Martin Bell, tax partner at BDO in Scotland:
“Today’s Budget announcement was all about ‘short term pain for long term gain’ with one big money raiser and dozens of other smaller but significant changes to tax rates and reliefs.
“The big revenue raiser was the rise in Class1 employer’s national insurance which is set to reach 15% from April 2025.
“This is just below the rate in force after April 2022 when the then Conservative Government increased the main rate to 15.05% due to the introduction of the Health and Social Care Levy – a measure that was subsequently reversed at the mini-Budget of September 2022.
“While this rise was widely trailed pre-Budget – possibly as a means of getting the bad news out early – it will have a significant impact on business as it is designed to bring in more than £122bn over the next 5 years.
“Not only has the rate increased, but larger employers who do not qualify for the Employment Allowance will be disproportionately affected. This is because they will pay the 15% rate on a larger proportion of their employee’s earnings.
“Leaving aside the debate over whether this was a breach of manifesto commitments, employer’s NICs do have the advantage of being very ‘collectable’, with limited opportunities for behaviour change to affect likely receipts.
“Among the key issues that affect Scotland is an increase in minimum wages, with hourly rates for over-21s set to rise from £11.44 to £12.21 an hour from April. Businesses will now have a short window of opportunity to rethink their budgets for the next financial year to take account of this change in employer’s NICs and the 6.7% uplift in the National Minimum Wage.
“Taken together, these increased costs for employers could pose challenges in sectors with high employee numbers and low profit margins – notably businesses in the retail, leisure and hospitality and healthcare sectors.
“For some businesses, these changes may impact hiring decisions, pricing strategies and future investment plans. For others already in financial distress, this change may be the straw that breaks the camel’s back.
“Today’s Budget included a number of increases in wealth and transaction taxes which apply to all taxpayers, regardless of their residence within the UK. A concern for Scottish business owners will be whether there are further increases to Scottish income taxes in the December Scottish budget which would mean a double hit for them.”
James Paterson, tax partner at BDO in Scotland added:
“In more positive news for business, the corporate tax roadmap published today does provide some predictability, with confirmation that the headline rate of Corporation Tax will be capped at 25% for the duration of this Parliament. There is also a commitment to maintain full expensing and the £1m annual investment allowance.
Scotland will receive an additional £3.4bn in Treasury funding as a result of the UK Budget. Businesses should also benefit from infrastructure improvements and public service investments.
“Businesses will be waiting to hear how the Scottish government’s Finance Secretary responds on December 4th.”