All posts by Terry Harris

Employment Law

When disciplinary processes and non-compete clauses implode

Dec 2, 2025 by Terry Harris 0 Comments

Many modern companies insist on the inclusion of restrictive covenants to limit the freedoms of employees upon the termination of their contracts. However, the High Court recently reinforced the stringent legal principles governing the enforceability of such restrictive covenants, suggesting that they often overstep.

A young man had been working as a salesperson for a UK subsidiary of an American company that sells made-to-measure suits and shirts manufactured in the USA. His original contract included restrictive covenants limited to 6 months. However, the contract was changed in 2022 to double the duration of the non-compete covenant to 12 months and remove the previous reliefs, significantly widening their scope. The employee asserted that he was not informed of these changes, and the claimant failed to produce any evidence to justify the widening of the scope of the limitations or the doubling of their duration.

The employee’s initial performance was strong, although following a conduct issue in January 2025, he was subjected to an addendum requiring humiliating and intrusive conditions, including weekly “counselling”, a ban from earned trips, and exclusion from leadership roles. The ex-employee had also raised product quality concerns, which he felt were ignored, and found the work culture ‘toxic’ and the disciplinary action both unfair and intrusive. As a consequence, he resigned in frustration in 2025, only to be subjected to an “insensitive, verging on brutal” retaliation. Within two days, the HR manager had cut off all IT access, threatened an investigation, and banned the defendant from the office. A day later, on Sunday, the claimant’s lawyers hand-delivered a threatening letter to the defendant’s home seeking to enforce a 12-month restrictive covenant. Moreover, there were claims that the defendant had breached his contractual duties, including running down his sales in the months prior to his resignation, and soliciting staff.

The High Court dismissed the claim for breach of contract and ruled that the 12-month restrictive covenant was unenforceable, as it far exceeded what was reasonably necessary to protect the claimant’s business. Moreover, the Court found the decline in performance to be stress-related and due to his inevitable demotivation.

This case reinforces the longstanding principle that courts will not uphold a covenant if it extends beyond what is strictly necessary to protect an employer’s legitimate business interests, which are typically delimited to confidential information and customer goodwill. The case serves as a warning in relation to the risks employers run when their conduct is perceived to be heavy-handed, humiliating, or toxic, particularly during disciplinary or exit procedures. HR departments should be wary of engaging in overtly humiliating or heavy-handed disciplinary rituals, as these may be viewed as a form of brutality.

Source:High Court | 01-12-2025
General

The likely direction of interest rates in 2026

Dec 1, 2025 by Terry Harris 0 Comments

As we look ahead to 2026, there is growing speculation about how the Bank of England will manage interest rates during what many economists believe will be a period of calmer inflation, steadier wage growth and a more predictable economic backdrop. After several years shaped by sharp price rises, supply chain shocks and policy responses that required rapid increases to the Bank Rate, the outlook for the coming year appears more settled and this is creating a sense that borrowing costs may edge downwards rather than upwards.

The current Bank Rate stands at around four per cent following a series of cuts through 2024 and 2025 as inflation eased gradually. Policymakers have indicated that they remain alert to any resurgence in inflationary pressure, yet they also recognise that the period of high inflation is now behind us. If this trend continues and inflation drifts closer to the Bank’s long term target, it will give the Monetary Policy Committee more room to make modest reductions during 2026. Many forecasters expect something in the region of a quarter to half a percentage point of cuts during the year, although the timing will depend heavily on the data released each quarter.

For households and businesses, this would create a slightly more comfortable lending environment. Mortgage borrowers on variable deals may feel some relief as repayments fall a little and businesses that rely on flexible credit facilities could find that their financing costs ease. Fixed mortgage rates may also become more attractive if lenders anticipate further gradual reductions. However, the broader economic impact is unlikely to be dramatic, since the Bank is not expected to deliver large or rapid cuts. The emphasis is more likely to remain on steady adjustments that avoid disrupting confidence or encouraging excessive borrowing.

