The Budget Chaos Continues?

After one of the most extraordinary build-ups to a Budget that I can remember, the drama – and indeed chaos – continued right up to the point at which Chancellor Rachel Reeves rose to her feet in the Commons.

Months of speculation, rumour, lobbying, briefings and counter-briefings on tax increases or changes across all areas of the tax system culminated in the barely believable gaffe by the OBR in publishing its report – containing much of the contents of the Budget – more than half an hour before the Chancellor took to the despatch box,

It was only at that point that things settled down into something approaching normality and while there was nothing in the way of headline-grabbing, manifesto-breaking policy changes the Chancellor delivered a measured performance while unveiling a significant package of wide-ranging changes, which to varying degrees will impact all businesses and individuals.

Here is my take on the key changes and areas for thought for individuals and those owning and running businesses.

Businesses

• Before she even stood up it had already been announced that the National Minimum Wage rates would be increasing again from April 2026, with an increase of 4.1% on the main rate from £12.21 to £12.71. On top of the 6.7% increase in April 2025 and the changes to employers National Insurance this will put further cost pressures on businesses and yet again, leading into the New Year, will require some careful consideration on business planning, pay strategy and budgets.
• With the majority of employers offering salary sacrifice for pensions, from April 2029 employee sacrificed amounts above £2,000 will be subject to both employers and employees NIC. The delay in this introduction is welcome, and the full impact of this will take time to be seen but is something all businesses will need to look at over the next couple of years as we have seen many pay reviews look to bring in pensions and salary sacrifice as a way to limit the impact of tax increases.
• To encourage businesses to invest, the main rate of capital allowances will fall from 18% to 14% in April 2026. Given the generous first year allowances available in most businesses this is likely to have little real impact in the short term. To keep the focus on investing in electric vehicles the 100% first year allowance on the purchase of electric cars and charging points is extended to April 2027.
• Particularly relevant to businesses in the South West is the continued pledge to create permanently lower business rates for retail, hospitality and leisure properties, which it appears will be focussed on properties below £500,000.

Individuals

• With a headline of not increasing income tax or national insurance, the Chancellor quietly announced a rise in the rates of income tax on dividends, savings and property income will increase by 2% from April 2026 for dividends and April 2027 for property and savings income. These changes will require consideration of remuneration structures for many owner-managed businesses and is yet another blow for landlords who are already facing increased regulation and compliance costs.
• 12 months ago the biggest changes to impact individuals were focused on Inheritance Tax with sweeping changes on APR/BPR and bringing pensions into the scope of IHT. We had been expecting some clarity on legislation in this area, but the only mention on IHT was what appears to be concession that the £1m lifetime allowance for APR/BPR will be transferrable between spouses. This will be welcome news for many farmers but is likely to only solve part of the issues they are facing with the new rules.
• As had been more recently speculated, we had confirmation that the income tax thresholds will continue to be frozen, however it will be longer than expected being for a further three years until 2030/31. With minimum wages increases and pension levels increasing this will inevitably lead to more people paying tax. For example, if the personal allowance had increased at the same rate as the NMW increase in April 2026 then an individual on the NMW would be £275 per year better off.
• There had been speculation around a wealth tax or sweeping changes on property taxes and stamp duty land tax. The Chancellor seems to have settled on bringing in a new “Mansion Tax” from 2028. This will apply on properties worth more than £2million, with a charge of £2,500, increasing to £7,500 for properties valued at over £5million.

Despite the chaos in the build up and speculation, the initial reaction to the announcements are that these do not seem as bad as many had expected and the markets have initially responded positively.  While there are tax increases within many  of the changes they are not immediate, which gives us time to plan and consider the impact, rather than making a knee jerk reaction.

As always our team of experts at Westcotts will be looking over the detailed Budget documents over the coming days to assess the impact and nuances of the announcements in detail. If you have questions or would like to discuss how these changes may affect you, please contact your local office here.