Chancellor Rachel Reeves today outlined significant economic shifts in the UK Budget, impacting wages and several tax domains.
The government has introduced notable changes to the national financial landscape, including increases in national insurance contributions by employers. Simultaneously, there is a noticeable shift in taxation, with hikes in farm inheritance duty, the soft drinks levy, tobacco, and vaping products.
Significantly, the National Living Wage for those aged over 21 will increase by 6.7%, adjusting to £12.21 per hour, affecting sectors such as grocery retail. For younger workers aged 18 to 20, the increase is 16.3%, raising their hourly pay to £10.00. These changes aim to support workers amid rising living costs.
In a move targeting large agricultural estates, 100% inheritance tax relief on farms and properties exceeding £1 million will be reduced to 50%, effective from 6 April 2026. This adjustment is poised to affect generational farm transitions.
Addressing public health concerns, the Chancellor has raised the Soft Drinks Industry Levy, reinforcing previous strategies to encourage manufacturers to lower sugar content in beverages. Although the specific new tax rates were not detailed, the existing framework charges 18p per litre for drinks with more than 5.7.9 grams of sugar and 24p for those exceeding 8 grams.
Further, Reeves has confirmed the Tobacco Duty escalator will persist, with an additional 10% duty increase on hand-rolling tobacco this year. A new Vaping Products Duty, set at £2.20 per 10ml of liquid and due from October 2026, complements an equivalent rise in Tobacco Duty, incentivising smokers to switch to vaping.
In the realm of alcohol, the government has decided to raise duty according to the retail price index, a move criticised by the wine and spirit sector as detrimental to both businesses and consumers. The Wine and Spirit Trade Association’s Miles Beale described it as a “real kick in the teeth” and contrary to government assertions of income protection.
The UK Budget introduces complex fiscal changes, balancing increased wages with higher taxes in targeted sectors, eliciting mixed reactions from businesses and individuals.
