great deal of pain to come” and the policy void has inevitably been filled with speculation leading to savers and pension holders withdrawing funds in the hope that they can avoid paying increased taxes.

Labour have promised the UK that it will put economic growth at the heart of their policies.  In planning the budget the Chancellor, Rachel Reeves is walking a fine line between creating stability – her 10-year plan for growth – and delivering big tax increases to shore up our debt whilst reassuring the markets that any borrowing will deliver growth.  It could be argued that she has been releasing nuggets in advance to test the response.  

However, for businesses and consumers alike we want to know will she create the crucial growth that the UK economy needs.  The Government must be rueing the day it naively promised not to tax “working people” with rises to income tax, National Insurance and VAT – especially now that it claims the black hole has risen to £40 billion.

Rachel Reeves is expected to unveil several significant changes for businesses. Here's an outline of what we believe will be the primary areas likely to impact UK businesses:

1.  The Minimum Wage is set to rise again by an expected 6% which is in line with last year. The rise will most likely come in April 2025.  It is a move that will not be welcomed by many businesses who are struggling with rising costs and the news that employers’ national insurance levels are also set to rise.  There is always the furore that by raising the minimum wage it will reduce employment levels, but this rarely is the case.  However, businesses are struggling and only time will tell if they can bear the brunt of these changes.
2. Employers’ national insurance is set to increase by 2 percentage points as well as cutting the earnings threshold at which businesses start making national insurance contributions.  These combined measures will raise about £20 billion and will represent the biggest tax rise.  The burden will fall entirely on the private sector, with public sector employers such as the NHS and Government departments reimbursed by the Treasury. 
3. Business and Capital Gains Taxes: Reeves is anticipated to adjust capital gains tax (CGT) rates, potentially aligning them more closely with income tax rates. This change could affect business owners looking to sell assets or companies and could influence investment behaviours.
4. ​Income Tax threshold freeze:  Extending the deep freeze on income tax thresholds for another two years to 2030.  This is a hidden tax on “working people” as peoples wages continue to rise pushing more people into higher thresholds.   
5. Skills and Innovation Investment: Labour’s focus on “smart growth” will likely lead to support for training and development initiatives across industries, helping businesses boost workforce skills. A renewed emphasis on STEM (science, technology, engineering, and mathematics) education and green innovation is anticipated to further enhance the workforce and attract investments in sustainability-driven enterprises​
6. Non-Dom Tax Status: The Labour government is reviewing the tax status of non-domiciled individuals. Any tightening of this rule could raise significant revenue but may deter some high-net-worth individuals and companies from relocating to the UK. While Labour has suggested a cautious approach, the policy’s details are awaited​
7. VAT and E-invoicing for SMEs: A key anticipated measure is the expansion of VAT, notably with VAT on private school fees, which could impact related services. Additionally, the government is expected to roll out a new e-invoicing system, potentially simplifying compliance for SMEs while improving tax reporting and collection accuracy​Fiscal and Indirect Tax Adjustments: To tackle the national debt, Inheritance tax reform, possibly reducing exemptions on business and agricultural assets, is also under consideration, impacting family-owned businesses and generational wealth transfers​.  

Whatever the Chancellor delivers in her budget, our advice is for UK Businesses to take stock and advice before deciding how their businesses will respond.  We must hope that the budget will contain steps to promote business confidence and economic growth.