After nearly four months since the election the big wait is over. Chancellor Rachel Reeves has delivered the first Labour budget in 14 years, and it is as Halloween as it gets.
There are annual tax increases of nearly £40 billion, an increase in borrowing of some £127 billion over five years, and billions of additional revenue and capital expenditure.
Prior to today’s budget the UK had its highest rate of taxation and debt for decades. That has been substantially increased with this budget, but that has enabled the Chancellor to provide funding for a wide range of new initiatives while continuing to support departmental spending.
It will be interesting the real scale of growth that can be “crowded in” with this spending spree. The growth numbers look meagre and worse, if they are considered per head of population.
For many employees today’s budget will be good news with a 6.7% increase to the national living wage in April 2025 to £12.21 per hour, and while personal allowances are frozen until 2028 there are no further increases to personal taxation.
But if you own a farm, a business, or some shares, the need to be afraid today is real. There are a series of changes to tax rates and reliefs that affect many across Northern Ireland.
The changes start coming into place in April 2025 - immediate action may be required if the worst of these impacts are to be avoided. While there are inheritance tax exemptions for the smallest farms and businesses, many local businesses will be impacted by this is a generational change.
If you are an employer or business owner the nightmare of this Halloween budget continues. The government is now in effect setting wages for the country as there is a ratchet effect across employer salaries. This combined with increased employers national insurance by 1.2% to 15%, and a lower threshold of £5,000, will see substantial additional burdens for businesses to cope with.
Owner managed businesses here are the backbone of our economy. I’m particularly concerned for businesses in the service sector where margins are already challenging. The increases to capital gains tax to 18% and 24% will affect investment for many in the coming years.
Fuel duty, pensions and R&D taxes have not been changed, and this will offer some silver lining. At least there is going to be 1p off a pint to drown our sorrows.
- Ross Boyd, founder and director of Belfast-based chartered accountancy RBCA (rbca.co)
