The Confederation of British Industry (CBI) is set to warn that Labour’s £25bn National Insurance tax increase will severely impact growth, investment, and jobs. Chief executive Rain Newton-Smith will address the CBI’s annual conference, stating that many industries, particularly retail and hospitality, are now in “crisis containment” mode. She will say that “profits are investment” and that hitting profits undermines competitiveness and growth. A recent survey revealed that half of CBI members are considering job cuts, while two-thirds are reducing recruitment plans. Chancellor Rachel Reeves is expected to respond in her own speech by chiding critics for failing to come up with alternatives to Labour tax hikes. She is expected to say: “We have asked businesses and the wealthiest to contribute more. I know those choices will have an impact. But I stand by those choices as the right choices for our country.”

Official data show HMRC pulled in an extra £31m from taxpayers it suspected of underpaying inheritance tax in 2023-24 compared to the previous year, a rise of 14%. The total netted by investigators was £285m. Neela Chauhan of UHY Hacker Young explains: “Taxpayers really resent paying tax on their inheritance – so many try to avoid paying it. But with inheritance tax being such a major earner for HM Treasury, there’s a strong incentive for HMRC to keep challenging inheritance tax submissions that it’s suspicious of. HMRC’s focus on inheritance tax is yielding a greater compliance take from fewer investigations – a clear sign that their efforts to clamp down on tax evasion are working.” Chauhan adds: “The Government’s decision to dramatically increase the range of assets and estates hit by inheritance tax in the Budget could spur a new wave of evasion and avoidance of this tax – creating far more investigations for HMRC.”

Recent figures from HMRC reveal that employers contributed £66.8bn in national insurance between April and October, marking a nearly 6% increase from £63bn in the same period last year. Damon Hopkins from Broadstone noted that these contributions “far exceed previous tax years,” indicating a lucrative future for the Treasury. The Labour Budget introduced a significant hike in employers’ national insurance contributions, raising the rate from 13.8% to 15% and lowering the payment threshold from £9,100 to £5,000. This move has faced criticism from businesses and charities, with concerns about potential job losses.

The Government’s proposed taxation changes on inherited pension pots could severely disrupt the UK pensions system, warns Michael Summersgill, chief executive of AJ Bell. In the recent Budget, it was announced that from April 2027, inherited pensions will incur inheritance tax, a shift from the previous tax-free status. This move is projected to generate nearly £1.5bn annually by 2030. Summersgill described the changes as “arguably the most complex and costly way of raising tax from unused pensions on death,” highlighting that higher-rate taxpayers could face an effective tax rate of 64% on inherited funds. He expressed concern that the new rules would complicate the probate process, delaying access to funds during an emotionally challenging time. Instead of these changes, he suggested closing a loophole that allows beneficiaries to avoid income tax if the pensioner dies before 75.

Britain is bracing for a surge in corporate insolvencies as businesses grapple with increased taxes and soaring costs, compounded by prolonged high interest rates following the recent Budget. Gordon Thomson from RSM UK warned of “a wave of distress” among firms due to the Chancellor’s national insurance hike and minimum wage increase. John Cullen from Menzies added: “It would be unrealistic to think that corporate insolvencies will go anywhere but up during the course of 2025.” Mark Ford, at wealth manager Evelyn Partners, warned many firms will be “fighting for their survival” due to rising wage bills while Ric Traynor, CEO of restructuring group Begbies Traynor, added that many firms will “throw in the towel” in the New Year rather than keep going only to be hit with a bumper tax rise in April.

Retail sales in the UK experienced a significant decline of 0.7% in October, reversing the previous month’s slight increase. This drop was worse than the anticipated 0.3% contraction, with non-fuel sales plummeting by 0.9%. The Office for National Statistics (ONS) attributed this downturn to consumer uncertainty surrounding Rachel Reeves’s tax proposals. Ellie Henderson, an economist at Investec, remarked: “Today’s release is disappointing and calls into question whether momentum in the UK economy is fading.” Despite the October slump, retail sales were up 0.8% over the three months leading to October and 2.5% year-on-year, indicating some resilience. Matt Swannell from EY Item Club noted that the drop is “not a major cause of concern,” suggesting cautious optimism for the retail outlook in 2025.

