Chancellor Rachel Reeves has outlined significant fiscal changes in her first budget. Key alterations include no increase in National Insurance, VAT, or income tax, while business National Insurance rates rise.
- Businesses will benefit from 40% business rates relief, capped at £110,000 per business, as the existing discount expires.
- National Insurance contributions by employers will increase from 13.8% to 15%, with the threshold being lowered from £9,100 to £5,000.
- The National Living Wage for over-21s will increase to £12.21 per hour in April 2025.
- Retail crime reduction and economic stability remain priorities amidst a challenging £22bn fiscal gap.
Chancellor Rachel Reeves presented her inaugural budget, ensuring no increases in National Insurance, VAT, or income tax. However, she announced a rise in the National Insurance rate paid by businesses to 15% from April 2025. Reflecting her commitment to balancing economic stability with necessary fiscal measures, Reeves made a controversial decision to lower the earnings threshold for National Insurance from £9,100 to £5,000.
To support retail and hospitality sectors, businesses will be granted a 40% relief on business rates, capped at £110,000 per business, effective until the current 75% discount ends in April 2025. This aims at aiding small businesses amidst economic challenges. Despite these measures, the multiplier for small businesses will remain frozen at 49.9p, with an increased multiplier planned for high-value properties in 2026-27.
Reeves acknowledged the Labour government faced ‘difficult decisions’ to address a £22bn deficit attributed to previous administrations. Her budget focuses on restoring economic stability, asserting that such fiscal irresponsibility will not be repeated. Alongside tax adjustments, Reeves assured an increase in the minimum wage to £12.21 for over-21s starting April 2025, alongside a rise in capital gains tax.
Addressing retail crime, Reeves committed to tackling shoplifting and prioritising the reduction of organised retail crime, responding to input from the British Retail Consortium and Usdaw. This aligns with her broader strategy to reinforce economic stability and support the retail sector.
Despite the absence of certain retail industry requests, such as the reinstatement of the VAT Retail Export Scheme, the budget emphasises financial prudence. The government plans to freeze fuel duty until 2025, ensuring relatively stable consumer price inflation of 2.5%, as projected by the Office for Budget Responsibility.
Rachel Reeves’ first budget strikes a balance between austerity measures and economic support, aiming to restore financial stability.
