Some of the ideas that were trailed, such as raising income tax, may have been hinted at to make the eventual Budget feel less dreadful than had been feared, but the final embarrassment came when most of the Budget, the government's costings and the expected effects on the economy were revealed early in error by the Office for Budget Responsibility (OBR) – moments before Reeves addressed the House of Commons on Wednesday (26 November).
We need to consider the effects on the industry itself, and the effects on our customers and their desire to travel. The further rise in minimum wages may be a concern, particularly to travel agents who guarantee the minimum wage but add commission based on the value of sales.
The rise won’t cost as much as last year, when employers National Insurance costs also rose, but some will be looking at the total cost per employee at around £1,000 extra per year as a disincentive to increase employment.
On the other hand, the chancellor has moved to encourage and incentivise businesses to hire more apprentices, as there will be no cost whatsoever for all SMEs.
In recent years, several employers who wished to retire have considered selling their businesses to their employees through an Employee Ownership Trust and enjoyed 100% capital tax relief as a result. This, though, has been cut by 50%, which makes this option far less attractive.
Business rates, which had been reduced on a temporary basis, will remain in future and there is no change in corporation tax paid on profits. However, everyone will see a rise in the actual income tax they pay as the personal allowance has been frozen for an additional three years.
This will obviously have an effect on consumer perceptions, but the reduction in energy bills promised next spring worth an average £150 should help. Against that, fuel duty will rise again, but not until next September, while the tax on cigarettes and booze rises immediately.
Those who depend on savings, such as pensioners, will welcome the continuation of the triple lock, which will ensure an above-inflation-rate increase in their pension next April, but they will not appreciate paying another 2% tax on savings earned above £1,000 a year.
It is unlikely those who live on the minimum wage will be in the market for many holidays next year, but that is no change from now. For those on higher incomes, the OBR warns everyone will see a fall in disposable income over time, but it could have been worse and this will hopefully ensure bookings return as expected for 2026.
Alan Bowen is the legal advisor to the Association of Atol Companies.
