Depending on which media channels you use to get your news, some of the headlines and predictions of what Chancellor Reeves was going to present in her November Budget could only be described as hysterical.
So, it might surprise a few people that here we are, after the event, and the financial markets haven’t crashed and nobody has reported fleets of small boats packed with people fleeing the country leaving the coast. But then again, governments do have a habit of floating really frightening ideas before every Budget only to make the actual thing feel less painful, and it’s no surprise that some sections of the media lap it all up to suit their own political agenda. And after all, most of the biggest media names do love to frighten their readers or viewers about almost everything.
The main takeaway from the real Budget is that the Chancellor has raised taxes. Does anyone expect something different from a Budget – except in the year before an election? But she has done this in a relatively stealthy way.
Take the increase in fuel duty. That tax was last increased in March 2011, followed by a 5 ppl cut during the height of the Covid crisis in March 2022; it should have been no surprise that it was going to be increased. The real surprise is that the increase has been delayed until September 2026, at which point it will see a staggered annual increase related to the increase in RPI. That is a surprise because with the ongoing transition to EVs the Treasury is already suffering a real fall each month in what it collects from drivers.
Then there’s the announcement to tax EV drivers on a pence-per-mile basis – 3p per mile for fully-electric vehicles, 1.5p per mile for PHEVs – but not until 2028. One good reason for the delay is that while the Treasury has issued a consultation document in relation to this proposal. That document is rather vague as to exactly how the charge might be implemented in practical terms. There have been references to some sort of voluntary reporting system – which sounds like a recipe for mass-evasion. In other words, they haven’t actually worked it out yet.
The much-feared personal tax-grab turns out to be another stealthy increase: keep the tax thresholds fixed for another couple of years and hope that nobody notices. Unless, of course they are lucky enough to receive a pay rise which might just put them into a higher band. In order to do that, they have to be in a job in the first place. And this is where the April 2026 increases in National Living Wage (employees aged 21 and over) of 4.1% to £12.71/hr and National Minimum Wage (employees aged 18 to 20) of 8.5% to £10.85/hr are going to be of immediate concern to all employers.
While governments of both political persuasions have liked to trumpet minimum wage increases as positive steps, they conveniently forget that it is not the government who pays them. It is, of course, the employers – small, medium and large.
It was only just over six months ago that employers faced the increase in their National Insurance contribution rates, and many have struggled to try and recoup the cost of that. Now they face another cost increase which leaves them with two options: try raising prices and hope that customers keep buying, cut the number of employees or hours worked, or some mix of the two. Obviously, there are limits to how much they can cut employee costs, without investing in some very expensive technology.
But as everyone in business knows, there are also limits to what your customers will accept as price increases before they go somewhere else – or simply buy less.
But then, that’s not the Chancellor’s problem; at least not until unemployment rates start to rise. Only by then that might be someone else’s problem.
- Jan Mikula represents nationwide franchise accounting company EKW Group – ekwgroup.co.uk
