The dreaded budget came - and it was as bad as expected

Round up of UK budget changes - individual's pension pots & farmers hit for IHT, and employers hit for NIC's - but dont worry as no doubt none of them are working people within Reeves' meaning!

As promised, here is a round up of the major changes in the budget yesterday – hint before you start reading – you will be poorer. Likely being poorer was not unexpected to anyone reading this, given where the globalists intend to try and take us over the next few years. But nevertheless, I think this budget will sadly be the final nail in the coffin for people that are already struggling with a cost-of-living crisis caused by an average annual inflation rate over the last 4 years of around 4.5%, which of course has had a significant impact on purchasing power.

So, take a deep breath and let’s dive into yesterday’s theft, I mean announcements.

Budget Changes for Inheritance tax (IHT):

Inherited Pensions: Starting from April 2027, inherited pension pots will be subject to IHT. This means that people will have to rethink how they use pensions in retirement. Currently, private pensions are excluded from IHT but from 2027 pension pots under defined contribution schemes will be included in IHT calculations. In practice, this means that when an individual dies they can still pass on the proceeds, but the pension pot value will get added to their estate as part of their chargeable assets and will likely push their estates into being taxable for IHT.

This is significant and will put a lot more people in scope of IHT charges. Previously I would advise people that largely they didn’t need to worry about their pensions on death because they passed IHT free. Hence, many people would traditionally use their pension pots as a vehicle for passing their wealth down to their children and beyond. Given this, the rule of thumb when advising clients was always spend ISAs first, pensions last, because ISAs were in scope for IHT and pensions were not.

Leaving pensions to the next generation has long been seen as a tax-efficient measure for individuals but now someone with a modest £250,000 pension pot will have a potential £100,000 IHT bill on the same.

The spouse exemption will still apply to pension pots for IHT following the budget change, which means that if someone leaves their pension to their spouse or civil partner, it will still be exempt from IHT, after the new rules come into effect. However, the changes to IHT on pension pots present significant challenges for unmarried partners and children as imposing IHT on pension assets undermines financial security for those left behind after a death, particularly young children, for which no IHT exemption exists. I cannot tell you how much of a disaster this is for unmarried couples and children because it is going to severely affect what income and capital they can receive after a death, when they are at their most vulnerable.

There is also going to be a negative impact on people saving for a pension in retirement. We already have a pension under saving crisis which even the Government accepts exists - millions of people do not save enough for a decent retirement – and no doubt people will be less inclined to save in a pension if that pension pot is going to be taxed for IHT on their death. Given this, we really must ask ourselves if people are being penalised simply for trying to be sensible to provide for themselves and their families in the future

Adding pension pots to IHT calculations could also mean more are pulled into losing some of their main residence nil rate band, which is gradually removed on estates worth more than £2million.

The Government’s rationale for the IHT pension move is to 'remove the opportunity for individuals to use pensions as a vehicle for IHT planning'. Because the government should always get a slice of your hard earned and saved for no reason, eh?

My advice is that anyone that has undertaken any IHT planning recently look again at this considering the new rules coming into force in 2027. That means around 1,000 of my previous clients will now have to go and pay someone to go through things again, taking into account the value of the pension pots they may have. If you are undertaking any planning for IHT in the future, make sure you get details of what your pension pots are worth at the time of taking advice – something most people didn’t historically bother with given most pension pots were exempt from IHT.

This move marks the government attempting to return pensions to vehicles solely for retirement planning and not IHT planning.  The problem is of course that there are many people that have been planning their finances around the previous rules.

Like with every tax on capital wealth I am going to ask you again – why should the government get a slice of it in tax? What have they done to earn it? And more importantly are they spending what they take for your benefit?

IHT Threshold Freeze: The IHT nil-rate band will be frozen until 2030, meaning the first £325,000 of any estate can be inherited tax-free, rising to £500,000 if the estate includes a residence passed to direct descendants, and £1 million for a surviving spouse or civil partner if the transferable nil rate band and transferable main residence band applies.

The IHT nil rate band has been £325,000 since 2009 and freezing it until 2030 will mean 21 years of the same value band. Property values have increased since 2009, but the nil rate band has not. This means more people are pulled into paying IHT, even with the available main residence allowance, as that only applies in certain circumstances. So as property prices have grown, more people are liable for IHT, even though their actual real cash wealth has not increased in real terms.

To understand the real-term value, we also need to consider inflation. Adjusting for inflation using the average UK inflation rate from 2009 to 2024 (approximately 3.2% per year), the equivalent value of the nil rate band in 2024 should be around £500,000. So, in real terms, the nil rate band is worth about £175,000 less now than it was in 2009. It has effectively decreased due to fiscal drag, as it has not kept pace with inflation. Another rip off.

Agricultural Property Relief (APR) removal for farms: From April 2026, the first £1 million of combined agricultural and business property will continue to attract no IHT (ergo a new allowance of £1 million will apply per taxpayer for the combined value of property qualifying for 100% Business Property Relief (BPR) and 100% APR).