It is worth noting that a full return to the ultra-low interest rate environment seen before the pandemic is not expected. Structural changes in the UK economy, global supply conditions and the government’s fiscal position all point towards a future in which interest rates remain higher than the levels seen in the decade prior to 2020. Even so, a move towards slightly lower borrowing costs in 2026 would be consistent with a maturing recovery and a gradual balancing of supply and demand across the economy.

Overall, the most probable outcome for 2026 is a measured reduction in interest rates that supports economic stability without risking a renewed surge in inflation.

Source:Other | 30-11-2025
Business Support

Outlook For Food And Energy Prices In The Year Ahead

Dec 1, 2025 by Terry Harris 0 Comments

Food and energy costs remain central concerns for households and businesses because they influence everything from wages to margins to day to day operating decisions. Inflation is easing compared to the volatility of the last few years, but the picture for the next twelve months is still mixed. Prices appear set to rise more slowly, yet neither category is likely to fall in any meaningful way.

Food price outlook

Food prices surged during the supply chain disruptions of 2021 to 2023 and were pushed higher again by wage pressures, transport costs and global shipping instability. Although the pace of increase has slowed during the past year, prices remain high. Many clients still question why food costs have not dropped as headline inflation falls. The reason is that the underlying conditions that drove those increases have not disappeared. Agriculture, food production, and distribution still face labour shortages, higher input costs, and ongoing uncertainty in global trade routes.

The most likely outcome for the coming year is a gradual easing in the rate of food inflation rather than a reduction in prices. Supermarkets report calmer supply chains and producers appear more willing to absorb cost pressures in order to protect sales volumes. Better harvests in some regions and lower freight costs should also help. These factors together should keep the next year more stable than the recent past.

Energy price outlook

Energy prices have been among the most unpredictable elements of the recent inflation cycle. While the extreme spikes have eased, the underlying global influences remain. The UK is particularly exposed because it relies heavily on imported gas and is tied to international pricing. Global gas markets continue to react to geopolitical tensions, shipping disruptions and variations in European storage levels. These variables explain why energy pricing still carries a degree of uncertainty.

However, the direction for next year looks a little steadier.

What this means for business planning

The next year is unlikely to bring substantial falls in food or energy prices, but the environment should feel less pressured. This increased stability provides an opportunity for better budgeting and more confident forecasting. Hospitality businesses and manufacturers may find it easier to plan pricing strategies, menus and supply arrangements. Broader stability also supports decisions on energy efficiency projects since assumptions about future savings appear more reliable.

Source:Other | 30-11-2025
Personal

Autumn Budget 2025 – High Value Council Tax Surcharge

Nov 27, 2025 by Terry Harris 0 Comments

Starting in 2028-29, the government will introduce a High Value Council Tax Surcharge (HVCTS) for residential properties in England valued at £2 million or more. This surcharge will be collected by local authorities, but the revenue will go to central government.

High Value Council Tax Surcharge Charging Structure

Property Value

Surcharge

£2 million – £2.5 million

£2,500

£2.5 million – £3.5 million

£3,500

£3.5 million – £5 million

£5,000

Over £5 million

£7,500

The surcharge amounts will be based on the value of the residential property in 2026. The surcharge will increase as the property value rises, up to a maximum charge of £7,500 for properties valued over £5 million.

According to HM Treasury figures, the surcharge will apply to fewer than 1% of properties in England. Homeowners, not tenants, will be liable for the surcharge, which will be in addition to their existing Council Tax. Social housing will be excluded.

Properties above the £2 million threshold will be reassessed every five years by the Valuation Office. The surcharge rates will increase annually in line with CPI inflation starting in 2029-30.

This new charge is expected to raise around £430 million annually for local government services. Local authorities will be compensated for the additional costs of administering the surcharge. A public consultation on further details, including reliefs and exemptions, will take place next year.

Source:HM Treasury | 26-11-2025
Duties

Autumn Budget 2025 – Fuel Duty rates

Nov 27, 2025 by Terry Harris 0 Comments

In the Autumn Budget, the Chancellor had been expected to increase fuel duty rates. However, she has extended the fuel duty cut for a further 6 months to help support households and businesses. 

