Autumn budget 2024

7 minutes to read

‘Difficult choices’ was the phrase repeated at regular intervals by Chancellor Rachel Reeves in the first Labour Budget for 14 years, to ‘fix the foundations’ and ‘deliver change’.

At 77 minutes, Ms Reeves’s speech was the longest we have heard for a while and contained a vast array of announcements on tax and spending.

The public had been warned to expect tax rises, and the Chancellor confirmed that a large proportion (£25bn) of these were to come from businesses in the form of an increase in employers’ National Insurance Contributions (NICs). Currently, employers pay NIC at the rate of 13.8% on staff salaries and this will increase by 1.2% to 15% from 6 April 2025. In addition, the threshold at which liability for employers’ NICs commences is to be cut from £9,100 to £5,000 from 6 April 2025 until 5 April 2028. There was some good news for smaller businesses, as the Employment Allowance will increase from £5,000 to £10,500 from 6 April 2025, and the restriction which meant that only employers with a secondary Class 1 NIC liability of under £100,000 in the prior tax year were able to claim, is to be removed.

Increases in capital gains tax rates were widely expected, and from 30 October 2024, the lower rate of capital gains tax paid by those with gains within the basic rate band will increase from 10% to 18%, and the higher rate payable where gains exceed the basic rate band will increase from 20% to 24%. There is no change to the residential property rates, which remain 18%/24%. Carried interest gains, previously taxed at 28%, will be taxed at the rate of 32% from 6 April 2025. There are also changes to the rates of capital gains tax payable where Business Asset Disposal Relief (BADR) applies: the 10% rate is preserved until 6 April 2025, when it will increase to 14% and then to 18% for disposals  made on or after 6 April 2026.

Inheritance tax was another area where changes were anticipated, and whilst the Chancellor stopped short of removing Business Relief and Agricultural Relief altogether, the combined amount of exemption is to be capped at £1m from 6 April 2026. Qualifying assets above the £1m threshold will be charged to inheritance tax at 50% of 40%, ie 20%.  The value of AIM quoted shares will also be taxable at 20%.  Unspent pension funds are also to be included in a person’s death estate from 6 April 2027.

From a corporate tax perspective, the ‘Corporate Tax Roadmap’ commits the Chancellor to not increasing the standard rate of corporation tax from 25% during the life of the current Parliament, to maintain the Annual Investment Allowance at £1m and to retain the current full-expensing and R&D regimes. There is also to be a consultation on various aspects of international taxation: transfer pricing, permanent establishments and the Diverted Profits Tax. Whilst it is easy to dismiss these as ‘big business’ issues, the potential lowering of thresholds for exemption from transfer pricing rules may bring smaller companies into scope, increasing compliance and reporting obligations.

One very small rabbit – fuel duty remains frozen next year, contrary to many expert predictions.

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PERSONAL TAXES

> The income tax threshold will be uplifted in line with inflation from 2028/2029.

> The interest for late paid tax will rise by 1.5% from 7.5% to 9% from 6 April 2025.

> The National Living Wage will increase to £12.21/hour for those over 21, and the National Minimum Wage for 18-20 years will increase to £10.00/hour from April 2025.

> The Chancellor has announced plans to work towards a single adult wage over time, in place of the variable minimum wage rates currently applicable to those between 18 and 21.

> The carer’s allowance earnings threshold will be increased to allow carers to earn more than £10,000 and still be within the scheme.

> There will be a 4.1% rise in the state pension in 2025/2026.

Capital Gains Tax

> Capital gains tax rates are increased from 30 October 2024 as follows:

Rate to 29 October 2024 Rate from 30 October 2024
Lower rate (gains up to the basic rate threshold) – other than gains on residential property 10% 18%
Lower rate (gains up to the basic rate threshold) –gains on residential property 18% 18%
Higher rate (gains over the basic rate threshold) – other than gains on residential property 20% 24%
Higher rate (gains over the basic rate threshold) –gains on residential property 24% 24%

> From 6 April 2025, capital gains tax rates for carried interest will be raised from 28% to 32%.

