Tax measures

Among the tax measures announced in the speech were: 

• Extension of the personal tax bands for three further years
• National insurance on pension salary sacrifice
• Reduction in Capital gains tax relief on employee ownership trusts
• Mileage-based charge on electric vehicles
• A high-value council tax surcharge on properties worth over £2m
• Freeze on fuel duty for five months
• Expansion of the sugar levy to milk products like lattes and milkshakes
• Increase in the national minimum wage and living wage.
• Introduction of a ‘tourism tax’ for local authorities  
• Introduction of a gambling duty reform
• A reform of the ISA allowance
• Tackling construction industry scheme fraud 
• Pursue promoters of tax avoidance
• Publication of the government’s response to the loan charge review

Announcements in detail

Personal tax thresholds

The extension of the personal thresholds from 2028-29 to 2030-31 follows Reeves’ pledge 12 months ago to unfreeze these from 2028. 

The freeze on personal tax thresholds rather than uprating with inflation has become a recurring measure announced at Budgets since Chancellor Rishi Sunak introduced it in Spring 2021, but it was only set to last until the 2025/26 tax year. 

“I know that maintaining these thresholds is a decision that will affect working people. I said that last year, and I won’t pretend otherwise. Now, I can keep that contribution as low as possible, because I will make further reforms to our tax system.” 

She also announced that people only in receipt of the basic or new state pension will not have to pay tax through simple assessment from April 2027.

£2,000 cap on salary sacrifice 

As expected, the Chancellor targeted salary sacrifice for pensions by introducing a £2,000 cap with contributions above that taxed in the same way as other employee pension contributions.

She said this was intended to be a “small part of our pension system” but added that it’s forecast to treble in costs. She said: “Those in the financial services sector, putting their bonuses into pensions, tax-free for those on the minimum wage or those whose employers don’t offer salary sacrifice, don’t benefit at all. That is not sustainable for our public finances, putting pressure on the tax that everyone else has.” Reeves branded the £2,000 cap as a  “pragmatic step”. These changes will come into effect in 2029. 

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CGT on employee ownership trust

The government has reduced the attractiveness of employee ownership trusts seemingly overnight, announcing that CGT disposals will be reduced from 100% to 50% from this month. From now on, 50% of disposals will be treated as chargeable gains. Reeves said the original relief created “a route for gains to go completely untapped when businesses are sold”.

Property 

The Chancellor also increased the basic and higher rates of property savings and dividend income by 2%. She argued, “A landlord with an income of £25,000 will pay nearly £1,200  less in tax than their tenant, tenants with the same salary, because no national insurance is charged on property, dividend or savings income.”

Still on property, she announced a high-value council tax surcharge in England. This will be an annual £2,500 charge for properties worth more than £2m, rising to a £7,500 for properties worth more than £5m. This surcharge will be collected alongside council tax. 

Vehicles

As expected from the Budget leaks, the government announced a new mileage tax for electric vehicles from April 2028. The mileage tax charge will equal £0.03 per mile for battery electric cars and £0.015 per mile for hybrid vehicles. 

Elsewhere, non-electric vehicle owners will have to pay more at the pump, too. The government is set to freeze fuel duty for a further five months before rolling out staged increases from September 2026. 

National minimum wage and apprenticeships

The national minimum wage and living wage were increased again this year, following the increase last year. NMW for 18 to 20 year olds will increase from £10 to £10.85 an hour and the living wage will go up from £12. 21 to £12.71 an hour.

This will come at a cost for businesses. However, the Chancellor offered support to small businesses with the announcement of free apprenticeships for SMEs. This initiative could prove beneficial for smaller accountancy practices looking to recruit apprentices.

Business rates

Expect several changes to business rates. The government announced changes to the multipliers used to uprate business rates, reducing rates for retail, hospitality and leisure properties. The Chancellor introduced permanently lower tax rates for over 750,000 retail, hospitality and leisure properties. 

Source – Accounting Web