A £40bn tax hike in NIC and Capital Gains Tax is leaving businesses on the edge
In her first budget, Chancellor Rachel Reeves introduced £40bn of tax increases, mainly focused on increasing employer National Insurance Contributions (NICs) and implementing a temporary rehoming facility for people who are not living at home.
According to Nimesh Shah, CEO of Blick Rothenberg, although pre-budget rumors suggested major tax changes, the actual announcements were more focused, though still significant.
The main tax increase is a £25bn increase from NIC changes. From April 2025, employers’ NICs will jump by 1.2 per cent to 15%, with a lower NIC limit of £5,000. For businesses, this means an additional cost of £615 per employee, creating significant costs for SMEs. A business with five employees earning £50,000 each will see their NIC bill rise by more than £5,500.
Capital Gains Tax (CGT) has also seen changes, with rates rising to 18% for basic rate taxpayers and 24% for higher rate taxpayers. Although the CGT changes were less drastic than expected, businesses will feel the impact, as the tax saving potential of Business Asset Disposal Relief drops to £60,000 in 2026. The private equity interest regime is also facing an increase, effectively increasing CGT on carried interest. to 32% from April 2025, and continuing to bring in the income tax and NIC rate from 2026.
The budget introduced a temporary repatriation facility for non-residents, allowing them to repatriate funds overseas at a reduced tax rate of 12% for two years. The move is expected to generate £12.7bn in profits. However, the move has left many non-estate districts considering their options, especially with the looming estate tax impact of the previously announced changes.
Family businesses face new challenges with a £1 million cap on Business Property Relief and a 50% discount thereafter. Although the changes go into effect in 2026, Shah advises planning ahead, noting that anti-deforestation measures around lifetime transfers can complicate efforts.
Shah’s take on the Budget is mixed; while avoiding the drastic changes many had feared, it leaves room for more tax increases in the Spring Budget. Businesses and investors will need to monitor developments closely as they navigate the evolving financial environment.