> Business Asset Disposal Relief (BADR):

    • Lifetime allowance maintained at £1m
    • Rates of capital gains tax on gains eligible for BADR:
      • To 5 April 2025 – 10%
      • From 6 April 2025 – 14%
      • From 6 April 2026 – 18%

> Investors’ Relief

    • lifetime allowance reduced from £10m to £1m from 30 October 2024
    • Rates of capital gains tax on gains eligible for Investor’s Relief:
      • To 5 April 2025 – 10%
      • From 6 April 2025 – 14%
      • From 6 April 2026 – 18%

Inheritance Tax

> The current nil rate band threshold of £325,000 will remain frozen to 2030.

> Inherited pension funds will fall within Inheritance Tax on death from 6 April 2027.

> Agricultural Relief / Business Relief: from 6 April 2026, £1m of combined business and agricultural assets will still be covered by these reliefs, but any eligible assets over this limit will be subject to Inheritance Tax at an effective rate of 20% (50% of the standard 40% rate).

> AIM listed shares will also be subject to Inheritance Tax at the effective rate of 20% from 6 April 2026.

Benefits in kind

> Electric cars: The Chancellor wants to ensure that EVs are still favourable as company cars. The existing incentives will remain from 2028.

> Double cab pick-ups: These vehicles will for tax and benefits in kind purposes, be taxed as cars if purchased from April 2025 onwards.

Non-UK domiciliaries

> As expected, “non-dom” status will be removed from 6 April 2025 and replaced with a residence-based regime. Transitional rules will allow existing non-doms to repatriate wealth to the UK over a three-year period.

> A new residence-based regime will apply to temporary UK residents from 6 April 2025. Foreign income and gains (FIG) of individuals coming to the UK will be exempt from UK tax for a period of four years. After the four year period has expired, FIG will be taxed at normal income/capital gains tax rates.

> The protected settlement rules applicable to UK resident non-domiciled settlors of offshore trusts will be removed from 6 April 2025.

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BUSINESS

> Class 1 National Insurance Contributions for employers will be increased by 1.2% to 15% from 6 April 2025.

> The threshold above which employer’s National Insurance Contributions are payable will be reduced from £9,100 to £5,000 from 6 April 2025.

> The Employment Allowance will increase from £5,000 to £10,500 from 6 April 2025.

> There will be no change in the standard rate of corporation tax (25%) during the life of Parliament;

> The annual investment allowance (AIA) limit of £1m will remain in place during the life of Parliament, along with the current rules on full expensing.

> R&D reliefs will remain unchanged during the life of Parliament.

> The government will consult on two changes to the transfer pricing rules:

    • the possible removal of UK to UK transfer pricing requirements, and
    • reducing the threshold for exemption from transfer pricing for SMEs.

Business rates

> The small business rates multiplier is frozen for 2025/26.

> Lower business rate multipliers will permanently apply to retail, hospitality and leisure businesses from 2026/27;

> 40% business rates relief in 2025/26 for retail, hospitality and leisure business (cap £110,000)

> VAT and Stamp Duty Land Tax (SDLT)

> The higher rate of SDLT on those acquiring second homes will increase from 3% to 5% from 31 October 2024.

> The charge to SDLT on the acquisition of residential property with a value in excess of £500,000 through a company will increase from 15% to 18% from 31 October 2024.

> VAT on private school fees will apply from January 2025, and business rate relief will be removed for these schools from April 2025.

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OTHER

> Fuel duty is frozen at its current rate for another year.

> Tobacco duty will be set at the rate of inflation plus 2%.

> A flat rate of duty will be introduced on vaping.

> Soft drinks levy will increase in line with inflation.

> Air passenger duty will increase by £2 for economy short-haul flights. The duty on private jets will increase and will be the equivalent £450 per passenger.

> Alcohol – the duty on draught alcoholic products is cut by 1.7%

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CONTACT

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