This means that for agricultural assets over £1 million, inheritance tax will apply with a 50% relief at an effective rate of 20%. This is a devastating blow for farmers. There are very few real farms worth less than £1,000,000, as farms need land to be profitable. Land is of course valuable – even agricultural land. This change will increase tax burdens for farmers, complicate estate planning and hamper the transfer of agricultural businesses to future generations. Many farmers may now be unable to pass down their farms to their children free of IHT and these changes mean farmers might choose to come out of farming all together, selling up to corporate interests in a view to realising cash to gift to the next generation, or equally when they die, their children may have to sell all or part of the farm to pay IHT. This is an attack on farmers and our food security. We should all be mad

Before the election, Defra secretary Steve Reed had stated there would be no changes to APR. Another lie – just like the Labour governments promise not to remove winter fuel payment from the elderly – a big fat lie.

Here is what NFU president Tom Bradshaw said about the attack on farmers in the budget

Business Property Relief (BPR): As stated above, BPR will also be limited. The first £1 million of business property will continue to attract 100% relief. However, for businesses worth over £1 million, (including farming business), the relief will be reduced to 50%. This means that businesses worth more than £1 million lose the full BPR on the excess amount. So, this is also an attack on non-farming business owners, and one has to ask how many businesses may have to be sold post death to pay IHT, affecting the job security of those employed by said business.

Additionally, the rate of BPR will be reduced from 100% to 50% in all circumstances for shares designated as "not listed" on recognized stock exchanges, such as AIM. Another IHT planning tool cut in half. The IHT exemption for AIM shares was introduced more than a decade ago, alongside AIM shares being eligible to be held in tax-efficient ISAs. Most shares listed on AIM qualify if the companies concerned are trading businesses and not investment companies. The budget has halved the relief on these products.

Budget changes for employers

1. Increase in National Insurance Contributions (NIC’s) Rate: The rate of employer NICs will increase by 1.2 percentage points to 15% from April 2025 and the threshold at which employers start paying NICs will be reduced from £9,100 to £5,000 per year creating an extra £615 due in employer NIC’s just due to this

2. Employment Allowance: The Employment Allowance, which allows eligible employers to reduce their NIC bill, is however going to be increased from £5,000 to £10,500. Additionally, the eligibility threshold of £100,000 will be removed

Warning bad language incoming. I am sick of the utter bollocks all over social media claiming that the above will somehow help workers, as they are not affected by the NIC rises given their employer is to bear the brunt. So, let's compare the NIC effect for an employer, (who has used up all their Employment Allowance), and is paying an employee £30,000 a year, looking at before and after the budget:

Pre-Budget:

• Employer NIC Rate: 13.8%

• Secondary Threshold: £9,100 per year

• Employer NICs: 13.8% on earnings above £9,100

• Calculation: £30,000 - £9,100 = £20,900

• Employer NICs: 13.8% of £20,900 = £2,884

• Total Cost to Employer: £30,000 + £2,884 = £32,884

Post-Budget:

• Employer NIC Rate: 15%

• Secondary Threshold: £5,000 per year

• Employer NICs: 15% on earnings above £5,000

• Calculation: £30,000 - £5,000 = £25,000

• Employer NICs: 15% of £25,000 = £3,750

• Total Cost to Employer: £30,000 + £3,750 = £33,750

Summary:

• Pre-Budget: Employer NICs = £2,884, Total Cost = £32,884

• Post-Budget: Employer NICs = £3,750, Total Cost = £33,750

So, in the calculation above, the increase in the NIC rate and the reduction in the secondary threshold mean that the total cost to the employer has increased by £866 per year for an employee earning £30,000. Where do you think that increase is going to be paid from? Yes - that’s right – from the future pay rises of workers - because they will not get one now given their employer will need to cover the increased costs of NIC’s on their existing salary. Given this, they certainly are not going to be thinking about giving pay rises which would cost even more in employers NIC’s. Worse, maybe some workers will get their hours cut to reduce employers NIC costs, or perhaps some could even lose their jobs altogether if an employer is looking to make savings.

As I have said above, Employment Allowance HAS increased, so the above calculation will have no effect if an employer’s total NI bill is below £10,000 for all staff. This initiative allows smaller businesses to claim and pay less employers’ NI each time they run payroll until the full employment allowance is spent or the tax year ends – whichever comes first. However, the allowance is per business, not per employee, and can only be claimed against one payroll. Once the allowance limit is met, any excess employers NIC’s need to be paid by the business to HMRC.

Given the above, for employers that are caught by employer NIC rises, I suspect they will be looking at ways to reduce employee costs, and quick. This is a looming fiscal disaster for employees given they are already suffering through a cost-of-living crisis. Now they could have no pay rise to look forward to, to assist with the additional costs of food and energy, or worse, find themselves with their hours cut as businesses look to make savings.