The Chancellor said ‘I know that the cost of travelling to and from work is still too expensive, so I am extending the 5p cut until September 2026. And because I know that changes in wholesale prices are not always passed onto motorists, I am bringing in new rules to mandate petrol forecourts to share real-time prices through a new Fuel Finder.’ 

This means that the temporary cut in the rates of fuel duty introduced at Spring Statement in March 2022, and extended multiple times is to be extended for a further 6 months until 31 August 2026.

The planned inflation-based increase for 2026-27 will be cancelled. Together with the launch of Fuel Finder, these measures are expected to save families £89 next year compared to previous plans.

Source:HM Treasury | 26-11-2025
Duties

Autumn Budget 2025 – Alcohol and Tobacco Duty

Nov 27, 2025 by Terry Harris 0 Comments

The Chancellor has confirmed a series of duty increases on tobacco, vaping liquid, and alcohol that will take effect over the next year, with new rates intended to balance public health concerns with support for producers and the wider hospitality sector.

As part of the Autumn Budget measures the Chancellor announced that the duty rates on tobacco products were increased by 2% above the rate of inflation (based on RPI) effective from 6pm on 26 November 2025. The one-off increase of £2.20 per 100 cigarettes or 50g of other tobacco products and annual uprating of tobacco duty by RPI + 2% next year will take effect from 1 October 2026

It was also announced as part of last year’s Budget measures that the government will introduce a new duty at a flat rate excise duty of £2.20 per 10ml on all vaping liquid which will come into effect from 1 October 2026.

The Chancellor also confirmed that effective from 1 February 2026, the government will increase the Alcohol Duty rates in line with Retail Price Index inflation. The Small Producer Relief discounts will also be uprated, so eligible small producers receive relative duty reductions as now. These changes will also take effect from 1 February 2026.

The government considered various views, from cutting or freezing alcohol duties to increasing them above inflation. The decision they announced seeks to balance supporting alcohol producers and the hospitality sector with the need to reduce alcohol related harm.

Source:HM Treasury | 26-11-2025
Pension

Autumn Budget 2025 – Pension changes

Nov 27, 2025 by Terry Harris 0 Comments

The Chancellor has kept the main pension allowances unchanged but has confirmed a new cap on salary sacrifice arrangements that will apply from April 2029.

There had been heated speculation that the Chancellor would change the pension rules to help the government raise taxes, but no changes were announced to the annual allowance (which remains at £60,000) or to the carry-forward rules which can use up previous year’s annual allowances. The lump sum allowance has also remained unchanged at £268,275.

However, the Chancellor announced changes to the salary sacrifice arrangements for pension contributions. Salary sacrifice allows employees to reduce part of their salary or bonus in exchange for pension contributions, which is tax-efficient and helps save for retirement. However, this arrangement has disproportionately benefited higher earners with salary sacrifice costs expected to rise from £2.8 billion in 2016-17 to £8 billion by 2030-31.

From April 2029, the government plans to introduce a cap on salary sacrifice contributions which will limit the amount that can be sacrificed without incurring National Insurance Contributions (NICs) to £2,000 per employee. Salary sacrifice contributions above this amount will be subject to employer and employee NICs. Pension contributions that are not part of a salary sacrifice will remain unchanged.

The Chancellor reaffirmed the government's commitment to maintaining the Triple Lock on the State Pension throughout this parliament. This means that in April 2026, the State Pension will increase by 4.8%. The Triple Lock ensures that the State Pension rises by the highest of three measures: inflation, wage growth, or 2.5%, helping to protect pensioners' income against rising costs of living.

Also, starting from 6 April 2027, the government will close a loophole that allows individuals to use pensions for inheritance tax (IHT) planning. Under the new rules, any unspent pension pots will be brought within the scope of IHT.

Source:HM Treasury | 26-11-2025
Employment & Payroll

Autumn Budget 2025 – Minimum Wage increases

Nov 27, 2025 by Terry Harris 0 Comments

The Chancellor of the Exchequer, Rachel Reeves announced increases to the Minimum Wage rates on the eve of the Budget. The Chancellor confirmed that the government has accepted in full the proposals of the Low Pay Commission (LPC) for increasing minimum wage rates from 1 April 2026.

