Employer taxes
- Firms to pay National Insurance on workers’ earnings above £5,000 from April, down from £9,100 currently, with the rate increasing from 13.8% to 15%, raising an estimated £25bn a year
- Employment allowance – which allows companies to reduce their NI liability – to increase from £5,000 to £10,500
- The government will also expand the Employment Allowance by removing the £100,000 eligibility threshold, so that all eligible employers now benefit
Business rates
- 40% relief on business rates for the retail, hospitality and leisure industry in 2025/26, up to a cap of £110,000 per business
- Small business rates multiplier will be frozen for 2025/26
- The Government intends to introduce permanently lower business rates multipliers for high-street retail, hospitality and leisure properties (RHL) from 2026-27. This will be funded through a higher multiplier for the most valuable properties
Corporate taxation
- Business Asset Disposal Relief (BADR), and Investors’ Relief (IR) will be increased to match standard rates of Capital Gains Tax. The rate for both will increase to 14% from 6 April 2025, and then will match the lower rate of CGT from 6 April 2026
- Main rate of corporation tax, paid by businesses on taxable profits over £250,000, to stay at 25% until next election
Wages, benefits and pensions
- Legal minimum wage for over-21s to rise from £11.44 to £12.21 per hour from April
- Rate for 18 to 20-year-olds to go up from £8.60 to £10, as part of a long-term plan to move towards a “single adult rate”
- Eligibility widened for the allowance paid to full-time carers, by increasing the maximum earnings threshold from £151 to £195 a week
UK debt, inflation and economic growth
- Office for Budget Responsibility predicts the UK economy will grow by 1.1% this year, 2% next year, and 1.8% in 2026
- Inflation predicted to average 2.5% this year, 2.6% next year, before falling to 2.3% in 2026
There were further measures announced relating to matters such as personal taxes, transport, housing, public services and more.
MIA Comment
With the headline being ‘£40 billion in tax rises’ it is unsurprising that a vast majority of people will be impacted by yesterday’s budget statement. Clearly the largest burden of these changes will fall on commerce and as such MI businesses will not escape unscathed.
As you would expect, it isn’t black and white in terms of the actual outcomes, and which of the policies announced will have the most fundamental impact. The headlines have been dominated by the significant increase in National Insurance Contributions (NICs) for employers, but as far as the MIA is concerned, this will not be the reality for all members.
In our last State of the Industry Survey, we noted that over 60% of businesses in the sector employed fewer than 10 people. Because of the increase in the threshold at which businesses need to make NICs, many will continue to have to make no payments or even see their current payments fall.
Companies employing more people however may well be hit the hardest by this particular policy shift, and as such this will have the most impact for those firms. This will be exacerbated by the changes announced to National Minimum Wage, pushing the cost of employment significantly for those with larger workforces. Whilst we recognise that MI businesses strive to offer generous renumeration packages, the double whammy effect of these policies taken together will undoubtedly impact on future wage and recruitment plans for many.
Where smaller retailers might have escaped the burden of higher NICs, they may be finding that the changes to Business Rate Relief are the most significant of the announcements. We should remember that the Retail, Hospitality and Leisure Relief had not been confirmed for 2025/26, and as such the continuation of this is a positive. However, the fact that the rate of relief has fallen from 75% to 40% will mean a significant increase in fixed property cost for many operating on the High Street. Prior to the budget, the MIA (in partnership with the Independent Retailer Consortium) had called for this relief to be maintained at the current rate.
There was some hope in the confirmation that a revised Business Rates system will be announced next year, and that a commitment has been made to protect the most vulnerable on the High Street, the fact remains that this is still some way in the distance.
To help us to understand the true impact of Wednesday’s announcements, we have put together a four-question survey so you can feedback on how your business will be affected. You can fill that in here or below.