I would remind you that a major Labour election promise was that the three main taxes – income tax, VAT and National Insurance – would not be increased for working people. This is why you keep hearing so much rubbish about what a working person is and hence why the rise on employers NIC’s is being deceitfully promoted as meeting this election pledge. However, and of course as with everything corrupt politicians say, the employer NIC rise directly affects a working person not only in the sense that employees are less likely to now get a pay rise, but also because business owners are working people themselves, now paying more in NICs as an employer.

Other Budget changes

National Insurance and Income Tax thresholds frozen: The threshold at which individuals start paying each tax remains frozen until April 2028, meaning all workers are losing out due to fiscal drag.

Capital Gains Tax rates increase:  The rate at which CGT is paid on shares and other assets above £3,000 has been raised from 10% to 18% (the lower rate) and from 20% to 24% (the higher rate) and took effect immediately from yesterday. The rate at which CGT is charged on residential property that is a second home will remain the same.

National minimum wage rises by 6.7%:  From 1 April 2025, the national minimum wage paid to workers aged 21 and over will rise from £11.44 an hour to £12.21 an hour. I have real concerns about the affordability of this for employers, when considering the increased NIC’s costs. Again, this could impact jobs and hours.

Fuel Duty freeze maintained: The current fuel duty freeze and 5p per litre cut introduced by the last government will be maintained for another year, meaning fuel duty remains at 52.95p per litre – still woefully high imho.

State Pension Increase: State pension to rise by 4.1%, giving state pensioners £230.30 per week as the new flat-rate benefit. The pension credit standard minimum guarantee is also set to rise by 4.1%, from around £11,400 per year to around £11,850 for a single pensioner.

Some benefits to rise by 1.7%: Universal Credit and Child Benefit to increase by 1.7% from April 2025. Universal Credit monthly debt deductions are also going to be reduced from 25% to 15%.

Reform to work capability assessments: Around half a million Universal Credit claimants will no longer be classed as having "limited capability for work", and this means they will be required to undertake more work-related activities to get their monthly Universal Credit payment.

Increase in interest rate charged on Government debt. From 6 April 2025, HMRC will increase the interest rate on unpaid tax by 1.5 percentage points. The interest rate is currently set at the Bank of England base rate plus 2.5%, meaning the rate will rise from 7.5% to 9%. Specific details about whether this rise will apply to the interest rate for paying IHT by instalments have not been explicitly mentioned in the available information, but I suspect the increase rate may well apply to the same. 9%! Wouldn’t you just love to get that on your savings – sadly us peasants can’t because we are not worthy.

Stamp Duty rates increased on second homes: The rate applies from today and has been increased from 3% to 5% above standard rates. This means that from today you will pay 10% stamp duty if you buy a second property worth more than £250,001 but less than £925,000. This of course lends itself to private individuals being priced out of being able to afford to buy second properties as an income generating tool for retirement, and I am sure we are going to see an ever-expanding push of pension companies and corporates buying property and becoming landlords instead– all part of the plan – remember you will own nothing.

Do not also forget that on 31 March 2025, there are several Stamp Duty changes coming into effect in addition to the above, and these were already in the pipeline before the budget. They are:

• The nil rate threshold which is currently £250,000 will return to the previous level of £125,000. This means your 10% on a second property will apply between the value of £125,001 and £925,000, meaning more stamp duty payable. Also those moving home after 31^ST March 2025 will be caught by an increase in stamp duty payable given the lower threshold coming back into force, increasing purchase costs and likely leading to a further cooling in the housing market.

• The nil rate threshold for first time buyers which is currently £425,000 will return to the previous level of £300,000.

• The maximum purchase price for which First-Time Buyers Relief can be claimed is currently £625,000 and will return to the previous level of £500,000.

Bus fare cap extended - but rising from £2 to £3 on 1^st January 2025

Alcohol Duty

Cut to Draught Beer Duty: This should reduce the cost of pints in pubs. However, pubs can choose whether to pass on the saving to customers

Labour yesterday proudly announced this 1p saving

Wow! Yes they really think we are that thick!

Insurance Premium Tax

No Changes: There were no changes announced to the Insurance Premium Tax in this budget. I am writing about this hidden tax in more detail soon.

Overall, this budget was a disgusting attack on everyone, with employers and farmers adversely affected by the changes, along with anyone that has worked hard to save into a pension. Employees are also likely to suffer given the employers NIC hike, and basically we are all going to end up being poorer, with nothing further to give. What next – asking for an arm or a leg?

The budget raid was expected given the endless commentary about the £20billion ‘black hole’ – a ridiculous gaslighting statement - given that total government debt stands at £2.8trillion. Seriously, a £20billion ‘black hole’ is chump change when considering this and totally meaningless.

All this budget has done is consolidate the plan to destroy businesses, destroy farming, reduce peoples standard of living, and stealthily march us all towards having fuck all under the broader plan of us returning to a feudal system that we apparently should be grateful for.

I have not covered all budget announcements in this article so please check other commentators for a full review – I lost the will to live after the above and am now off to drink 1 million pints in an effort to claw back £10,000.