The National Living Wage (NLW) rate will increase from £12.21 to £12.71 on 1 April 2026 and represents an increase of 50p or 4.1%. The NLW is the minimum hourly rate that must be paid to those aged 21 or over. The increase represents a pay rise of £900 a year for someone working full-time and earning the NLW.

It was also announced that the National Minimum Wage (NMW) – for 18-20 year olds – will increase from £10.00 to £10.85 an hour. This is an 8.5% increase and will see younger workers having their pay boosted by up to £1,500 next year. This increase is part of moves to narrow the gap in wage rates for 18-20 years olds and the NLW and ultimately create a single adult wage rate for all those aged 18 and up.

The NMW rates for 16 to 17 years old will increase from £7.55 to £8.00 – an increase of 45p or 6% per hour – from next April. The Apprentice Rate will mirror this increase in line with earlier recommendations by the LPC.

At the Budget, the government also announced two new measures aimed at supporting young people’s employment and skills development.

  1. The Youth Guarantee: Jobs Guarantee Scheme will provide a six-month paid work placement for eligible 18-21 year group, who have been on Universal Credit and searching for work for at least 18 months. This scheme will cover 100% of employment costs for 25 hours a week at the minimum wage, alongside other support measures.
  2. The Youth Guarantee and Growth and Skills Levy will allocate more than £1.5 billion over the spending review period to improve employment and skills support. This funding will help ensure that young people have access to high-quality training opportunities and streamline the apprenticeship system to make it more efficient.
Source:HM Treasury | 26-11-2025
Income Tax

Autumn Budget 2025 – Personal Tax changes

Nov 27, 2025 by Terry Harris 0 Comments

The chancellor Rachel Reeves announced as part of the Autumn Budget measures that the Income Tax thresholds will be maintained at their current levels for a further three years until April 2031. This will see the personal tax allowance frozen at £12,570 through to April 2031 across the UK. In addition, the higher rate threshold will remain at £50,270 (there are differences in Scotland). National Insurance thresholds will also remain frozen until 2031.

This means that more taxpayers will be pushed into paying higher taxes as income increases at a far faster rate than the frozen tax bands. This phenomenon is known as fiscal drag. The freezing of most of the Income Tax allowance and rates at current levels until 2031 means that many taxpayers will pay more Income Tax as their income increases with no corresponding increases in their allowances and more taxpayers will see their taxable income boosted into the 40%, or 45%, Income Tax bands.

The existing thresholds for the basic rate, higher rates and additional rates of tax have also been frozen where income is derived from employment or self-employment. However, the government will create separate tax rates for property, savings & dividend income.

  • Tax on most dividend income will increase by 2% from April 2026. The ordinary rate will rise from 8.75% to 10.75%, and the upper rate from 33.75% to 35.75%. The additional rate will remain unchanged at 39.35%.

The changes to the tax rates for property and savings income will take effect from April 2027.

  • From 2027-28, the property basic rate will be 22%, the property higher rate will be 42%, and the property additional rate will be 47%. These rates will apply across England, Wales and Northern Ireland.
  • From 2027-28, the savings basic rate will be increased to 22%, the savings higher rate will be increased to 42% and the savings additional rate will be increased to 47%.

The current rules that allow Basic Rate taxpayers to receive £1,000 of interest without paying tax, and Higher Rate taxpayers to receive £500 without paying tax are set to remain as is the Starting Rate for Savings of up to £5,000 for lower earners.

Source:HM Treasury | 26-11-2025
Budget Summary

Budget Summary 26 November 2025

Nov 26, 2025 by Terry Harris 0 Comments

The degree of speculation about this year’s Budget announcements was further compounded when the Office of Budgetary Responsibility uploaded their report on Budget changes prior to Rachel Reeves announcements to Parliament.

