The market gave a largely positive response to Labour’s first Budget with the domestic-facing FTSE 250 index and AIM market both enjoying strong gains following the unveiling of chancellor Rachel Reeves’ plans.

While the inheritance tax exemption on AIM shares was halved it wasn’t abolished as had been feared. Rachel Winter, partner at Killik & Co: ‘AIM shares have suffered from a perfect storm in recent years. Brexit has damaged confidence in British companies, and higher interest rates have made investors more risk adverse and less willing to hold shares in smaller companies.

‘The AIM index lost half its value between late 2021 and late 2023. There were some tentative signs of a recovery in 2024, but the index had been heading downhill again since Labour’s victory in the election due to fears that Business Relief would be removed. The index has rallied on the news that AIM shares will attract an inheritance rate of 20% rather than the usual 40%.’

Capital gains tax was increased although not as much as had been feared in some quarters. The lower rate going up from 10% to 18% and the higher rate from 20% to 24%. However, Reeves sprung something of a surprise by removing the inheritance tax exemption on pensions. While the death of the British ISA proved not to be exaggerated as the mooted new tax wrapper was scrapped.

Gilt yields moved higher after initially falling while the pound made some progress against the dollar. There was an increase in the amount employers will pay on their employees’ national insurance contributions from 13.8% to 15% from April 2025, with the current £9,100 annual threshold lowered to £5,000. Although there were protections for smaller businesses.

On stocks and sectors, there was relief in the gambling sector which had feared punitive new tax measures with Ladbrokes-owner Entain (ENT) among the gainers, up nearly 7%.

Elsewhere, pubs groups JD Wetherspoon (JDW) and Marston’s (MARS) toasted news of a 1.7% reduction in duty on draught alcohol served in hospitality settings.

As expected the windfall tax on the oil and gas industry was increased but North Sea operators like Serica Energy (SQZ:AIM) surged on relief that some allowances will be retained.

Infrastructure names Costain (COST) and Balfour Beatty (BBY) got a boost on news the HS2 rail line will run to Euston. Costain CEO Alex Vaughan says: ‘This is positive news that gives certainty and clarity for the UK’s largest and most complex infrastructure programme.’

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