This Budget Statement 2025 seems to have been even more anticipated than the 2024 version when the incoming government forewarned of cuts in services and tax rises to fill the black hole left by the Conservatives. Speculation has been rife and already changes to NI and tax offsetting each other have been rejected. Apart from this advanced warning the Office for Budgetary Responsibility (OBR) released it's briefing just before the Budget and the speaker berated the government for leaks to the press ahead of the Budget announcements, these should be made "to the House" before of public release. While there was a lot of rhetoric about supporting enterprise and business there was little for small businesses, a summary of the main points is below:
For business
- Headline rates of corporation tax remain the same at 19/25%
- Capital allowance writing down allowance is reduced from 18% to 15%, so it is important for small businesses to claim the Annual investment allowance (AIA) on purchases upto £1m. However there is a new 40% first year allowance for assets outside of this or above the AIA limit but excluding eg cars
- Under 25 apprenticeships are to be made free for small businesses
- For disposals by the owner to an employee ownership trusts (EOT) there is a reduced 50% CGT relief
For individuals
- Personal tax thresholds to be held for further 3 years from 2028/9, so will remain at £12,570 and £50,270 for basic and higher rate bands. It will be a decade of no change, while inflationary growth in income means that more people will be paying more tax
- Tax on property, dividends and savings to be increased by 2%, so business owners paying dividends will be taxed a further £200 on each £10k of dividends. This will also affect anyone with property rental profits and savings tax over the small tax allowance
- Full use should therefore be made of the £20k ISA allowance will be retained but £8k must be for investment purposes, ie shares ISA not cash ISA. However over 65s will retain the full £20k cash ISA allowance
- Inheritance tax thresholds are being frozen until 2030, likewise drawing more estates into tax as property values increase. The Agricultural property relief (Farm tax) will now allow a transfer between spouses on death and the £1m allowance added to the surviving spouse meaning £2m available in total
- From April 2027 those on basic state pensions will not be assessed to tax to on the part of the pension above the personal tax allowance, so effectively the pension becomes tax free – this will only affect those issued simple self assessments by HMRC, not those completing their own self assessment
- Those using salary sacrifice for pension contributions will be capped at £2k from 2029, any contribution over that limit being taxed in the usual way as a pension contribution. This is aimed at those sacrificing large bonuses in favour of a payment into a pension scheme but not supposed to affect lower earner making small top ups
- The much publicised Mansion tax will be introduced from 2028. A new surcharge as part of the council tax of £2.5k/£7.5k will be paid on properties over £2m and £5m respectively
Duties and other measures
5p cut in fuel duty introduced in Covid extended to September 2026
Gambling taxes - remote gaming duty to increase to 40%, bingo duty to be abolished next year, and face to face gambling to remain the same
Alcohol duties to continue to rise in line with inflation
Electric vehicle excise duty 3p/mile, 1.5p/mile for hybrids – for an electric vehicle this will be £360 for someone driving 12k miles pa
Household energy bills to be reduced by cuts in the green levy, saving on average £150 for each family from next year
Making voluntary Class 2 contributions to top up state pension entitlement will be made unavailable to those living abroad
Motability to remove luxury vehicles from their lists
For small business owning clients the main change from the Budget Statement 2025 will be the increased taxation on dividends, and for everyone the continued erosion of tax allowances while there is inflationary growth in earnings. You should seek professional advice before taking any steps based on these contents. If you would like advice in this or other areas feel free to call. Alastair Wood, AW Accounting, Shrewsbury, Shropshire – Accountants who “speak your language”