However, there are to be no changes to the main rates of Income Tax, NIC and VAT that affect wage earners across the UK, but the Budget Report highlights numerous changes to plug the gap in government finances. We have set out below the most impactful of these changes as they affect business owners and UK taxpayers.

Individuals — what changes and what to watch

Personal tax thresholds remain frozen

  • The thresholds for income tax and employer National Insurance contributions will be frozen until at least April 2031 (with earlier freezes extended further by the new Budget).
  • This “fiscal creep” means that as wages (or inflation) rise, more people will effectively pay higher rates of tax or move into higher tax bands even though nominal rates remain unchanged. 

Higher tax on investment, property and savings income

  • Tax rates on dividends, property income and savings income are being increased by two percentage points. The dividend changes are due to take effect from April 2026 and the property and savings income a year later from April 2027. The dividend changes only apply to the basic and higher rate bands.
  • Existing allowances (for example on dividends and savings) will continue to provide protection for people with low to moderate amounts of such income.

ISA reforms will see some limits reduced

  • From 6 April 2027, the annual cash limit for ISA savings will be reduced to £12,000. The subscription limits for ISAs overall will remain at £20,000. Savers aged 65 and over will continue to be allowed to save up to £20,000 in a cash ISA each year. 

Two-child limit for Universal Credit (UC) to be scrapped

  • The two-child limit introduced back in 2017 is to be scrapped from April of next year. The government has said that removing the two-child limit will lift 450,000 children out of poverty. There had been a concerted campaign over many years to have this cap removed.

Pension contributions via salary sacrifice will be limited

  • For individuals using salary sacrifice schemes to contribute to pensions tax-efficiently, the relief will be capped so that only the first £2,000 of pension contributions per person per year remain exempt from National Insurance. Contributions above that threshold will be subject to NICs from 2029.
  • This change is likely to hit higher earners and those with larger pensions contributions more heavily.

A new council-tax surcharge for high-value properties

  • From April 2028, homes valued at over £2 million will attract a “High Value Council Tax Surcharge”.
  • The surcharge will be banded: a property worth £2 million to £2.5 million will incur a surcharge of £2,500; properties worth more will pay higher surcharges (up to £7,500 for properties valued over £5 million).
  • The surcharge will be collected locally (with council tax) but the revenue will go to central government.

New taxes on electric vehicles, online gambling and imports

  • A new per-mile Electric Vehicle Excise Duty (eVED) will be introduced for battery electric cars and plug-in hybrids from April 2028. This is intended to replace some of the lost revenue from fuel duty. The rate will be 3p per-mile for fully electric vehicles and 1.5p for plug-in hybrids.
  • The government is removing the customs-duty relief for low-value imports (£135 or less), a move aimed at levelling the playing field for UK retailers competing with foreign-based online sellers. This change will take effect from March 2029 at the latest.
  • There will be tighter rules for VAT on ride-sharing taxi apps (preventing misuse of a scheme intended for tour operators).
  • Changes to the taxation of online gambling are also on the way. This includes an increase in Remote Gaming Duty from 21 per cent to 40 per cent from 1 April 2026 and the abolishment of Bingo Duty from the same date.

Other changes with possible future effects

  • Some changes to Capital Gains Tax for non-resident individuals, share exchange/reorganisation rules, and inheritance-related trust charges for former non-domicile residents were also announced.

Businesses — what changes and what to watch

Business rates relief and targeted support for certain sectors

  • The government plans to make permanent lower business rates for over 750,000 retail, hospitality and leisure properties amounting to nearly £900 million per year from April 2026.
  • A support package worth £4.3 billion will help businesses with rate bill increases following revaluations from April 2026.
  • For film studios, 40 per cent business rates relief will be maintained for ten years, until 2034. 

Corporation tax, capital allowances and investment incentives adjusted

  • Corporation Tax remains capped at 25 per cent for the duration of this Parliament.
  • Writing-down allowances (the tax relief businesses claim when they buy capital items not qualifying for “full expensing”) will be reduced from 18 per cent to 14 per cent from April 2026, making it marginally less attractive to invest in some capital items unless they fall under the full expensing rules.
  • From 1 January 2026, the government will introduce a new 40 per cent First Year Allowance for main rate expenditure. This will apply to most spending on assets for leasing and expenditure by unincorporated businesses.

