Earlier this week, the Chancellor presented this government’s first Budget. Here’s how the measures set out will affect the beauty industry…

On Wednesday 30 October, Rachel Reeves delivered her first budget, and the first budget from a Labour government for 14 years. Below, we have given you a run-down of how the measures may affect the beauty industry.

• Increase in Employment Allowance

The Council called for an increase in Employment Allowance to fund apprentices, incentivise employment and staff retention, in order to enable the growth of emerging new talent. The Government has met this ask, with an increase from £5,000 to £10,500 from next April.

• Increase to Employer National Insurance Contributions

The government is increasing the rate of employer National Insurance contributions from 13.8% to 15% and reducing the per-employee threshold at which employers must pay National Insurance to £5,000 from April next year.

On this measure, the British Beauty Council says: ‘There is a failure to recognise that the vast majority of businesses in the UK are SMEs. Within the beauty industry in particular, most businesses employ less than five people (70%). Therefore, placing the burden largely on UK business, and by that very fact, small businesses, to shoulder the majority of tax increases, will be unlikely to see the benefits the Treasury thinks. The assumption that they can simply absorb the costs is hugely misguided. Instead, it will most likely prevent wage increases and deter people from hiring more staff therefore stifling growth.

‘The beauty industry already has a growing movement towards self-employment as well as a fundamental issue with recruitment and a marked decrease in apprenticeships of over 70% – this will only exacerbate these challenges.’

• Increase in Minimum Wage

The minimum wage for over 21s will rise by 6.7%, from £11.44 to £12.21 from April 2025. This equates to a full time, 37.5 hour week salary of £23,873.60 a year, up from £22,368.06.

For 18 to 20-year-olds, the minimum wage will rise from £8.60 to £10. This equates to a full time, 37.5 hour week salary of £19,552 a year, up from £16,815. Currently, only a minority of people in this age group do work full time.

Apprentices will get the biggest pay bump, from £6.40 to £7.55 an hour. Their annual wage will go up to £14,762 from £12,513.

There is concern, given the existing  decline in apprenticeships within the hair and beauty industry, that this will further deter businesses from taking on apprentices.

• Business Rate reform

Business Rate relief is to be reduced for businesses within the beauty and personal care industry from 75% to 40% from next April. Support will be available up to a cash cap of £110,000 per business.

For 2025-26, the small business multiplier in England will be frozen at 49.9p. The government will lay secondary legislation to freeze the small business multiplier. The government also intends to introduce permanently lower multipliers for properties within our sector (classed as retail, hospitality and leisure) from 2026-27.

The Council called for a continuation of rates relief until such time as the government can undertake wholesale business rates reform, with a view to providing greater certainty to allow businesses to plan for the future. The government has published a discussion paper setting the direction of travel for transforming the business rates system and inviting industry to a dialogue about future reforms.

• Corporation Tax

Alongside a commitment to publish a Corporate Tax Roadmap, the government confirmed that it will cap the rate of Corporation Tax at 25%, the lowest in the G7, for the duration of the Parliament.

• Capital Gains Tax Increase

Capital Gains Tax, which is paid on the increase in value of an asset when it is disposed of, is to increase. The lower rate will increase from 10% to 18%, with the higher rate increasing from 20% to 24%. This will take effect from 30 October 2024.

• Business Asset Disposal Relief (BADR), and Investors’ Relief (IR)

Two reliefs which offer access to a lower rate of Capital Gains Tax are also due to change. Business Asset Disposal Relief (BADR), and Investors’ Relief (IR) rates will increase from 10% to 14% from 6 April 2025, then increasing further to match the main lower rate of 18% from 6 April 2026. This is often referred to as Entrepreneur Relief.

‘Entrepreneurs are the lifeblood of our economy, shouldering risk, taking on personal guarantees in the hope that they can grow a successful business. We rely on this entrepreneurial spirit across the economy to build, innovate, employ and problem solve. Removing these reliefs will hugely disincentivise people from taking these risks – which goes against the Chancellor’s primary motive – to drive growth,’ the British Beauty Council comments.

• Carried interest

The government announced an increase in the rates of Capital Gains Tax on carried interest from 28% to 32% from 6 April 2025, with it then moving in line with the Income Tax framework from April 2026.

• Extension of the Enterprise Investment Scheme (EIS) and Venture Capital Trust (VCT) Scheme and financing and loan support

Alongside an extension to the EIS and VCT schemes, the government has committed £250 million in funding in 2025-26 for the British Business Bank’s small business loans programme. They also intend to consult on how to better support SME access to finance, which will include exploring the need for new products to support small exporters to access the insurance and finance they need.

• Expansion of the HMRC counter fraud team and increase to the interest rate on unpaid tax debt

£110 million was committed to increasing counter fraud and error support in 2025-26. The government also announced its intention to increase the interest rate on unpaid tax from April 2025.

• Fuel Duty freeze to continue

The government extended the current freeze on fuel duty for one year.

On the Budget and its affects on the beauty industry, CEO of the British Beauty Council, Millie Kendall OBE, comments: ‘Whilst we welcome some elements of the Chancellor’s first Budget, there is a balancing act between securing growth and supporting those businesses that are integral to achieving this aim. The doubling of the Employment Allowance is a most welcome shot in the arm to encourage recruitment and staff retention. However, when paired against increasing minimum wage and apprenticeship wage rates and employer NI contributions, reducing the per-employee threshold when employers have to pay NICs and scaling back business rate relief, any potential savings to employers soon gets swallowed up.

‘We need measures that reflect the fact that the vast majority of businesses in the UK are SMEs. Within the beauty industry in particular where 70% of businesses employ less than five people. Placing the burden largely on UK business, and by that very fact, small businesses, to shoulder the majority of tax increases, are unlikely to reap the benefits the Treasury expects. The assumption that they can simply absorb the costs is hugely misguided. We predict this will lead to a rise in self-employment, further reducing the number of apprentices we take on which have already dropped drastically over the last decade.’

What we’ll be looking for in 2025

Here are some of the key investment and support areas that the British Beauty Council lobbied for in the lead up to the Autumn Budget that we will be continuing to campaign for into next year:

• Commitment to review VAT Retail Export Scheme

Despite an acknowledgement in the Spring Budget document of cross-industry calls for a VAT Retail Export Scheme and a commitment to consider evidence and report back to Parliament, the reintroduction of tax-free shopping for overseas visitors was not referenced in the Autumn Statement.

• Capital investment to encourage onshoring/reshoring of businesses to be ‘made in the UK’

The Council called for targeted support to encourage more manufacturing in UK to rebuild the nation’s reputation for innovation and product development. Whilst there is some scope for support as part of the government’s Industrial Strategy, no specific support was outlined in the Budget that would directly benefit our sector.

• Training in new areas of business tax-deductible

The Council called for the Treasury to address current HMRC guidelines which do not allow expenses to be claimed for training that expands into new areas of business. This disincentivises innovation, stifles productivity and goes against the Government’s commitment to promoting lifelong learning to acquire vital new skills.

• VAT reform – tapering mechanism to reduce ‘bunching’ under VAT threshold

The Council called for a review of the current VAT system. The current model stifles growth, business investment and development, by hitting businesses with such a burdensome tax bill as soon as the minimum threshold has been met.

• Business VAT reclaim scheme for green purchases

The Council supports the Federation of Small Businesses’ call for 150% rebate on VAT paid on specified green purchase. Such an incentive would motivate SMEs to invest more in net zero despite the long payback periods, provide fast cash back into the business, and create an incentive for SME’s to register for VAT.