The Autumn Budget unveiled some key changes to tax policy as the Chancellor looks to raise £40bn of additional funding. In this article, we look at how these changes will affect the care home sector.
Staff costs
From April 2025, the care home sector among many others will be faced with significant increases to staffing costs due to two main announcements in the Autumn Budget.
Employer National Insurance Contributions
Firstly, from 6 April 2025 the government announced that it will increase the employer rate for National Insurance Contributions from 13.8% to 15%. Furthermore, the threshold at which employers become liable to pay National Insurance Contributions on their employee’s earnings will be reduced from £9,100 to £5,000. This will significantly increase the amount of Employer National Insurance Contributions they will be required to pay from the next tax year. Employers should do the sums to see the financial impact of these changes for their business so that they can plan accordingly for annual recurring items such as pay rises and fee uplifts for residents, as deemed necessary.
However, there is some good news for care homes when it comes to claiming the Employment Allowance. The Employment Allowance currently allows businesses with employer NICs bills of £100,000 or less in the previous tax year to deduct £5,000 from their employer NICs bill. From 6 April 2025, the government will increase the Employment Allowance from £5,000 to £10,500 and remove the £100,000 threshold for eligibility, expanding this to all eligible employers with employer NIC bills. Therefore, all care operators should be eligible to claim the Employment Allowance from 6 April 2025 so it is crucial that you claim this. Find out more about the Employment Allowance
National Living/Minimum Wage
Secondly, the government has announced increased rates of the National Living Wage (NLW) and National Minimum Wage (NMW) which will come into force from 1 April 2025. The rates which will apply are as follows:
| NLW | 18-20 | 16-17 | Apprentices | |
| From 1 April 2025 | £12.21 | £10.00 | £7.55 | £7.55 |
This means that care homes will now have to increase the salary of their staff and pay higher rates of National Insurance Contributions.
Calculate your staff costs from 6 April 2025
We advise that you should calculate how the changes in Employer National Insurance and National Living/Minimum Wage will affect you staff costs in advance so you can prepare the increased staff costs and it will not be an unexpected surprise.
Business Property Relief for IHT purposes
From 6 April 2026, business property will continue to benefit from the 100% Inheritance Tax relief up to a limit of £1 million. However, property that is in excess of this limit will benefit from a 50% relief, as will, in all circumstances, unquoted shares designated as ‘not listed’ on the markets of recognised stock exchanges, such as AIM. Therefore, care home owners will now need to rethink their financial planning strategy when it comes to inheritance tax and estate planning.
For example, if you own a care home that is worth £5million your beneficiaries can currently inherit this tax-free. However, from April 2026, your beneficiaries will only receive 50% tax relief on business property worth over £1million. The inheritance tax rate is currently 40%, so in this scenario your beneficiaries will receive a tax bill for 20% of £4million after the Business Property Relief has been applied which would be £800,000, assuming there are other assets above the tax free threshold. This is a significant change that care home owners will need to consider carefully moving forwards.
How can we help?
At Hawsons our dedicated team of specialist accountants and tax advisors offer a wealth of experience in the care sector including residential homes, nursing homes and other specialist care services.
Our in-depth knowledge and understanding of the sector is applied and we work closely with our clients, ensuring that changes in the care sector are recognised promptly and appropriate strategies implemented and actions taken. We recognise that no two homes are the same.
Scott Sanderson
Partner
Free initial meeting
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