Budget impact on the Care Home Sector

The Chancellor, Rachel Reeves, delivered her 2024 Autumn Budget speech yesterday, outlining a range of financial measures, which was not a good Budget for care home operators including not making additional provision for social care.

For care home operators, the most significant of the measures are set out below. 

Employment

Employer’s National Insurance - Class 1 Employer’s National Insurance is to increase from 13.8% to 15% from 6 April 2025. In addition, the threshold at which National Insurance is payable in respect of an employee reduces from £9,100 to £5,000 per annum. Accordingly, for any employee earning more than £9,100 per annum from 6 April 2025, there will be an additional Employer’s National Insurance cost of £615 per annum in addition to the rate increase for earnings in excess of £9,100 per annum. 

National Living Wage – The National Living Wage is to be increased from 6 April 2025 from £11.44 per hour to £12.21 per hour (6.7%). For 18 to 20 year olds, the increase is 16.3% and for apprentices, 18%. 

Capital Gains 

For gains not falling within an individual’s basic rate of income tax band, the rate has been increased from 20% to 24%. 

The amount of cumulative gains eligible for Business Asset Disposal Relief (BADR) is to remain at £1m per individual taxpayer, however, the rate of Capital Gains Tax in respect of gains eligible for BADR will increase from 10% to 14% from 6 April 2025 and to 18% from 6 April 2026, materially eroding the benefit of such relief.

Inheritance Tax 

Typically, Business Property Relief would be available on death in respect of the ownership of a care home business. With effect from 6 April 2026, only the first £1m of eligible assets will be available for this relief, with any excess having the rate of relief reduced from 100% to 50%. This will require more planning in order to mitigate the impact.

Our partners in the Buyacarehome/Ownacarehome group, Morris lane have prepared a summary of the budget.