Withdrawal of certain reliefs and tightening of anti-avoidance rules

  • Relief for gains on disposals to Employee Ownership Trusts is being cut, from 100 per cent to 50 per cent. That reduces the appeal of these trusts as a tax-efficient exit strategy or ownership structure for both entrepreneurs and businesses.
  • The Budget introduces new anti-avoidance rules addressing certain non-derecognition liabilities, among other technical reforms.

Changes to imports, compliance and VAT arrangements

  • The removal of the low-value consignment relief (which previously exempted many foreign online retailers from customs duties on small-value imports) may benefit UK bricks-and-mortar retailers by levelling the playing field.
  • More robust HMRC compliance and administrative reforms are planned, which the government expects will reduce the tax gap (the difference between what is owed and what is collected).

Minimum wage changes

  • The National Living Wage (NLW) will rise from £12.21 to £12.71 per hour on 1 April 2026, a 4.1 per cent increase. The National Minimum Wage (NMW) for 18-20 year olds will also increase from £10.00 to £10.85, an 8.5 per cent increase, increasing pay by up to £1,500 a year. This change is part of efforts to narrow the wage gap between younger workers and those on the NLW. Additionally, the NMW for 16-17 year olds and the Apprentice Rate will both rise from £7.55 to £8.00 (a 6 per cent increase).

What this means in practice for different types of taxpayers

For a middle-income employee

If you are a typical employee with mainly salaried income and modest savings or investment income, the freeze on thresholds may slowly push more of your earnings into higher rate bands, reducing your disposable income over time. If you rely on dividends or rental income, your after-tax return may suffer due to the higher rates. Pension contributions made via salary sacrifice may lose some of their attractiveness if they exceed £2,000 per year, but modest savers should be relatively unaffected.

For higher earners, property owners, and investors

If you own a high-value home, rental property, or significant investments, these changes may hit you harder. The council-tax surcharge on expensive properties and the higher rates on investment income make clear that future tax burdens will increasingly fall on wealth, capital, and savings rather than earned income. Pension-savings advantages for high earners are reduced. For business owners, particularly those using or considering Employee Ownership Trusts, the reduction in reliefs may diminish some previously attractive exit or succession planning strategies.

For small businesses, investors and growth companies

The maintenance of Corporation Tax at 25 per cent provides some certainty, but reduced capital allowances and fewer reliefs may raise the effective tax cost of certain investments. On the plus side, support for high-streets (lower business rates for retail, hospitality, leisure) and targeted reliefs (e.g., for film studios) offer relief for businesses in those sectors. The removal of import-duty relief for low-value imports could benefit UK retailers by levelling the competitive field.

Broader context and likely economic impact

  • The government expects these measures to raise around £26 billion per year by 2029–30, making this among the largest medium-term tax increases in recent decades.
  • As a result, the overall tax take is projected to reach a record 38 per cent of GDP by 2030–31.
  • Some planned reliefs and public spending measures are intended to offset cost-of-living pressures: for example, cuts to energy bills, freezing rail fares, and support for households on lower incomes.

What to keep an eye on

  • Implementation: Many changes (pension-salary sacrifice cap, high-value property surcharge, vehicle mileage levy) come in over a number of years. The detail of how they will be applied may affect their actual impact.
  • Behavioural responses: As thresholds remain frozen and investment incomes are taxed more heavily, individuals may shift the balance of their income (more salary, less dividends, changes to pension contributions) which could reshape personal tax planning strategies.
  • Business planning and investment: Reduced writing-down allowances and withdrawal of some reliefs may influence decisions about capital expenditure, timing of investments, and business structure (especially for those considering Employee Ownership Trusts).
  • Compliance and administration: The government’s push to tighten compliance and close loopholes may mean higher scrutiny for individuals and businesses, particularly around imports, VAT, and offshore arrangements.
Source:HM Government | 25-11-2025