Limited Liability Partnerships (LLPs) have been exempted from the national insurance increase outlined in the recent Budget, leaving many major employers, who are facing increased costs, feeling frustrated. LLPs, commonly used by law, accountancy, and private equity firms, benefit from lower Class 4 national insurance rates, despite often earning substantial salaries. Peter Noyce, a partner at Menzies, noted that he would not be surprised if HMRC began scrutinising “salaried member” structures more closely. The Labour government, which has pledged to tackle tax avoidance, has seemingly overlooked a potential £4bn revenue from just four major City law firms. The decision raises questions about the Government’s priorities, especially as sectors with lower profit margins bear the brunt of the tax changes.

According to a recent survey by the High Pay Centre, a significant majority of respondents, 55%, believe that chief executive pay should be capped relative to workers’ earnings to prevent excessive pay disparities. The survey, which included over 2,000 participants, also revealed that 51% support having two workers on company boards, while 70% favour increased transparency regarding salaries exceeding £150,000. Luke Hildyard, Director of the High Pay Centre, stated: “There is an opportunity to use the new Government’s legislative agenda to strengthen worker voice and bridge the pay gap between top executives and the wider workforce.” The thinktank plans to release “A Charter for Fair Pay” ahead of the Employment Rights Bill, advocating for a more equitable relationship between executives and employees.

Recent research by International Workspace Group (IWG) reveals a significant increase in job applications from employees unhappy with strict return-to-office policies. Two-thirds of recruiters reported a rise in applicants from companies enforcing five days in the office, while 75% noted candidates rejecting roles lacking hybrid options. The study highlights that 72% of recruiters believe firms without flexible working are losing their competitive edge. Mark Dixon, chief executive of IWG, stated: “Flexible working offers further benefits to businesses beyond employee retention.” Companies like Starling Bank, Asda, PwC, and Amazon are among those to have tightened remote work policies.

The head of the British Business Bank has suggested the Labour Government could strip asset managers of pension tax breaks if they fail to invest enough in the UK economy. Louis Taylor told Bloomberg in an interview that rather than providing additional tax breaks to encourage investment, the Government could instead strip funds of some of the benefit they currently receive – via tax relief on worker pension contributions, which boosts assets under management. Taylor explained that he is not endorsing the idea, but it would be a measure that fell short of compulsion.

The Cop 29 talks in Baku have highlighted tensions over financial commitments from wealthy nations to assist poorer countries in transitioning from fossil fuels, writes Dominic O’Connell in the Times. As the UK prepares for significant changes in sustainability reporting, companies will face new regulations stemming from the Glasgow Cop 26 agreement. The new rules aim to enhance transparency in environmental, social, and governance (ESG) practices, moving beyond mere net zero commitments. Companies will need to disclose sustainability-related risks that could impact their financial performance. O’Connell says: “The biggest question is whether to embrace the rules wholeheartedly or to treat them as another annoying compliance issue.”

Several banks and credit card companies in the UK are facing a new £18bn payment protection insurance (PPI) claim. HSBC, Santander, and Lloyds Bank are accused of secretly charging commission payments of up to 95% when they sold PPI to customers. UK law firm Harcus Parker is waiting for the High Court’s permission to launch a group action against the banks. The court is expected to make its decision in early 2025. The claim comes as banks face a wave of compensation claims for hidden commission paid on motor finance deals, the cost of which has been estimated at £16bn. The PPI scandal was closed off by the FCA with a 2019 deadline for claims, but Harcus Parker believes it can reopen the issue because the new legal action is related to hidden commission rather than mis-selling. Gary Greenwood, investment analyst at stockbroker Shore Capital, warned that the combined claims risked a “total meltdown in financial services”.

Recent data reveals that Britain’s economy is stagnating, with private sector activity dropping to a 13-month low in November. Chris Williamson, chief business economist at S&P Global Market Intelligence, stated: “Companies are giving a clear ‘thumbs down’ to the policies announced in the Budget.” The increase in employers’ national insurance, aimed at raising £25bn, has led to concerns over job cuts and price rises among major retailers. The purchasing managers’ index (PMI) indicates a decline in expected output, falling below the growth threshold. Paul Dales, chief UK economist at Capital Economics, warned that a contraction in the economy during the fourth quarter would not be surprising.

Research by First Direct reveals that approximately 76% of Millennials and 73% of Gen-Z individuals are committed to achieving their financial goals, despite economic challenges. The OnePoll survey, conducted among 4,000 participants, found that 59% of Gen-Z savers have a five-year financial plan, compared to 40% of Millennials. Carl Watchorn, head of banking at First Direct, stated: “What our data shows is that younger people have very high aspirations when it comes to achieving their financial goals.” The survey highlights that common aspirations include better work-life balance, saving for retirement, and achieving financial independence. However, 50% of Millennials reported that the cost-of-living crisis has delayed their financial milestones.