Tax Surge in the UK Budget: A Mixed Bag of Numbers
After months of guessing games, Rachel Reeve’s Budget announced a whopping £40 billion increase in taxes, a splash higher than most thought.
Who’s Paying and How Much?
The most wild part of the new plan is the steep rise in employers’ National Insurance:
- The earnings threshold for the tax moves from £9,100 down to £5,000 starting April 2025.
- The rate jumps to 15 %, hitting businesses hard.
Other hikes include:
- DC pension assets will count as part of estates for Inheritance Tax (IHT) from April 2027.
- A tighter Business Relief and Agricultural Relief for alleviating IHT.
A Glimmer of Relief
Despite the blow, a few bright spots emerge:
- There’s no cut or new lifetime cap on ISAs— a sigh of relief for savers.
- The tax‑free cash withdrawable from pensions remains unchanged, keeping many mornings less stressful.
- Those who pulled out their pension cash recently might revisit their decisions, depending on their providers’ 30‑day cooling‑off periods.
Capital Gains Tax (CGT) Takes a Step Up
Commissioners had already hinted at a CGT hike, so rumours weren’t a surprise—but:
- Higher‑rate and additional‑rate taxpayers will see a jump from 20 % to 24 %.
- Basic‑rate taxpayers face a rise from 10 % to 18 %.
The twist? Today’s rates start right now. A mid‑year rise is rare; the previous Gordon Brown era took a similar step but from midnight. That means anyone selling shares this morning might have to pay the higher rate.
A Silver Lining?
Even though the jump is closer to the high end, it doesn’t match the full alignment with Income Tax that some had wanted. The government still keeps a pro‑investment stance.
In practice, though, the higher CGT and trimmed annual exemptions make the tax landscape a bit less friendly for investors. Your ISAs and pensions are now more valuable, as they shield gains and dividends from tax. If you’re married or in a civil partnership, make sure to use both allowances and consider transferring savings between partners to avoid extra taxes.
