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It’s official! After a 14-year hiatus, Labour has delivered its first Budget, bringing with it bold reforms across tax, business support, and social spending. At Black and White Accounting, we’ve dissected the announcements to highlight the key moments that matter most for you and your business. With specific rate changes, new allowances, and targeted incentives, Labour’s budget introduces both opportunities and important adjustments to navigate. Here’s a brief summary, with a more details summary to follow shortly, once we have seen more of the details.
1. Corporation Tax Overhaul: Targeted Relief and Green Investment Incentives
Labour made a decisive move with Corporation Tax by holding the main rate at 25% but introducing new reliefs to encourage growth and sustainability. Companies investing in green technology and renewable energy solutions can now benefit from additional capital allowances, enabling eligible businesses to offset 130% of investment costs against profits. Additionally, a new Investment Allowance of £1 million per year has been introduced for SMEs, making it easier to invest without triggering large tax bills.
For our clients in green industries or those looking to expand, this is a significant opportunity. We can help you leverage these allowances to boost your bottom line.
2. Income Tax Adjustments: Easing the Cost of Living
Labour introduced changes to income tax thresholds to provide relief for lower and middle-income earners. The Personal Allowance has been raised to £13,000 (from £12,570), and the higher-rate threshold increased to £55,000 (from £50,270). These changes mean more take-home pay for many, especially those in middle-income brackets, as well as a new 45% tax rate for earnings above £150,000.
For individual clients, this shift could mean more available income, and we’ll help you plan for any changes in withholdings and potential reliefs.
3. National Insurance Changes to Support Small Businesses
Labour’s Budget reduced National Insurance (NI) contributions for businesses with fewer than 50 employees, introducing a new reduction of up to 15% on NI contributions. This move is aimed at encouraging small business growth and making it more affordable to hire, which could prove invaluable to businesses looking to expand their teams.
If you’re considering hiring or expanding, this could be a beneficial change. Reach out to us for support in navigating these new NI policies.
4. Enhanced R&D Tax Credits for Innovation and Growth
Research & Development (R&D) tax credits have been enhanced to stimulate innovation. Eligible businesses, especially those in tech, healthcare, and green sectors, can now claim up to 25% of qualifying R&D expenditure—an increase from the previous 13%. This generous relief is designed to incentivise businesses to innovate and maintain the UK’s competitive edge.
If you’re working on innovative projects, these credits can reduce your tax bill significantly. We’re here to help ensure you qualify and claim every penny available.
5. VAT on Energy-Saving Products Cut to Zero
In a push to encourage eco-friendly home and business upgrades, Labour has eliminated VAT on energy-saving materials and products such as solar panels, insulation, and heat pumps, slashing it to 0% (down from 5%). This change makes it more affordable for both businesses and individuals to reduce their carbon footprint and invest in sustainable energy solutions.
If your business or home is considering green upgrades, this VAT relief makes it an excellent time to move forward with energy-saving investments.
6. Stamp Duty Relief for First-Time Buyers
To tackle the housing crisis, Labour has increased the threshold for first-time buyers’ relief on Stamp Duty Land Tax (SDLT), now set at £350,000 (up from £300,000). For properties above this amount, first-time buyers will pay a reduced rate, making homeownership more accessible to young people and families.
For clients looking to purchase their first home, this could reduce upfront costs. We’re here to guide you through any tax implications for first-time buyers.
7. Childcare Support and Family Reliefs
In response to the cost-of-living crisis, Labour has announced substantial increases in childcare support, with an additional £1,500 in childcare tax credits per year available to families earning under £50,000. The goal is to alleviate childcare costs for working parents, giving them the support needed to return to or remain in the workforce.
For families, this provides a substantial relief opportunity, which we can help integrate into your overall financial strategy.
8. Energy Price Cap and Household Reliefs
In light of fluctuating energy prices, Labour has committed to a capped rate on household energy bills for the next two years. While details on the exact cap are still emerging, it promises relief for individuals facing high energy costs, with rebates available directly through utility providers.
For those impacted by rising energy costs, these capped rates and rebates could mean more manageable household expenses. We’ll be keeping a close eye on the finalised cap details to provide our clients with updated advice.
9. Inheritance Tax Threshold Freeze
Labour announced a freeze on the Inheritance Tax (IHT) threshold, keeping it at £325,000. While this freeze provides stability for many, it may lead to higher tax liabilities in the long term as property values continue to rise.
For clients with estates approaching this threshold, strategic planning is more important than ever. Reach out to discuss options for tax-efficient legacy planning.
Final Thoughts: Seizing Opportunities and Preparing for Change
Labour’s first Budget in 14 years introduces a mix of reliefs, allowances, and targeted tax increases that could create opportunities and adjustments across the board. As always the devil is in the detail and as we read more, we will provide a more detailed summary for you to review.
At Black and White Accounting, we’re here to ensure that you’re well-prepared to navigate these changes, seize opportunities, and position your business or personal finances for success. Whether you’re investing in your business, considering green upgrades, or planning for family and legacy changes, we’re here to help every step of the way. There are always winners and losers from any budget, but either way we will keep you posted with any changes. Contact us today to explore how these changes could impact you and set up a strategy that maximises the benefits and minimises the negative impacts from this landmark Budget announcement!
