If you tuned in to watch Chancellor Rachel Reeves deliver the budget on October 30th, you’ll probably know that debt recovery wasn’t mentioned, and why would it be? The budget focuses on healthcare, infrastructure, investments, taxes, education and public services. But, that doesn’t mean that the budget doesn’t have an impact on debt recovery in some way.
The budget details how the government plans to bring in, spend and invest money, and this has a direct impact on how much cash individuals and businesses have. With more money to spare, repaying debts becomes easier. With less money, paying back debts is unlikely to be a priority, but it’s also when businesses and individuals need repayments most.
How Will Budget Announcements Impact Debt Recovery?
With the recent budget announcements and Sir Keir Starmer warning of unprecedented economic challenges ahead, there’s been a lot of talk about what the future holds for business owners. A lot of Labour’s plan centres on long-term growth and putting money back into working people’s pockets, but there have also been announcements of changes that could increase costs for businesses. For example, there’s going to be an increase of 1.2% to employer National Insurance contributions from April 2025. Currently, employers start paying National Insurance on employee earnings over £9,100 a year, but this will be reduced to £5,000.
With businesses spending more, business debt recovery is going to be more important than ever. Increased National Insurance contributions is likely to be a strain on small businesses, many of which could struggle to cover the increased costs. To keep up, debts are going to have to be recovered sooner, as businesses are unlikely to have the budget to cover payment delays and disrupted cash flow.
Will People Find it Harder to Repay Debts?
There’s also the question of whether people will find it harder to repay debts. Labour has put a huge emphasis on putting money into the pockets of working people and many of the budget announcements will help with that, but other announcements could increase costs elsewhere. For example, stamp duty on second homes will rise from 3% to 5%, and a vaping duty of £2.20 per 10ml of liquid will be introduced from October 2026. Capital gains tax is also going up, with the lower rate rising from 10% to 18%, and the higher rate rising from 20% to 24%.
Not all of the budget announcements will impact everyone equally, but these changes could make it difficult for people to find the money to repay an outstanding debt, as they’ll be paying higher costs elsewhere. Of course, that’s bad news if you are owed money, and it’s why effective debt collection is going to be more important than ever.
To find out more about debt collection, both business debt collection and personal debt recovery, get in touch with Cobra Financial. We’re here to handle debt collection so you can focus on other things.
