Two changes are likely to most significantly impact our clients – for businesses, employers national insurance is increasing. However, for small employers with just two or three employees the impact is likely to be minimal. Larger employers will suffer significantly. For employees, non-dom status is being abolished and replaced by a much simpler regime. But this regime can only be used for up to 4 years.
These changes, and the other main changes that are likely to impact our clients are briefly summarised below. The full budget can be found here.
Employer National Insurance Contributions (NICs)
Employer’s National Insurance (known as Secondary Class 1 NICs) will increase from 13.8% to 15%. The threshold at which Employer’s NI is paid (known as the Secondary Threshold) will reduce from £9,100 to £5,000. To mitigate this, the Annual Employment Allowance (which can be used to offset Employer’s NI) will increase from up to £5,000 to £10,500. These changes will be effective 6 April 2025.
The impact of this will mean that, for example, for each employee on a £40k salary the employer will pay an additional £986 NI.
| Now | Future | |
| Salary | 40,000 | 40,000 |
| Secondary threshold | (9,100) | (5,000) |
| Subject to Employers NI | 30,900 | 35,000 |
| Rate | 13.8% | 15.0% |
| Employer’s NI | 4,264 | 5,250 |
However, this will be offset by the increase in Annual Employment allowance, so that small employers with say 3 or 4 people on £40k may not be adversely impacted.
Changes to the Non-Dom Regime
As announced by the Conservative Government, the Non-Dom regime will be replaced with the “FIG” regime from 6 April 2025. The FIG (Foreign Income and Gains) regime will apply for up to 4 years for UK tax residents that came to the UK after being resident abroad for 10 consecutive years. FIG allows for foreign income and gains to be excluded from UK tax. However, the regime needs to be applied for and the amount of FIG needs to be disclosed on the tax return. Those claiming FIG will not be entitled to personal allowances for income and CGT.
For Capital Gains Tax purposes, current and past remittance basis users will be able to rebase personally held foreign assets to 5 April 2017.
Overseas Workday Relief will be extended from three to four years, and the need to keep overseas income offshore removed. The amount claimed annually will be limited to the lower of £300,000 or 30% of the employee’s net employment income.
Inheritance Tax
IHT rules will be changed so that they follow residency (not domicile) so that people resident for 10 out of 20 years will be caught by UK IHT. The nil-rate band will continue at £325,000 and the residence nil-rate band will continue at £175,000 until 5 April 2030. The residence nil-rate band taper will continue to start at £2 million. Qualifying estates can continue to pass on up to £500,000 and the qualifying estate of a surviving spouse or civil partner can continue to pass on up to £1 million without an inheritance tax liability.
Capital Gains Tax (CGT)
- CGT rates will increase from 10% to 18% (lower rate) and from 20% to 24% (higher rate), effective 30 October 2024.
- Investors’ Relief (IR) Lifetime Limit will be reduced to £1 million for qualifying disposals, effective 30 October 2024.
- Business Asset Disposal Relief (BADR) and Investors’ Relief (IR) rates will rise from 10% to 14% from April 2025 and reach 18% by April 2026.
Business rates
For 2025-26, retail, hospitality, and leisure (RHL) properties in England will receive 40% relief on business rates, with a cap of £110,000. Also, the small business multiplier in England will be frozen at 49.9p for 2025-26, while the standard multiplier will be updated by the September 2024 CPI rate to 55.5p. From 2026-27, permanently lower multipliers for RHL properties will be introduced, offset by a higher multiplier for properties with rateable values above £500,000.
Air passenger duty rates
For 2026-27, the government will increase rates of Air Passenger Duty (APD). This equates to £1 more for those taking domestic flights in economy class, £2 more for those flying to short-haul destinations in economy class, £12 for long-haul destinations, and relatively more for premium economy and business class passengers.
Stamp Duty
Stamp Duty Land Tax (SDLT) Higher Rates for Additional Dwellings surcharge will increase by 2 percentage points from 3% to 5%, effective 31 October 2024.
Capital allowances
First Year Allowance on zero-emission cars will be extended to 2025/26.
Umbrella Companies
To curb tax avoidance, recruitment agencies or client businesses will be responsible for PAYE in the umbrella company market, effective April 2026.
VAT on Private Education
VAT at the standard rate of 20% will apply to private school education and boarding services, effective 1 January 2025.
Late Payment Interest Rates
HMRC’s late payment interest rate will increase by 1.5 percentage points as of 6 April 2025.
Two changes are likely to most significantly impact our […]