As she looked in the mirror and readied herself for the photographs on the steps and her speech in The House, someone at the OBR pressed a button and released all the Budget 2025 information to the world. Whether a mistake or conspiracy, it’s just another thing to railroad the Chancellor having undergone backbench rebellion, a manifesto that keeps coming back to haunt and the most challenging situation to navigate in most of our memories.
She toughed it out – Zak Crawley and other English batsmen take note – and delivered her speech to loud cheers from said back benchers appeased by the two-child benefit being scrapped, but let’s be honest – has she and the Labour leadership really got their support?
Today, we have a theoretical discussion as to whether the freezing of allowances is a tax rise or not, but in essence, let’s forget about that and admit we are where we are. Whatever measures are put forward won’t be willingly accepted, but we have a debt issue that needs attention. We had feared a basic rate increase and an attack on the Limited Liability Partnership, but both faded pre-budget in the usual rumour mill that tests out the water.
What didn’t fade was the Mansion Tax on properties in excess of £2 million and £5 million. I asked Craig (Weavers) whether £7,500 was enough on a £5m property – what if it was £9,500 as you must have money to live there? What we discover is that this measure will only raise £0.4bn, whereas the 3p on Electric Vehicle miles will produce £1.4bn, probably be difficult to monitor on new vehicles and put off those worried about range anxiety from changing fuel sources. However, it’s necessary as these vehicles do more damage to our roads, I’m told, due to their weight!
There is a rise with the additional 2p on basic and higher rate for those in receipt of bank interest, dividends and rental income. This is to make up for a lack of national insurance on these sources. It will have an impact. £2.1bn raised as many smaller companies still operate a personal allowance salary with dividends to complete the package. Landlords may well increase rent to accommodate this increase, so once again tenants may get hit by a landlord’s additional costs.
Having hit farmers and business owners last year with the infamous IHT changes, there was a slight concession to enable a transfer of unused allowances between married couples and civil partners, which may slightly appease but not undo the damage many elderly land and share owners face.
The Minimum Wage has also gone up for 18-20-year-olds, many of whom will be living at home and may be working in hospitality or retail as they start their first jobs. These sectors, as we traditionally know them, are struggling and the Chancellor recognises this, looking to give them relief for rating whilst asking Amazon’s massive warehouses to take up the slack. Whilst that is welcome, along with the dropping of the £135 duty de-minimus to help out our local economy, minimum wage increases are now becoming viewed as a reason not to take on employees, fearing that the cost cannot be met by the business.
Gambling profits have been targeted to raise £1.1bn in a sector that remains popular and other corporation tax changes will raise £1.5bn. These CT changes focus on reducing the rate of the written-down allowance within capital allowances where not all of the expenditure is expensed under AIA. There is a new FYA of 40% to compensate for this, but I don’t see many of our clients benefiting from it.
That leaves the changes in capital gains. The trend of late has been to sell a business to an Employee Ownership Trust to avoid capital gains tax entirely rather than take the BADR at the 10% or new increased rates. This has been changed to create a gain at half rates with immediate effect, which still leaves them as an attractive alternative if the ability exists to manage and run the business after the owner retires.
Overall, I don’t think – after all of the hype – that Budget 2025 was that controversial. I’m more concerned about our performance at The Gabba. Politicians will argue till the cows come home about whether the measures were appropriate or promise-breaking, but the facts are that to continue with the lives we have got used to, it costs more than we are generally prepared to pay. Are we therefore just putting another sticking plaster over the wound, which, without growth in the economy, will continue to fester?
(c) Photos credited to James Manning/PA Wire
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The views expressed in this article are the personal views of the Author and other professionals may express different views. They may not be the views of Lambert Chapman LLP. The material in the article cannot and should not be considered as exhaustive. Professional advice should be sought in connection with any of the issues contained in the article and the implementation of any actions.